Skipping class

Skipping class
New data show that joining the 1% remains unsettlingly hereditary
Jan 28 2017
http://www.economist.com/news/united-states/21715735-new-data-show-joining-1-remains-unsettlingly-hereditary-skipping-class

READING John F. Kennedy’s application to Harvard College is a study in mediocrity. The former president graduated from high school with middling marks and penned just five sentences to explain why he belonged at Harvard. The only bit that expressed a clear thought was also the most telling: “To be a ‘Harvard man’ is an enviable distinction, and one that I sincerely hope I shall attain.” America’s premier universities, long the gatekeepers for the elite, have changed greatly since their days as glorified finishing schools for scions. But perhaps not as much as thought.

New data on American universities and their role in economic mobility—culled from 30m tax returns—published by Raj Chetty, an economist at Stanford University, and colleagues show that some colleges do a better job of boosting poor students up the income ladder than others. Previously, the best data available showed only average earnings by college. For the first time, the entire earnings distribution of a college’s graduates—and how that relates to parental income—is now known.

These data show that graduates of elite universities with single-digit admissions rates and billion-dollar endowments are still the most likely to join the top 1% (though having wealthy parents improves the odds). And despite recent efforts to change, their student bodies are still overwhelmingly wealthy.

Princeton University is the best at producing plutocrats—23% of its graduates end up as one-percenters, about the same as the share of its students who hail from equally wealthy households. Following closely are the University of Pennsylvania, Harvard and Stanford where this rich-in, rich-out model works well.

No matter their family income, students at America’s most prestigious universities have a roughly equal chance of reaching the top 20% of the income distribution. Reaching the top 1% is a different story altogether. In this case, having a trust fund appears handy. Even if a student attends an elite university, the chances of eventually reaching the economic elite increase greatly with the wealth of parents (see chart). A rich student, hailing from a household in the top 5%, has about a 60% greater chance of reaching the income summit than a poor student, whose parents were in the bottom 5%, even if they both attended one of America’s most esteemed universities. Elite financial and consulting firms, which often recruit for highly paid positions exclusively at Ivy League-calibre schools and rely on networking, may bear some of the blame.

Breaking into the upper-middle class is a good bit easier, our analysis of Mr Chetty et al’s data shows. Three of the important factors in determining the average earnings of graduates are test scores, where the college is located and what subjects the alumni studied. Those who do not get into Yale should feel relieved that a clear path to the upper-middle still exists: study a technical subject like engineering or pharmacology, and move to a large city. Graduates from lesser-known colleges focusing on science, technology and maths like Kettering University and the Stevens Institute of Technology earn, on average, just as much as their Ivy League peers.

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