Literature Review There have been many studies on the relationship between education and earnings.

Maurer-Fazio & Dinh (2004) describe the role of education in determining a workers income in urban Chinas labor markets. They find that returns to education for workers who have found employment by means of a competitive method to be higher than those whose jobs were assigned. The authors decompose earnings differentials based on worker data from 1999-2000 by surveying 4873 individuals from 118 enterprises in six cities. They find that workers who have labored for their positions tend to be more productive. By choosing random samples of census data collected from a wide spread area, and applying regression analysis, they were able to accurately describe the population. In addition, Blanden, Gregg & Macmillan (2007) claim, those born to poor parents have restricted mobility and often do not achieve their economic potential. Their study proposes that education is the most obvious and efficient means of transmission explaining intergenerational mobility. A strong association between incomes across generations indicates weak intergenerational mobility. Cognitive ability offers a substantive contribution to mobility, but only if given ample opportunity to be nurtured. Theoretical Argument Education is the major factor in transferring wealth along. A well educated individual is more productive, which makes him more profitable. The increased profitability increases competition for workers, thus increasing wages. A well educated worker has acquired the basic skills in problem solving and analysis. The training received through education makes workers more productive by increasing their cognitive abilities. This is achieved through the academic process. A productive worker is more profitable, since employers have to spend less time and effort training workers for a position, and workers can work independently with little or no guidance. Wages increase with the level of training due to the competition for workers. Employers prefer to hire, and may pay a premium for skilled and productive individuals, who can increase their profits. Empirical Model Using Ordinary Least Squares (OLS) regression, with median income as our dependent variable and the percentage of bachelors degree holders as the independent variable, we expect to see a positive relationship between earnings and education.

Data Description The data was collected was based on U.S. census information of median income, and the percentage of bachelors degree holders from 50 states plus the District of Columbia.

Table 1

Summary Statistics N Minimum

17.3 36338

Maximum
47.5 68080

Mean
27.14705882 50248.29412

Std. Dev
5.475412421 8079.626294

Percentage of Bachelors degree holders Median Household income

51 51

Empirical Results

Table 2

OLS Regression Results

Unstandardized Coefficients

B
Percentage of Bachelors degree holders Median Household income 21534.2391 8 1057.7225

Std. Error
4069.10249 5 146.988583 2

t-statistic
5.29213486 5 7.19595003 2

F-statistic
51.7816968 7 -

R Square
0.513800605 -

Interpretation The results have led to a strong conclusion that education has a large positive effect on earnings. The R-squared value indicates that 51% of the data is explained by the model. The high value for the t-statistic of the independent variable shows a significant impact on the dependent variable. The F-statistic shows a high level of significance for a 95% confidence interval. The coefficient of the independent variable shows that with only a high school education the median income is about $21534, and the coefficient of the dependent variable shows that per year of schooling above high school income can rise by about $1057.

Conclusion This article has explored the role of education as a factor for the transfer of wealth. As we can see from the analysis, education is indeed the main source of this. Our analysis of the data has proven that the variables involved are significant in supporting our claims. Based on the results of the study we also see that though education has a large effect on earnings, there are other possible factors involved. Other possibilities are cognitive ability, and economic status, which we could not investigate through the lack of data.