The Meritocracy Trap

by Daniel Markovits

  “an unwavering commitment”: See Julie Coffman and Bill Neuenfeldt, “Everyday Moments of Truth: Frontline Managers Are Key to Women’s Career Aspirations,” Bain & Company Insights, June 17, 2014, accessed September 28, 2018, www.bain.com/publications/articles/everyday-moments-of-truth.aspx.

  “from the rich to the poor”: See Arthur Okun, Equality and Efficiency: The Big Tradeoff (Washington, DC: Brookings Institution, 1975), 91. Hereafter cited as Okun, Equality and Efficiency.

  “will simply disappear in transit”: See Okun, Equality and Efficiency.

  “large-scale redistribution of income”: Robert M. Solow, “Stray Thoughts on How It Might Go,” in 100 Years: Leading Economists Predict the Future, ed. Ignacio Palacios-Huerta (Cambridge, MA: MIT Press, 2013), 142.

  “those who are doing well”: Angus Deaton, “Through the Darkness to a Brighter Future,” in 100 Years: Leading Economists Predict the Future, ed. Ignacio Palacios-Huerta (Cambridge, MA: MIT Press, 2013), 38.

  losing a war or succumbing to a revolution: This conclusion follows from Winters, Oligarchy. Winters himself is too circumspect a scholar to assert the conclusion outright, although his book as a whole suggests that he recognizes what his study reveals.

  “only [an] all-out thermonuclear war”: See Walter Scheidel, The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century (Princeton, NJ: Princeton University Press, 2017), 438. The quotation is reported in Eduardo Porter, “A Dilemma for Humanity: Stark Inequality or Total War,” New York Times, December 6, 2016, accessed September 28, 2018, www.nytimes.com/2016/12/06/business/economy/a-dilemma-for-humanity-stark-inequality-or-total-war.html.

  Scheidel is not alone in his view. At least two other comprehensive studies conclude that orderly corrections of concentrated income and wealth are immensely rare and that the principal historical mode of unwinding extreme wealth has been large-scale violence. See Kenneth Scheve and David Stasavage, Taxing the Rich: A History of Fiscal Fairness in the United States and Europe (Princeton, NJ: Princeton University Press, 2016); Winters, Oligarchy.

  build the midcentury middle class: See Winters, Oligarchy, 232. Britain in the twentieth century might present a second instance, if Britain is treated as winning the two world wars and decolonization is treated as different from revolution. But both these characterizations capture just the formal rather than the substantial truth of the matters that they address. Britain won the First World War only in the narrowly legal sense that Germany surrendered: the British “victory” achieved no significant objective, and Britain suffered devastating losses in blood and treasure (with an entire generation destroyed by the war). And decolonization deprived the British of an empire and converted Britain from a global hegemon to a minor power. The redistribution that remedied inequality within British society was thus accompanied by a reduction in Britain’s overall wealth and power, of thus the sort associated with internal revolution or external military defeat.

  what’s past need not be prologue: See William Shakespeare, The Tempest (Cambridge, MA: Harvard University Press, 1958), Act II, scene i.

  abolitionists and civil rights campaigners emphasized: “Many of our white brothers, as evidenced by their presence here today, have come to realize that their destiny is tied up with our destiny. And they have come to realize that their freedom is inextricably bound to our freedom.” Martin Luther King Jr., “I Have a Dream” (speech), March on Washington for Jobs and Freedom, Washington, DC, August 1968, accessed October 19, 2018, http://avalon.law.yale.edu/20th_century/mlk01.asp.

  “the work of a civilization”: The phrase comes from Michael Gerson, “Our Disconnected Working Class,” Washington Post, May 15, 2014, accessed September 28, 2018, www.washingtonpost.com/opinions/michael-gerson-our-disconnected-working-class/2014/05/15/f02fdac8-dc52-11e3-8009-71de85b9c527_story.html?utm_term=.706543dfd8e6.

  to attack meritocratic inequality head-on: This agenda represents a revolution in education reform. Education reformers of all stripes conventionally focus their efforts on the lowest-performing schools, whose students typically hail from the poorest families. Charter schools gravitate toward inner cities, and school finance equalization litigation seeks to close the funding shortfall suffered by the poorest school districts. Generalist policymakers who turn to education typically follow suit, as when Federal Reserve chair Janet Yellen, in a recent speech on “Perspectives on Inequality and Opportunity,” devoted the portion of her remarks that took up education to promoting pre-kindergarten education for the poor and increased spending in low-income schools. See Janet Yellen, “Perspectives on Inequality and Opportunity from the Survey of Consumer Finances,” Conference on Opportunity and Equality, Federal Reserve Bank of Boston, October 17, 2014, accessed September 28, 2018, www.federalreserve.gov/newsevents/speech/yellen20141017a.htm.

  But while the undereducated poor may present economic inequality’s most heartrending face, the overeducated rich present its most consequential one. Even narrowly within education, the gaps between investments made in poor and middle-class students are perhaps a fifth as large as the gaps between investments made in middle-class students and rich ones. Moreover, the overeducated rich rather than the undereducated poor drive meritocratic inequality’s broader systemic failures. They concentrate industry, income, and status. They condemn middle-class workers to hopeless idleness and superordinate workers to alienated overwork. They isolate themselves comprehensively from the rest of society. And they corrupt democratic politics.

  Achieving equality requires closing the educational gap between the middle class and the rich. And this requires massively expanding access to education not at the bottom, but at the top. The conventional approach to education reform is simply mismatched to meritocratic inequality’s distinctive profile.

  not included in their estates: The estate and gift tax applies to estates greater than $11.2 million for individuals and $22.4 million for married couples and imposes a top rate of 40 percent. Brian J. O’Connor, “Heirs Inherit Uncertainty with New Estate Tax,” New York Times, February 23, 2018, accessed September 28, 2018, www.nytimes.com/2018/02/23/business/estate-tax-uncertainty.html. At present, money that rich parents spend on their children’s educations is not included in their estates, for purposes of computing the tax. But these meritocratic inheritances have become essential to the dynastic transmission of privilege, and the sums involved are enormous. The present tax regime amounts, in effect, to a massive tax shelter for rich families that prefer meritocratic over aristocratic mechanisms for securing their dynasties. Inheritance taxes played a central role in the reforms that reined in the aristocracy. Including a rich child’s meritocratic inheritance in her parents’ estate would play a similar role in reining in the meritocracy today.

  devoted to the public interest: A public charity is, in effect, a tax-exempt organization that is not a private foundation. IRC [26 U.S.C.] §§ 501(c)(3), 509(a)(1)–(a)(4).

  Essex County College in Newark: These numbers reflect 2013 budgets. The average implicit public subsidy at the ten most highly endowed colleges in that year was $41,000. See Kellie Woodhouse, “The Widening Wealth Gap,” Inside Higher Ed, May 21, 2015, accessed September 28, 2018, www.insidehighered.com/news/2015/05/21/rich-universities-get-richer-are-poor-students-being-left-behind. Rich Schools, Poor Students: Tapping Large University Endowments to Improve Student Outcomes, 7, Table 1, Nexus Research & Policy Center, accessed September 28, 2018, http://nexusresearch.org/wp-content/uploads/2015/06/Rich_Schools_Poor_Students.pdf.

  “hedge funds with universities attached”: See, e.g., Astra Taylor, “Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached,” The Nation, March 8, 2016, accessed September 28, 2018, www.thenation.com/article/universities-are-becoming-billion-dollar-hedge-funds-with-schools-attached.

  U.S. households generally: The 7 percent figure reflects the past twenty years. See NACUBO-Commonfund, “U.S. and
Canadian Institutions Listed by Fiscal Year (FY) 2017 Endowment Market Value and Change in Endowment Market Value from FY2016 to FY2017,” accessed September 29, 2018, www.nacubo.org/-/media/Nacubo/Documents/EndowmentFiles/2017-Endowment-Market-Values.ashx?la=en&hash=E71088CDC05C76FCA30072DA109F91BBC10B0290; IPEDS, U.S. Department of Education, National Center for Educational Statistics, Integrated Postsecondary Education Data System (IPEDS), Table 333.90, “Endowment funds of the 120 degree-granting postsecondary institutions with the largest endowments, by rank order: Fiscal year 2015,” accessed September 29, 2018, https://nces.ed.gov/programs/digest/d16/tables/dt16_333.90.asp. Note that all private university endowments add up to about $550 billion but also that the smaller endowments grow at slower rates than the larger ones. Rick Seltzer, “Endowments Rebound, but Is It Enough?,” Inside Higher Ed, January 25, 2018, accessed October 11, 2018, www.insidehighered.com/news/2018/01/25/college-endowments-rise-122-percent-2017-experts-worry-about-long-term-trends. Robert Reich, “Why the Government Spends More Per Pupil at Elite Private Universities Than at Public Universities,” Business Insider, October 14, 2014, accessed September 28, 2018, www.businessinsider.com/government-spends-more-per-pupil-at-private-universities-than-at-public-niversities-2014-10 [inactive].

  designed the new buildings to last forever: Telephone conversation between Eric Veenstra of the Yale Office of General Counsel and Yicong (George) Shen, reported by email from Shen on September 14, 2017.

  from these sources: See Report of the Treasurer 2015–2016, Princeton University, Princeton University Highlights (2015), accessed October 11, 2018, https://finance.princeton.edu/princeton-financial-overv/report-of-the-treasurer/2015-2016.pdf; U.S. News & World Report, “National University Rankings” (top twenty private universities selected), accessed September 29, 2018, www.usnews.com/best-colleges/rankings/national-universities.

  bottom two-thirds of the income distribution: The policy should also apply to private educational endowments, including those that support rich but nominally public schools. In addition, elite but nominally public school districts—such as Scarsdale’s—might be assessed luxury taxes even on their public budgets, based on the differences between their per-student spending and state medians, unless they admit more working- and middle-class students.

  by expanding enrollments: Colleges might construct their newly economically diverse student bodies by giving an admissions preference to graduates of high schools whose student bodies skew away from wealth. This would connect reforms to schools and colleges, so that changes at each level support changes at the other.

  A crude version of this approach already exists, although in a narrow context, in the University of Texas’s commitment to admitting all applicants who graduate in the top 10 percent of their high school classes. A more sophisticated version, which takes into account the incentives that the college admissions preference would give to economic integration in high school, is developed by Thomas Scott-Railton in “Shifting the Scope: How Taking School Demographics into Account in University Admissions Could Improve Education and Reduce Inequality Nationwide,” Yale Law and Policy Review (2017). Scott-Railton also helpfully assesses the legality of the preference that he proposes.

  It would help if the publications that rank colleges and universities, which at present reward increased selectivity with higher rankings, recalibrated their methods to reward inclusive admissions practices. For accounts of the tension between open admissions and rankings competition that university presidents now feel, see The Education Conservancy, Financial Aid: Examining the Thinking Behind the Policy (2015), http://educationconservancy.org/PresidentialThinking.pdf. See also Wendy Espeland and Michael Sauder, Engines of Anxiety: Academic Rankings, Reputation, and Accountability (New York: Russell Sage Foundation, 2016).

  can afford to grow: Some universities are demonstrating that high-quality education can be delivered to large numbers of students at much lower costs still. Arizona State, for example, has dramatically opened its student body over the last decade, with its president Michael Crow going so far as to partner with Starbucks CEO Howard Schultz to make tuition support into a widely available employee benefit. Joe Nocera, “A New College Model: Arizona State Matches Starbucks in Its Trailblazing Ways,” New York Times, June 16, 2014, accessed September28, 2018, www.nytimes.com/2014/06/17/opinion/joe-nocera-starbucks-and-arizona-state-add-an-education-to-benefit-package.html?mcubz=3. See also Starbucks, “Starbucks College Achievement Plan,” accessed September 29, 2018, www.starbucks.com/careers/college-plan.

  as it did in 2000: See Chapter 5.

  The new students would have to skew less to wealth than the old. At Princeton, for example, slightly more than 15 percent of the present class come from the bottom two-thirds of the income distribution. See Benjamin Wermund, “How U.S. News College Rankings Promote Economic Inequality on Campus,” Politico, accessed September 28, 2018, www.politico.com/interactives/2017/top-college-rankings-list-2017-us-news-investigation [inactive]. If Princeton composed a doubled class using all the students that it presently admits plus additional students drawn evenly from households across the income distribution, then almost exactly half of the total class would come from the bottom two-thirds of the income distribution.

  as they did in 1970: See Chapter 5.

  than their public counterparts: See Chapter 5.

  may be transformed again: If elite universities expand and open their student bodies at the same moment as elite schools, they will not yet have a larger and more inclusive pipeline from which to admit their classes, and they might lack qualified applicants. For this reason, it may be best to make education more inclusive from the bottom up, as it were, beginning with kindergarten and then moving through the grades.

  the most recent tax reform: The Tax Cuts and Jobs Act of 2017 imposes a 1.4 percent excise tax on the endowment incomes of universities with endowments larger than $500,000 per full-time student and enrollments greater than five hundred students. Richard Rubin and Andrea Fuller, “Which Colleges Will Have to Pay Taxes on Their Endowment? Your Guess Might Not Be Right,” Wall Street Journal, accessed September 28, 2018, www.wsj.com/articles/which-colleges-will-have-to-pay-taxes-on-their-endowment-your-guess-might-not-be-right-1516271400. Roughly twenty-seven universities will be affected. Ben Myers and Brock Read, “If Republicans Get Their Way, These Colleges Would See Their Endowments Taxed,” Chronicle of Higher Education, accessed September 28, 2018, www.chronicle.com/article/If-Republicans-Get-Their-Way/241659; “Tax Reform,” National Association of Independent Colleges and Universities, accessed September 28, 2018, www.naicu.edu/policy-advocacy/issue-brief-index/tax-policy/tax-reform.

  The new tax follows a long line of unsuccessful prior efforts. In 2007 a Republican member of the Senate Finance Committee proposed that university endowments should be required to disburse 5 percent of their value each year, under the same rule that governs tax-exempt foundations. See, e.g., Janet Lorin, “Universities Seek to Defend Endowments from Republican Tax Plan,” Bloomberg, April 18, 2017, accessed September 28, 2018, www.bloomberg.com/news/articles/2017-04-18/universities-seek-to-defend-endowments-from-republican-tax-plan. More recently, a Republican congressperson proposed requiring colleges with endowments greater than $1 billion to devote at least a quarter of their earnings to tuition assistance. See Stephanie Saul, “How Some Would Level the Playing Field: Free Harvard Degrees,” New York Times, January 14, 2016, accessed September 28, 2018, www.nytimes.com/2016/01/15/us/a-push-to-make-harvard-free-also-questions-the-role-of-race-in-admissions.html?mcubz=3&_r=0. Some state lawmakers are embracing similar proposals. A recent Connecticut proposal, for example, sought to subject profits on university endowments greater than $10 billion (which is to say, Yale University) to a tax, unless the university reinvested the profits in its educational mission or in the local economy. See Connecticut General Assembly Raised Bill No. 413, February Session 2016. See also Timothy W. Martin, “One New Fix for Connecticut’s Budget Cru
nch: Yale University,” Wall Street Journal, March 24, 2016, accessed September 28, 2018, www.wsj.com/articles/one-new-fix-for-connecticuts-budget-crunch-yale-university-1458853613.

  narrowly political motives: See “Sharp Partisan Divisions in Views of National Institutions,” Pew Research Center, July 10, 2017, accessed September 28, 2018, www.people-press.org/2017/07/10/sharp-partisan-divisions-in-views-of-national-institutions. See also Sofia Tesfaye, “America Hits Peak Anti-intellectualism: Majority of Republicans Now Think College Is Bad,” Salon, July 11, 2017, accessed September 28, 2018, www.salon.com/2017/07/11/america-hits-peak-anti-intellectualism-majority-of-republicans-now-think-college-is-bad.

  did not require excluding men: When Yale College first admitted women, in 1969, it made this logic distressingly explicit. Yale had long advertised a commitment to training a thousand American leaders each year. The college observed that by growing its class, rather than displacing men with women, Yale could honor this commitment even as it embraced coeducation. Linda Greenhouse, “How Smart Women Got the Chance,” New York Review of Books, April 6, 2017, accessed October 10, 2018, www.nybooks.com/articles/2017/04/06/coeducation-how-smart-women-got-chance/. See also Nancy Weiss Malkiel, Keep the Damned Women Out: The Struggle for Coeducation (Princeton, NJ: Princeton University Press, 2016).

  relax competition among rich applicants: The combinatorics of stratification ensures this. As where only a small slice of all applicants are competitive to begin with, a small increase in available places dramatically increases admissions chances within this competitive slice. Moreover, fixed absolute changes in acceptance rates have greater effects on the intensity of admissions competition at low rates than at high ones: raising the acceptance rate from 10 to 20 percent transforms admissions competition, even as raising the acceptance rate from 60 to 70 percent would not.