The Rich Get the Most Out of College

(Bloomberg Opinion) -- Representing economic research to the public is a difficult exercise; results can be subtle and come with a lot of qualifications. What’s more, the research tends not to come with guidelines for how to apply the results to real-world public debates — that’s a pundit’s job. Thus, it’s inevitable that pundits will sometimes make mistakes.

Tim Bartik, an economist at the Upjohn Institute for Employment Research, recently took journalism professor Ellen Ruppel Shell to task on Twitter for alleged misrepresentations of his research with colleague Brad Hershbein. Shell’s New York Times op-ed entitled “College may not be worth it anymore,” argued that the monetary returns to higher education are much lower for poor families than for middle-class or rich ones.

As Bartik points out, he and Hershbein found that the college earnings premium — the lifetime difference in earnings between those who get a bachelor’s degree and those who only finish high school — was substantial for people from all income backgrounds:

For people from families below 185 percent of the poverty line, a 71 percent earnings premium translated to a lifetime income boost of $335,000 — hardly something to sneer at, and much more than the cost of most college degrees. And interestingly, for people from families actually below the poverty line, Bartik and Hershbein found a very large premium of 179 percent, although their estimates are less precise.

Also, as Bartik notes, the class difference Shell cites doesn’t exist for black people, or for women. The  researchers found that black people from low-income backgrounds who earn college degrees actually earn $408,000 more during the course of their lives than white college graduates from similar class backgrounds. So by downplaying the value of a college degree, Shell and others could be doing a great disservice to disadvantaged minorities.

Of course, the college wage premium doesn’t mean that getting a degree will automatically boost your income by the given amount. Some fraction of that extra income is probably just due to the talent and work ethic needed to graduate. And your major matters too — earnings are substantially higher for STEM, health-care and business majors than for arts and humanities majors. So Bartik and Hershbein’s research doesn’t provide a perfect answer to the question of “Should I go to college?” Still, for most people, it’s probably worth it — as long as you can graduate.

But Shell’s op-ed also touched on an important point that discussions of the college premium sometimes ignore — the college system may be increasing inequality. This can be seen in Bartik and Hershbein’s numbers for the lifetime incomes of graduates from various backgrounds:

For poor people, Bartik and Hershbein found a very large college earnings boost, so at the lower end of the distribution, college probably works to reduce inequality. But in dollar terms, people from the upper classes get the biggest boost of all — more than $1 million in extra lifetime earnings.

To the extent that this premium represents a causal effect, it means that college degrees actually increase the total income gap between the upper class and the middle class. Bartik and Hershbein found that the difference is largely driven by white male college graduates from well-off backgrounds:

College graduates who come from high-income families … particularly men and whites and those who get graduate degrees, have a much higher chance of accessing the top of the earnings distribution than otherwise similar individuals who come from poorer families.

This is sadly predictable, since part of the benefit of college comes not from classes and studying but from the people you meet. For poor kids, this can mean learning about better career options from more privileged peers. But for rich kids, it can mean networking with other rich kids, creating and cementing the exclusive social groups that give access to very lucrative job and investment opportunities later in life. This high-powered networking effect is probably strongest for white men, who continue to dominate the upper ranks of the corporate hierarchy and the investor class, and for whom college networks can act as a gateway to that social world.

So college is very important for the poor, but it may be even more beneficial for the rich — especially the rich, white and male. Unfortunately, there’s no easy answer to that problem. Abolishing the college system would almost certainly hurt the poor, and rich white men would probably find some other way to form good-old-boy networks. A better solution would be to make college social networks more egalitarian — to somehow ensure that rich white men make lots of friends who are women, minorities, and people from less advantaged backgrounds during their formative years. That’s easier said than done. But colleges should be thinking about how to promote such a mixing of human networks.

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