In the dog days of summer (August 25), I wrote a rather nerdy/techie blog that made what I thought was a provocative argument: The recent expansion of American colleges and universities is promoting income inequality in the United States (whereas earlier in history, colleges were a factor in reducing such inequality). Judging by comment volume, the piece got a respectable but not spectacular audience, although Peter Wood’s marvelous follow-up received a good deal more attention.
Let us, for the sake of argument, suppose I am right and that expanding access to college in America is NOT a good way of promoting progressive ideals of increased economic equality of results. In short, groups like President Obama and the Lumina Foundation are barking up the wrong tree. Why might that be so?
I asked my able student associate Ryan Brady to gather two pieces of data pertaining to students or graduates of elite, top-flight private schools that made the top of either the US News & World Report or Forbes lists of best schools (the US News list was from 2010). For US News, we looked at both top research universities and liberal arts colleges (Forbes has a single comprehensive list). We compared this list of 42 schools with the bottom 42 schools on the Forbes list of 650—almost all state colleges, such as Cleveland State, Northern Illinois, or Boise State University. As a measure of the income of the families of the students, we looked at the percent of undergraduates receiving Pell Grants. For earnings data on the graduates of those schools, Ryan and I looked at the impressively large database of one of my favorite web sites, PayScale.com.
Here is what we found. In the first year or so after graduation, those going to the elite schools (Harvard, Williams, Northwestern, Princeton, Duke, Stanford, etc.) made typically about $50,000 a year—25 percent more than the almost precisely $40,000 estimate for the less distinguished schools. But those income differentials grew steadily over time—the graduates of the elite schools 10 to 20 years after graduation were making a much bigger differential compared to the graduates of schools with modest reputations. Ryan calculated the discounted present value of the lifetime stream of future earnings for the elite graduates to be typically 38-39 percent higher than for those attending the lower-quality state schools.
But the inequality part comes from the fact that the top colleges are, for the most part, rich kid schools, or at least havens for the moderately affluent middle class. Only 10.6 percent of the students received Pell Grants on average at these 42 schools. By contrast, the low-ranked schools had 32.7 percent—over triple the proportion—with Pell Grants, so these schools largely served poor and lower-middle class kids.
We have created a system where rich kids go to the schools where graduates often make the really big bucks, but the poorer kids go to schools where the graduates are far less likely to hit it big financially. Over time, the expansion of higher education has been accompanied by soaring admission applications for the top schools (e.g., Northwestern’s have roughly doubled in six years) in significant part for the financial reasons just elucidated. Yet those expensive schools still favor some rich kids for legacy reasons, and others because wealthier kids likely got a better high-school education, higher SAT scores, etc. (and, more cynically, perhaps because they or their parents are more likely to contribute to the school).
It used to be the mere possession of a college degree was the major screening device that separated those that were smart, ambitious, and disciplined from their high-school counterparts with fewer of these attributes. With so many going to college today, however, we have added an additional, secondary screening device, the quality of the institution attended.
Another factoid: A great new poster from postsecondary.org shows that around 1975, when Pell Grants were in their infancy, somewhere north of 12 percent of bachelor’s degrees were awarded to students from the bottom quartile of family incomes. Today, the figure is 7.3 percent—roughly a 40-percent decline. Despite vast increases in enrollment and well over a doubling in the proportion of adult Americans with bachelor’s degrees or more, and despite vast increases in the magnitude and number of government grant and loan programs, the proportion of poor kids amongst the college graduate population is falling.
These two factoids may go a long way in explaining the increased association of higher education with rising income inequality in our nation. They don’t explain, however, why so-called “progressives” continue to promote higher education as an egalitarian panacea.
