04 June 2020

How Our Inequality in Educational Policy Drives Inequality in Income

Our country's most elite are beneficiaries of extraordinary investments. Our poor and middle class, not so much. This huge difference in educational investment makes for huge difference in lifetime earnings.

If you are in the top 1% of households in this country, your annual income would translate into $18 million in lifetime earnings. If you are in the 25th percentile, your lifetime earnings will be about a million dollars. This difference of 18 to 1 in lifetime earnings begins with a difference of about 10 to 1 in early investment.

It starts with public schools.

In K-12, Connecticut invests an average of $18,000 per student whereas Mississippi invests $8,000. Wealthy school districts spend even more than the state average. One wealthy school district in New York invests $27,000 per student.

Private, elite schools will invest about $75,000 a year in students.

It's no wonder that by the eighth grade, students from rich families are four grades ahead of students from poor families. A gap of 4 years by year 8.

The investment gap continues at university. $92,000 per year is invested in students at the most selective universities compared to $12,000 a year at the least selective.

"A 2004 study of the most selective private universities found more freshmen whose fathers were medical doctors alone than whose fathers were hourly workers, teachers, clergy, farmers, and soldiers combined." "More distressingly still, across the Ivy League, the University of Chicago, Stanford, MIT, and Duke, more students come from families in the top 1 percent of the income distribution than from the entire bottom half."

In 1967, the ratio of subsidies at the most selective colleges to the subsidies at the least selective was 3 to 1. By 2007, that ratio had grown to 15 to 1. That is, even among the minority of citizens whose university education we subsidize, the disparity has become 5X greater in the last half century.

[All these stats on education are from Daniel Markovits' The Meritocracy Trap.]

What is the punchline? I think it won't be long before Americans insist on equal investments. For our brightest it may come in the form of education. For our most clever it might come in the form of capital equipment. For our most bold, it might come in the form of startup capital. For others it might simply come in the form of a bond or stock that pays an annual dividend or compounds during their working career. Narrowing the gap in investments could do a great deal to narrow the gap in income and wealth.

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