In 2018 year, about 2M Americans will apply to college. Most will apply to nearby schools without global brands. But for all the families applying to America’s most elite institutions, the so called IVY league, the admissions process is a high-cost, high-stress process.
The middle class is expanding in emerging markets. India and China are growing. The Chinese are obsessed with quality education. The one child policy makes Chinese parents break the bank in order to give their only child the very best.
This process that starts from kindergarten. Parents obsessed with their children’s education enroll their kids in the so called prep schools. These schools have a track record with IVY league admissions. The admissions process is equally brutal.
Parents use education consultants to maximize their children’s chances. Just in America parents spend $500M every year on independent education consultants. This excludes the cost of test prep courses and the travel expense (campus visits, airfare, lodging etc.) associated with it. Many top colleges have more students from the 1% than from the bottom 60%. Education ends up increasing inequality.
Does it really matter whether you attend an elite college? Is it really worth the stress and the money associated with the whole process? Ivy League colleges provide more than world-class instruction. Their biggest asset is the connected alumni network and the validation to all future employers that you are talented. College isn’t just an education; it’s a network and an identity.
IVY league colleges in America are disproportionately responsible for minting the American elite. About 45% of America’s billionaires and more than 50% of Forbes’s list of the most powerful people attended schools where incoming freshmen average in the top first percentile of SAT scores.
In England more than 40% of the students at Oxford and Cambridge attended Private schools. Every year the 2 colleges admit more boys from Eton than from the country’s entire pool not financially privileged children.
There is some contrarian evidence though. In November 2002, the Quarterly Journal of Economics published a paper by the economists Stacy Dale and Alan Krueger that reached a surprising conclusion. For most students, the salary boost from going to a super-selective school is “generally indistinguishable from zero” after adjusting for student characteristics, such as test scores.
What does this mean? If Kate and John have the same SAT scores and apply to the same colleges, but Kate gets into Harvard and John doesn’t, they can still expect to earn roughly the same income throughout their careers.
The 2 economists also found that the average SAT scores of all the schools a student applies to is a more powerful predictor of success than the school that student actually attends.
This finding implies that the raw talent of individual students is worth more than the resources of IVY league schools. It is like saying that the clothing does not make the man.
This suggest that all the monies, angst and time devoted to the admissions process is a waste for the vast majority of its participants.
In 2018 economists from Virginia Tech, Tulane, and the University of Virginia published a new study that reexamines the data in the Dale-Krueger study. Among men, the new study found no relationship between college selectivity and long-term earnings.
But for women, “attending a school with a 100-point higher average SAT score” increased earnings by 14% but reduced marriage by 4%.
This shows that college selectivity does seem to matter, especially for married women, by raising earnings almost entirely through the channel of increased labor force participation.
What does this mean for non-economists like us? Women who graduate from elite schools delay marriage, delay having kids, and stay in the workforce longer than similar women who graduate from less-selective schools.
Another study had interesting outcomes too. In 2017 a study led by the economist Raj Chetty found that lower-income students at an elite school have a much higher chance of reaching the top 1% of the earnings distribution than those who attend an excellent public college. In other words selective schools also seem to make a difference in the lives of minorities and students whose parents have no college education.
What is the cause for that? Why do top colleges help minorities more than the typical white richer students? Shouldn’t it be the same given that they have the same professors and coursework? It is the drive that the poor students have. They lack their parents connections so they need to be hungry and driven.
So do elite colleges matter? Yes but it really depends on you, who you are. It depends on whether you come from an unprivileged background. It increases earnings for minorities and low-income students, and it encourages women to delay marriage and work more, even though it doesn’t raise their per-hour wages.
What if employers instead had access to accurate, real-time, and comprehensive data sets around each job applicant? Big data in education will provide that. In less than 10 years job candidates will be able to show down to the atomic concept what they really know.
Top colleges will start seeing recruits from outside of the top IVY league colleges who fit their profile. McKinsey does not care about Princeton. It cares about finding the best person for the job. The college degree will stop being a proxy for ability.
Colleges and schools will be affected, Employers will know which school consistently produces the best engineers. Students will surely follow the jobs. They don’t intrinsically care about an IVY league degree either.
