What does it take to make it into the 1%? A fancy college degree and a family that’s already there (or close to it), new research finds.
Within the group of students who took Chile’s national college exam since 1980, the 1.8% who were admitted to six programs at two elite colleges in Chile since 1980 made up more than 40% of directors and top managers in the country and 38% of the top 0.1% of the income distribution between 2005 and 2013, according to a paper published Monday by the National Bureau of Economic Research, a nonprofit economic research organization. This group also accounted for nearly 46% of the 0.001% during the same period.
But these elite higher education programs aren’t a ticket to wealth and success for everyone, the study found. Students who came to these programs from high-cost private schools were much more likely to reap the benefits of these programs, whereas for students from other backgrounds, the programs offered almost no benefit compared with what they might have done otherwise — likely attend a similar program at a less prestigious school.
“The types of programs that produce a disproportionate share of the very richest people are also the programs where there’s a much smaller return for people who aren’t from very wealthy backgrounds,” said Seth Zimmerman, an economics professor at the University of Chicago Booth School of Business and the author of the study.
One of the major explanations for this trend, according to the study: chumminess. Two students who attend private high schools and are in the same elite college class are 126% more likely to go on to work in leadership roles in the same firm than two students from private high schools who attend the same top college but are in different years. On the other hand, students from different backgrounds who are in the same college class are no more likely to serve on leadership teams in the same firm than if they didn’t attend college together, the study found.
That dynamic indicates that the ability to land these top-paying leadership positions is less about skills — whether learned in school or passed on through wealthy families — and is more about the ability of students from similar, rich families to successfully form connections while in school, Zimmerman said.
Though the outcomes for less-wealthy students in these programs are comparatively bleak, Zimmerman said that doesn’t mean middle-class or low-income students should doubt the value of an elite education in improving their earnings prospects. Zimmerman’s study was focused on the kinds of business-centric programs that launch students into extremely high-paying careers. Other fields, like medicine, at these top schools tend to benefit students more equally, regardless of background, Zimmerman found. But while students who become doctors will likely become rich, the field of medicine probably won’t make them 1%-level wealthy, he said.
“For rich people who are interested in business, it matters a lot” which school you go to, he said. This finding echoes other research, which indicates that an Ivy League degree is particularly beneficial for students interested in working in business, in no small part because of the networking that takes place in these programs.
It’s hard to say how Zimmerman’s findings would translate in the US. Chile’s business world is smaller and more concentrated than corporate America. And unlike in the US, students in Chile apply directly to their major — in this case, a business-related field — when they apply to college. But it appears that there are similar dynamics at play here. Corporate chiefs are very likely to come from a handful of elite schools, according to Equilar, a compensation research firm.
And it may be harder for less-wealthy students to participate fully while attending these schools. In the paper, Zimmerman highlights a 2013 story in the New York Times noting that students at Harvard Business School said that class was a major divider during their time at the school, as less wealthy students struggled to keep up with the spending necessary to participate socially.
Harvard isn’t alone. Students at elite business schools often shell out thousands of dollars for excursions to ski resorts and far-flung locales that can serve both educational and bonding purposes, Bloomberg reported last year. These students typically spend more than MBA candidates at lower-ranked schools.
“There’s a lot of evidence to suggest that qualitatively what’s happening in Chile is happening in the US,” Zimmerman said.
If you aren’t lucky enough to be born into the 1%, there’s always winning the lottery, but most winners tend to blow it: