Friday, January 9, 2015

Rich or Smart... Knowledge, Skills Matter

Being "smart" (or at least hard-working with the opportunity to learn) matters, regardless of the economic class into which you are born. As even the most progressive, class-conscious scholars have found, a college education (in the STEM fields, ideally) at a good school corresponds well to later economic success. 

A year ago, The Atlantic featured this story:
Would You Rather Be Born Smart or Rich?
http://www.theatlantic.com/business/archive/2013/12/would-you-rather-be-born-smart-or-rich/281828/JORDAN WEISSMANN
DEC 2 2013, 12:17 PM ET
A recent Brookings paper gives reasons for optimism. Over the long term, it finds, smart kids earn more than rich kids. But sadly, there's a big catch.
The Brookings paper looked at the relationship between brains, motivation, and economic mobility among a group of youth the government began tracking in 1979. Here's the executive summary: If they were bright and driven, poor kids stood a decent chance of becoming upper-middle-class, or better. Of low-income teens who scored in the top third of test-takers on the Armed Forces Qualification Test (on the far left in green), more than 40 percent made it to the top two income quintiles by adulthood. Meanwhile, dimwitted children of affluence generally fell down the economic ladder. Among high-income teens who scored in the bottom third of AFQT takers (on the far right in orange), more than half ended up in the bottom two income quintiles. 
Studies using tests similar to the AFQT, such as the SAT or ACT, have found similar trends. Data indicate the rich and powerful are consistently in the top two percent academically. In other words, the "One Percent" (those wealthy people we should envy) consistently come from the "Two Percent" of academic test-takers (the "98th Percentile" in admissions parlance). 

As Jonathan Wai of Duke University wrote in his 2014 paper "Investigating The World's Rich And Powerful: Education, Cognitive Ability, And Sex Differences," the attendees of the Davos forums are well-educated in demanding STEM fields. Wai found: 
Among billionaires and Davos attendees, many majored in business and STEM. In the U.S., top 1% ability individuals were highly overrepresented: 45 times (base rate expectations) among billionaires, 56 times among powerful females, 85 times among powerful males, and 64 times among Davos participants.
As the Brookings Institute researchers found, and Wai confirmed the next year, academic success correlates to financial success and social leadership. Wai carefully recognized that wealth alone might not measure success, so he also included "leaders" of society in his data, though Brookings did limit their study to social mobility and educational potential.

Consider this chart from Brookings:



If you are born into the bottom quintile (the "lowest" class) but score well on academic placement exams, you have a pretty decent chance (clearly not all luck) of moving into the top two quintiles of income. If you are born into a top-income family, but score badly on placement tests, there's a decent likelihood that you will exit that upper-income quintile. 

As The Atlantic's Jordan Weissmann noted, there is a complication — and one I witness at the university at which I teach. 
Now about that catch. The unfortunate truth is that, more often than not, the rich kids are the smart kids. For many years now, the single biggest gap in American education has been between the well-to-do and the poor. Thanks to the resources their families can pour into parenting, wealthy students start out academically ahead the day they walk into kindergarten, and stay ahead through their high school graduation day.
By their late teens, six out of every ten children from the wealthiest slice of families place among the top third of test takers; six in ten children from the poorest slice of families place among the bottom third. They're mirror images of wealth and acumen.  
Now, we have a question that cannot be answered easily. The truth is going to be complicated in ways that please no political ideologues.

The genetic argument leads fallacies along uncomfortable ethnic lines, for example. Are the wealthy genetically predisposed to certain types of skills we now value in this economy? If that's the case, do their genes pass along some portion of the skills for success? 

The pure wealth argument (money buys opportunity) leads to ignoring genetics, culture, and other variables. Fallacies arise as simple correlations are used to "prove" the unfairness of tests, school, and the economy. The problem with this is that Wai studied data globally, not merely United States citizens. Success globally correlated to elite university educations. We also know that wealthy parents still can and do raise children who eventually fall out of the top income quintiles. 

The children of the wealthy fall from the top to the next-highest quintile. They do have a safety net, as data reflect. But, as adults those former children of the wealthy, newly part of the upper-middle classes, have children with even greater mobility — up and down the income ladder. Within generations, a family can rise or fall. In two generations, smart children and grandchildren of poor parents can reach the top two quintiles. 

In the United States, this intergenerational mobility isn't as quick as in some nations, but our income brackets expressed as class quintiles cover much wider income distributions. In other words, it is a much, much greater distance from the top to the bottom in the United States than in developed European nations. 

The true nature of social mobility eludes us. We know education is the key to success, including success not defined by money alone. But, how do we ensure access to education? And why do some people with access still fall from the top income quintiles? What variables determine how well someone uses the opportunity to obtain an education? 

Being test-smart and college-educated (at a top-tier school) matters a great deal in our technology-driven global economy. 

Friday, January 2, 2015

Washington Post... The Middle Class

Middle-class families have found themselves stagnating for the last two decades (at least). The Washington Post has published an outstanding series on the issues affecting the middle-class. The stories are long and well researched.

ABOUT THIS SERIES: The American middle class is floundering, and it has been for decades. The Post examines the mystery of what's gone wrong and shows what the country must focus on to get the economy working for everyone again.


My personal favorite part of this series has been Chapter 4, which describes how the appeal of the financial industry has drawn our best and brightest minds from other pursuits.