The Role of Elite Institutions

The increase in the college premium—the differential in what is earned by college graduates compared with what is earned by those with high-school diplomas—is a major factor contributing to rising inequality in America. A widely cited study by the economists Claudia Goldin and Lawrence F. Katz,

The Race Between Education and Technology, reveals a sharp increase in the salaries of individuals with college diplomas and advanced degrees, because of the need for better-educated workers in our increasingly complex economy. According to Goldin and Katz, the college premium accounted for roughly 60 percent of the growth in wage inequality from 1973 to 2005.

And the increasing demand for educated workers has led to tuition increases, especially since the 1980s.

Whereas tuition at public and private universities averaged, respectively, 4 percent and 20 percent of annual median family income from the 1950s to 1970s, by 2005 the comparable figures had surged to 10 percent and 45 percent of median family income. Thus, unlike in earlier years, increases in college tuition have placed a severe financial strain on the budgets of middle- and lower-income families. Indeed, many Americans have to forgo any prospect of sending their children to college, because the costs are so far beyond their means. For others, as Timothy Noah put it in his impressive new book,

The Great Divergence, “a college education is so inarguably necessary to thrive in today’s economy that parents will pay whatever they can scrape together, even if it means dipping into retirement funds. Financial and student loans make up the difference for many families, and others pay sticker price.”

Universities and colleges realize that, Noah argues, and therefore experience few constraints in raising tuition levels. He quotes a dean at Mount Holyoke College saying colleges raise tuition to attract students who equate cost with prestige. The dean called it “the Chivas Regal strategy.”

The net result is that elite institutions now feature a disproportionate number of students from affluent backgrounds. Recognizing the problem, Harvard University, where I teach, has instituted a scholarship program that provides virtually free tuition for students from middle- and lower-income families in the United States. Other rich elite universities, like Princeton and Yale, have followed suit.

Nonetheless, the number of low-income students in the nation’s colleges and universities remains distressingly low. In many institutions, enrollments of lower-income students have actually declined. In 2003 more entering freshmen at the University of Michigan at Ann Arbor came from families earning at least $200,000 than were from the entire bottom half of the income distribution. And a study by Anthony Carnevale revealed that while 67 percent of the entering freshmen in the class of 2010 at the 193 most selective colleges came from the top fourth of the earnings distribution, only 15 percent came from the bottom half of the distribution.

It is obvious that more steps have to be taken to attract low-income students. Institutions of higher learning may not be able to directly influence preparatory programs to enter college, but they can focus on creative ways of recruiting lower-income students—and, given the continuing tuition hikes, on more-comprehensive need-based scholarships and aid packages.