From Forked Lightning, a Substack by David Deming, one of the coauthors of Raj Chetty’s new paper on college admissions:

One of the most interesting findings in our paper was that while Ivy-Plus [Eight Ivy League colleges plus MIT, Stanford, Chicago, and Duke] students are much more likely to have top 1% earnings, their average earnings are not too much different than students who attend selective public universities.

This is because public university graduates mostly earn incomes in the 70th to 95th percentile—very good, but not at the top.

Before diving into the reasons, a quick word on magnitudes. We find small impacts on mean income rank, but the value of a “rank” is different at different places in the distribution. The difference between 78th and 79th percentile (the average for people who attend selective public flagship schools) is about $2,000 per year, but the difference between 98th and 99th is almost $40,000 per year. We find mean impacts of about 1.5 ranks, or an increase of about $3,000 relative to a base of around $60k. But we also find that Ivy-Plus students are much more likely to get to the 99th percentile of income and beyond.

… Social ties may indeed be very important, especially for top positions in business leadership. However, I don’t think social ties alone can explain our results.

Digging deeper into the data, we see that a college applicant’s employer at age 25 very strongly predicts their own earnings at age 33. So strongly, in fact, that we can use it to increase the precision of our estimates. Not very many of the applicants in our sample have even turned 30 yet, the age where earnings tend to stabilize and graduate school attendance is mostly complete (unless you are getting a PhD, or as my friend Jeff Smith often says with a smirk, you are a “gradual” student).

Instead of using actual earnings at age 25, we ask “are you working at a firm that paid very high salaries to other 33-year-olds in the past?” Of course this is only an approximation, but the fact that we find similar results for the smaller number of students where do see earnings at 33 gives us confidence that this is a sensible workaround.[3]

Although using predicted income was a practical choice, the fact that it works so well explains a lot about what is going on. At age 25, most graduates are still working in the first job they took after college. They aren’t CEOs or top managers, but rather fresh meat for the corporate grinder. So to understand our results, we need to know more about the kinds of firms that hire Ivy-Plus graduates right out of college.

We create a measure of firm “prestige”, which roughly speaking corresponds to being the kind of employer that hires a lot from the Ivy-Plus but not much from public universities. Now you may ask – isn’t that a little bit circular? …

Here’s how to think about it.

If you want to work in finance, graduating from Ohio State gets you a great job at a regional operation like Huntington Bank or Nationwide Insurance. If instead you graduate from Harvard, you work somewhere like Goldman Sachs. For consulting, the comparison might be Deloitte vs. McKinsey. In journalism, it’s the Columbus Dispatch versus the New York Times. The point is that there are a small number of nationally recognized prestigious firms which provide a gateway to high-earning and high-status occupations. [4]

On-Campus Recruiting

And boy, do these firms spend a lot of time hanging out on Ivy- college campuses! At Harvard, the three most prestigious management consulting firms – McKinsey, Bain, and Boston Consulting Group – interview students in their sophomore year for internships the following summer, which often lead to formal job offers shortly thereafter (Yale and Princeton follow a similar pattern, with recruiting events held as early as freshman year). In 2022, 40% of Harvard graduates and 30% of Yale graduates went into consulting or finance.

Aden Barton wrote a wonderful article in the Harvard Crimson on this subject, which you should really read in full, provocatively titled “How Harvard Careerism Killed the Classroom”. He argues that careerism is driven by the increasingly brutal competition to be admitted. Having worked so hard to earn their spot, Harvard students feel intense pressure to have something to show for it. He also highlights the many ways that students are unconsciously funneled into finance, consulting, and technology jobs. These firms recruit early and often, promising the security that students crave, and in contrast jobs in the nonprofit and public sectors are hard to learn about and aren’t filled until students are very close to graduation. This matches my sense from talking with the students I know well. It’s not just the money that matters, but also the security of knowing what you are going to do next.

The concentration of prestigious employers is not only limited to industries that pay extraordinarily high salaries. A recent study found that 1 in 4 journalists at the New York Times, the Washington Post, and the Wall Street Journal attended an Ivy-Plus college. Ivy-Plus graduates constitute 1 in 4 current U.S. senators, nearly half of all Rhodes scholars, and almost 30 percent of MacArthur “genius” grant winners. (This is all in Figure 1 of the paper, shown below.)

Figure 1: Share of Individuals in Leadership Positions who Attended Ivy-Plus Colleges

The 12 Ivy-Plus colleges educate less than one percent of U.S. college students, yet their graduates occupy a hugely disproportionate share of high-earning and high-status positions in society. That’s an incredibly narrow talent pipeline. The importance of first job after college suggests that on-campus recruiting practices could be a key lever for change.

Perhaps Goldman Sachs and McKinsey should be pressured into visiting more campuses?

It’s kind of dumb that we let a small number of high-end firms’ desire to not have to recruit at fly-over campuses be the tail that wags the whole dog of our college system.

It would probably be better to have a system where getting into an Ivy+ college out of high school is not your one do-or-die chance to make it into the elite.