restricted access 62 The Economic Payoff of Attending an Ivy-League Institution
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62 The Economic Payoff of Attending an Ivy-League Institution PHILIP J. COOK AND ROBERT H. FRANK Many of our best and brightest high-school seniors know what most of our higher-education leaders have been reluctant to admit: An increasingly small number of colleges and universities have become the gatekeepers for society's top-paying jobs. Look at the legal profession. Lawyers who deal with mergers and business acquisitions, for example, receive just a small percentage of the money that changes hands in the transactions that they negotiate, but their fees can amount to millions of dollars in multibilliondollar deals. Not surprisingly many bright and ambitious young people ask themselves, "How can I get a job as a Wall Street lawyer?" Wall Street law firms typically are inundated with applications for each entry-level position and will not grant interviews to graduates of any but the top law schools. And how does one gain admission to such a school? The surest route is to have been an outstanding student at one of a handful of prestigious colleges and universities. In past decades, many of our best students attended state universities close to home, where they often received an excellent education at reasonable cost. Today, such students are likely to be vying for admission to the nation's most elite colleges and universities. Does this widening of the "prestige gap" between elite and lower-tier institutions, this "tracking " of students into educational institutions by their ability, raise matters of public concern ? Or are these shifts simply of interest to institutions at or near the top? We think they raise issues of general social importance. The increased interest of top students in attending the most prestigious institutions is easily documented. During the 1980s for example 59 per cent of the finalists in the Westinghouse Science Talent Search (one of the nation's premier academic contests for highschool students) chose to enroll at one ofjust seven institutions-Cornell, Harvard, Princeton , Stanford, and Yale universities, the California Institute of Technology, and the Massachusetts Institute of Technology. The same seven institutions led the list in the 1970s, but enrolled only 48 per cent of the Westinghouse finalists. Further, by 1990, about 43 per cent of students scoring above 700 on the verbal section of the Scholastic Assessment Test chose one of the 30 "most competitive" colleges listed in Peterson's Guide to Four Year Colleges, up from 32 per cent in 1979. And Richard Spies, vice-president for finance at Princeton, has estimated that from 1976 to 1987, the probability increased by about half that a student with a combined S.AT. score above 1,200 CHRON. HIGHER ED., January 5,1996, at B3. Originally published in the Chronicle of Higher Education. Reprinted by permission of the authors. Copyrighted Material The Economic Payoff of an Ivy League Institution 379 would apply to one of the 33 elite private institutions belonging to the Consortium on Financing Higher Education. This trend in applications has continued into the 1990s. The quest for a high-paying job is clearly not the only cause of the increased concentration of top students at prestigious colleges and universities. Travel costs are lower now, and elite institutions have increased their efforts to attract talented students from outside their traditional applicant pools. Even more important, demographic and economic trends have made elite institutions increasingly affordable and therefore attractive to more families. Households headed by well-educated older workers-which provide a disproportionate share of the top students-have enjoyed substantial growth in income since the early 1970s. This period also has witnessed a steep decline in the average number of children in the families of college-age youths. Thus despite a doubling of tuition (in constant dollars) since 1979 in the Ivy League, for example, an elite private education has actually become more affordable for a substantial share of the relevant market. But we cannot escape the conclusion that the growing economic payoff of obtaining a degree from an elite college is driving the concentration of top students at such institutions. In our recent book, The Winner-Take-All Society (The Free Press, 1995), we document a large increase in inequality of earnings within every white-collar profession. The number of Americans earning more than $120,000 a year (in 1989 dollars) doubled during the 1980s. While median earnings were stagnant in most of the white-collar professions during that time, more than 60 per cent of the increased number of Americans earning...