Returns to elite education

In an earlier post I discussed a survey of honors college students here at U Oregon, which revealed that very few had a good understanding of elite career choices outside of the traditional ones (law, medicine, engineering, etc.). It's interesting that, in the past, elite education did not result in greater average earnings once SAT scores are controlled for (see below). But I doubt that will continue to be the case today: almost half the graduating class at Harvard now head into finance, while the top Oregon students don't know what a hedge fund is.

NYTimes: ...Recent research also suggests that lower-income students benefit more from an elite education than other students do. Two economists, Alan B. Krueger and Stacy Berg Dale, studied the earnings of college graduates and found that for most, the selectivity of their alma maters had little effect on their incomes once other factors, like SAT scores, were taken into account. To use a hypothetical example, a graduate of North Carolina State who scored a 1200 on the SAT makes as much, on average, as a Duke graduate with a 1200. But there was an exception: poor students. Even controlling for test scores, they made more money if they went to elite colleges. They evidently gained something like closer contact with professors, exposure to new kinds of jobs or connections that they couldn’t get elsewhere.

“Low-income children,” says Mr. Krueger, a Princeton professor, “gain the most from going to an elite school.”

I predict that, in the future, the returns to elite education for the middle and even upper middle class will resemble those in the past for poor students. Elite education will provide the exposure to new kinds of jobs or connections that they couldn't get elsewhere. Hint: this means the USA is less and less a true meritocracy.

It's also interesting how powerful the SAT (which correlates quite strongly with IQ, which can be roughly measured in a 12 minute test) is in predicting life outcomes: knowing that a public university grad scored 99th percentile on the SAT (or brief IQ test) tells you his or her expected income is equal to that of a Harvard grad (at least that was true in the past). I wonder why employers (other than the US military) aren't allowed to use IQ to screen employees? ;-) I'm not an attorney, but I believe that when DE Shaw or Google ask a prospective employee to supply their SAT score, they may be in violation of the law.