The effect of Higher Education on social mobility in the United States.

Characteristics of United States Higher Education system.

In order to understand Higher Education’s effect on social mobility in the United States, it is important to understand the characteristics and components of the Higher Education system. Structurally, Higher Education in America lends from both British and German University models (European Union. 2015. Internationalisation of Higher Education – Study – European Parliament). Three key philosophical beliefs influence the Education system in America (Eckel and King 2004).

The Education system in America remains largely autonomous from the government.

America has no national system for Higher Education. The US Constitution grants responsibility to each state and empowers local authorities to shape and resource Higher Education in a way they deem appropriate (Lynch, 2014). The degree of influence each state has varies within jurisdictions. The U.S federal government’s main involvement with Higher Education comes in the form of student loan programmes and research funds (Fuller, 2014). Through the allocation of these funds, the US government has the ability to exert influence on policies, but does not prescribe over-arching operating procedure (Fowler, 2009). The Federal Government has the ability to withhold funds if they deem policy objectives do not align with institutions, although the government rarely does so (Liesbet Hooghe and Gary Marks, 2003).

The US Department of Education attempts to encourage and incentivise curricula and pedagogical approach through ‘white papers’, although in reality, influence is exerted mainly through grants (Bradley, et al., 2011). Regional accreditation bodies have the authority to hold institutions to account and effectively moderate coursework and curricula across educational disciplines. Within the public and academic community, there is little evidence of appetite for increased government influence on Higher Education (Eckel and King 2004). This guiding principle aims to cultivate a climate for innovation. The ability for Higher Education to adapt and contort during changing financial and political climates, provides the U.S Higher Education system a high degree of responsiveness (Universities UK, 2011).The Breadth and quality of research have also helped American universities rank among the most prestigious in the world. In a variety of academic polls and performance metrics, the United States Higher Education system consistently out performs other countries (universitas21 2016, Kingkade, Tyler 2014, HESS rankings, 2016).

World University Rankings 2016-2017

(Source: Adapted from: https://www.timeshighereducation.com/news/world-university-rankings-2016-2017-results-announced)

Methodology: How the ranking is measured

 (Source: https://www.timeshighereducation.com/world-university-rankings/methodology-world-university-rankings-2016-2017)

Capitalism.

Universities in America compete in market for students, faculty, and funding (Eckel and King 2004). Whilst free markets drive the Higher Education system in America, many argue that it also places significant pressure on it as well. Increasing student debt and decreasing public funding create a culture of commoditised learning (Heller, 2016). Many within the academic community believe that the marketplace has overtaken the state’s dominance as the driver shaping Higher Education in America (Labaree, 2010). As institutional expenditure increases in a bid to extend resources, faculties, and to attract new students, new and greater sources of income are required. This has the potential to result in institutions favoring disciplines that generate more financial income. Programs such as humanities generate significantly less money for institutions compared to subjects such as engineering, or MBA programs (John A. Byrne, 2014). In a commoditised learning environment, each program must potentially justify its economic effectiveness (Heller, 2016). Students in America feel the effects of a largely capitalist model for Higher Education. The growth of tuition fees continues to climb by an annual rate of 7.4% per year, which has vastly outstripped the consumer price index of 3.8% (Glenn Reynolds, 2012). With the median cost of a degree at $30,000, students are often facing the prospect of excess debt after graduation. Total student debt in America has escalated to over 1.3 trillion dollars (Forbes. 2017. Student Loan Debt In 2017: A $1.3 Trillion Crisis.

Average fees at US universities, 2016-17

(Source: Adapted from: https://trends.collegeboard.org/college-pricing/figures-tables/average-published-undergraduate-charges-sector-2016-17)

The American agenda for social mobility through Higher Education

Universities in the United States aim to promote and encourage widespread social mobility and equal opportunities. Historically, Higher Education in America was a pursuit for the elite and wealthy, excluding individuals based on gender, race and social class (Eckel and King 2004). Societal changes during the 20^th century created pathways for under-represented groups within American society to access Higher Education. To fulfill the “land of opportunity” notion, women, minorities, and the middle class, were encouraged and supported into accessing Higher Education (Hurst, 2012). The process of bringing education to a wider American audience has not been easy, and progress has been somewhat inconsistent. Universities effectively engaging with low-income students’ across America, pre and post enrolment are two of the biggest factors regarding social mobility in Higher Education (Hurtado, Guillermo-Wann. 2013). Significant financial aid programs, aimed at encouraging minorities and low-income households to attend Higher Education, have not completely bridged the diversity gap (Long, 2011). Whilst the number of diverse students has improved, white middle and upper-income students are still more likely to graduate from universities in America (U.S. Department of Education. 2014). One of the key challenges for American Higher Education successfully addressing social mobility, is the conflict between capitalism and a resistance to government control. “A constant preoccupation of American higher education is this tension between the competitive, ambitious nature of institutions and the interests of government in promoting important public goals, primary among them broad access and widespread success for all students (Eckel and King 2004. P17). Higher Education as catalyst for social mobility remains a largely popular idea amongst the American public (Callan and Immerwahr, 2008). Although public criticism remains regarding the cost, the social and potential income value of obtaining a degree is regarded as high (Duderstadt, 2008).

The American political agenda for Higher Education’s role in social mobility.

In 2014, The U.S. Department of Education publically announced new plans aimed at addressing barriers for low-income families to access Higher Education (The Executive Office of the President, U.S. Department of Education. 2014. Increasing College Opportunity for Low-Income Students). With an increased demand for a higher skilled, technical workforce across America, new legislation aimed to address the labor market shortfall and simultaneously propel more low-income families into the middle-class. The U.S. Department of Education plan consisted of three significant policy changes;

• The doubling of investment in Higher Education grants and college tax credits.
• Reforming student loans.
• Reducing Higher Education cost and improving the value.

The economic imperative driving the plans also identified barriers to increasing the Higher Education opportunity. Actions intended to support low-income households were broken down into four key sections.

1. Low-income students should attend colleges and universities where they have the best chance of success. Many low-income students choose universities and colleges that do not match their academic ability and do not provide the appropriate student support for their specific needs, resulting in “academic undermatch” (Smith et al., 2013).
2. Prioritise early intervention and help students prepare for Higher Education. Financial aid should be explained clearly to students prior to enrollment and a culture of Higher Education accessibility should be established. (Venezia and Laura Jaeger, 2013).
3. Increase access to advisory services and test preparation. Students from low-income households typically have less access to mentors and guidance counselors compared to their higher income contemporaries (Avery, 2009).
4. Prepare and support low-income students. Identify skill gaps before students arrive on campus and increase support services (Bettinger et al., 2012).

President Donald Trump has yet to unveil any concrete strategies for Higher Education since his inauguration in January 2017. During Donald Trump’s election campaign, he expressed concern regarding student loans and announced that repayment would be capped at 12.5% (BU Today. 2017. What a Trump Presidency Might Mean for Higher Education.

An overview of social mobility in America. How socially mobile is American society?

Social mobility refers to the movement of individuals or households within a social grouping in society. American culture champions the concept of social mobility and the ideal that regardless of the circumstances you were born into, you can improve your income and social standing (Corak, 2012). The idea of America as an opportunity utopia is far from the reality within the United States, where the top 1% of Americans hold more than 40% of the nation’s wealth (Bricker et al., 2016). In research conducted by the Brookings Institute, they found that Americans born into the bottom quintile of American society have a 1-in-3 chance of remaining there and a 1-in-10 chance of moving to the top quintile. Race also dramatically affects the social mobility opportunity in the United States. Black Americans born into the bottom quintile of society, have a 50% chance of remaining there and only a 3% chance of moving to the top fifth quintile (Greenstone et al., 2013). In a number of studies, the United States has decreased in its rate of upward mobility over the last 40 years (The Economist. 2014. Mobility, measured). In a comprehensive study conducted by Harvard University and UC Berkeley, economists examined 40 million tax returns between the years 1971 – 1993. The focus of the study was to scrutinise intergenerational social mobility – the income correlation between parents and their children. They found that despite significant media and political attention on social mobility, not much had changed since 1971. At that time, a child from the poorest fifth of society had an 8.4% chance of making it to the top quintile and a child born in 1986 had a 9% chance. In comparison to Europe, the United States has become less socially mobile. In contrast, a child born in the poorest fifth of society in Demark has twice as much chance to make it to the top quintile compared to America. (Grusky, et al., 2016. The Fading American Dream: Trends in Absolute Income Mobility Since 1940 ).

• Relative economic mobility of the generation compared with the previous one Source: Adapted from: http://business.time.com/2012/01/05/the-loss-of-upward-mobility-in-the-u-s/

There is a strong correlation between income inequality and low levels of social mobility. The “Great Gatsby” curve plots the relationship between inequality and social mobility through intergenerational income elasticity. Miles Corak introduced the curve in 2012 to the Council of Economic Advisers, using data from the US department of labor.

Income inequality > Social mobility falls into two broad categories;

1. Intergenerational mobility: This refers directly to the socio-economic status of parents and the status their children. A recent trend in education has caused an overall decline in intergenerational mobility. In earlier decades, many high school education parents successfully sent their children to college, but today college students are increasingly likely to have college-educated parents narrowing the experience of upward mobility (Sawhill and Morton, 2007).

• Intergenerational mobility in the United States.
• Children born into high-income households have a 22% chance of remaining in the top fifth quintile of wealth distribution (Pew Trust, 2012).

• Children born into low-income households have a 1% chance of reaching the top fifth quintile of wealth distribution (Chetty et al., 2014).
• Households with a family income of $42,000 – $54,300 have around a 39.5% chance of moving up a quintile, and a 36.5% of moving down. An individual’s chance of moving to the top fifth quintile from this socio-economic group are around 8% (Hertz, 2006).

Most up to date figures available:

Intragenerational mobility: This refers to changes in an individual’s socio-economic statusthroughout their lifetime. Vertical mobility can occurs when an individual moves up or down socioeconomic groups. This could happen through a promotion, marriage or unemployment. Horizontal mobility refers to remaining at the same socioeconomic level, but possibly changing locations within a similarly prestigious position.

 Intragenerational mobility in the United States.

• In America since 1990-1991, households that have experienced downward short-term mobility have increased (Kalleberg and Till M. von Wachter, 2017).
• 8% of American households experienced income decline by $20,000 or more (in real terms) in 1997-1998 and 16.6% in 2003-2004 (U.S. Department of Commerce Economics and Statistics Administration, 2014).
• Top quintile households experienced no significant increase in short-term downward mobility (Hertz, 2014).
• In 2003-2004, households with adults working 40 or more hours per week for two years in a row were less upwardly mobile than households in 1990-91 and 1997-98. This suggests that working longer hours no longer generates significant upward intragenerational mobility for families in America (Hertz, 2014).

Is education the answer to social mobility?

Education is often cited education as the great equalizer. The notion that inequality is not inevitable and through education, the gap between rich and poor can be narrowed is a particularly popular American construct. Within a global context, access to education plays a pivotal role in effecting social mobility. In a comprehensive report delivered by the OECD it was stated that climbing the social ladder is influenced by a variety of factors, “But public action – particularly education and to some extent tax policies – plays a key role in helping people achieve a higher income and social status than their parent” (Organisation for Economic Co-operation and Development, 2010. A Family Affair: Intergenerational Social Mobility across OECD Countries, P187). The study found that across all countries, the lack of parental education has a significant effect on a child’s future prospects and income generation potential. In southern Europe and the UK, children whose parents have a university degree earn on average at least 20% more than children whose parents finished education at upper-secondary level. Highly educated parents, tend to have well educated children for whom employment and earning potential is increased (Organisation for Economic Co-operation and Development, 2010. A Family Affair: Intergenerational Social Mobility across OECD Countries).

Evidence of Higher Education’s impact on social mobility in America

While social mobility remains a central tenet of American society (Lagemann, 1992), what influence does Higher Education have on this, and what is the evidence?

• Individuals aged 25 – 32 earn on average $19,500 more in income per year than for those who only graduated high school (PEW Research Centre, 2014).
• Over the course of an average American lifetime, college graduates earn $580,000 more than their contemporaries without a 4-year college degree (Mary c. Daly and Leila Bengalii, 2014).
• 7% of Americans will experience extended unemployment during their adult lives, compared to only 4.2% of those have graduated college (United States Department of labor, 2015).
• Americans that do not complete high school have a 50% chance of staying within the bottom quintile of society and a 1% chance of reaching the top (Chetty et al., 2014)
• College drop-outs have earning and unemployment levels closer to high school graduates, than college graduates (United States Department of labor, 2015).

• Individuals born into families at the bottom of the income distribution quintile who graduate with a college degree have more upward mobility than those who do not pass on education advantage (Joanna Venator and Richard V. Reeves, 215).

• Parents that possess at least an Associate’s Degree, pass on an educational advantage to their children (Joanna Venator and Richard V. Reeves, 215).

Highly selective colleges and universities in America are almost entirely dominated by high-income households. The top quartile of high-income students out-populate the lowest quartile students by a margin of fourteen to one. At institutions deemed less-competitive the lowest quartile students are over represented (Carnevale and Strohl, 2010).   (Source: Adapted from Carnevale and Strohl (2010)

Top Colleges by Mobility Rate

(Source: The Equality Opportunity Project, 2017) This table shows the ten colleges with the highest level of bottom-to-top-quintile mobility rates among colleges with 300 or more students per cohort.

Escaping poverty with a college degree. 

Earnings amongst college graduates are significantly higher. In an equally mobile society, an individual would have an equal chance of residing in any of the five quintiles. Children born into a low-income household, have a 45% chance of remaining there, without a degree and only a 5% chance of reaching the top economic group. In comparison, the same individual from a low-income household that earns a college degree has a significantly increased chance of becoming upward mobile (Joanna Venator and Richard V. Reeves, 215).

Source: Adapted from: (Haskins, 2008). Notes: Calculations based on the PSID, which compares children’s adult income at roughly forty with that of their parents at about the same age.  Investment yield of a college degree. Individuals that graduate from college arguably have an appetite for ambition. Americans between the ages of thirty and fifty who did not attend college can expect to earn less than $30,000 annually, whereas individuals with an Associate’s Degree earn over $40,000. Individuals with a Bachelor’s Degree earn just under $60,000 and Advanced Degrees over $80,000 a year. According to the U.S. Bureau of Labor, even attending college without graduating can generate an additional $7,000 a year, compared to those who just graduated high school. Although the return to an associate’s degree really stands out, this high return partially reflects the lower cost of an Associate’s Degree rather than a major boost to long-term earnings. Individuals with an Associate’s Degree with make roughly $170,000 over their lifetime compared to average high school graduate. Individuals with a Bachelor’s Degree will make roughly $580,000 more (U.S department of Labor, 2014). The low cost of tuition for an Associate’s Degree makes it a particularly good investment.

Source: Adapted from CPS (2009,2010-2012); Damodaran (2013); Federal Reserve Economics Data (2013) Statistics (NCES) 2012,2013); National Mining Association (2012); Shiller (2013); authors’ calculations. Note: Sample is civillan, natural born U.S citizens. Earnings data from CPS (2010-2102) and tutition data from NCES (2010-2102).

Higher Education Innovation to boosts social mobility

Within recent years, MOOCS (Massive Open Online Courses) have been received a lot of attention within the Higher Education sector. Reportedly, over 25,000,000 people have accessed online courses worldwide (Reich el al., 2014). MOOCs possess the potential to create a level playing field for access to Higher Education and in turn, increase potential earnings for online graduates. The promise of MOOC’s to deliver High Education to all is in its infancy. New platforms like Coursea, UDacitiy and EDx aim to provide learners around the world with high quality learning materials, that students can access from any internet enabled device. It is unclear however how much impact non-accredited or remote learning credentials will affect earning potential (Oliver, 2016). In the report “unbundling’ of competition in the sector”, one of the key findings is the potential for MOOCs to widen participation in education. More recently, prestigious university such as Harvard, MIT and Berkley have started to provide online introductory and advanced courses in range of subjects that provide academic credit. Some of the introductory courses are free to enrollee and require an administration fee to accredit once completed. The administration fees are significantly lower than the cost of attending one of the Ivy League colleges. Potentially, irrespective of social strata, students could access top universities and increase their chance of intragenerational upward mobility. MOOCs are developing in their sophistication and reach. Many now produce high quality learning materials and accompanied by world-renowned professors. The criticism of MOOCs as a vehicle for social mobility come broadly in three critiques.

1. MOOCs require a high degree of motivation (Creuzé, 2015).

• Students are required to complete courses remotely and this requires discipline. Students from lower socioeconomic groups may struggle. A widely observed characteristic for the under achievement of low-income students is support (The Executive Office of the President, U.S. Department of Education. 2014. Increasing College Opportunity for Low-Income Students).

2. MOOC’s already have a notoriously low completion rate (4%) and by encouraging low-income students to access Higher Education online, this could be seen as discouraging them to enter Higher Education through traditional pathways that may be more appropriate to support their learning journey (Jordan, 2013).

3. Students who have already completed a bachelor’s degree are more likely to enrollee on online courses. In the report by Harvard business review, they found that over 80% of people that enrolled on their online courses had completed their Bachelor’s Degree first and 60% where in full time employment. From this analysis, MOOCs currently seem to be serving the most advantaged.

 The Educational benefits of MOOCs(Source: Harvard Business Review 2015)

Tangible career benefits through MOOCs

(Source: Harvard Business Review 2015) The research conducted by Harvard Business School in 2015, does support the notion that MOOCs overwhelming carry educational and career benefits. A substantial proportion of those who completed the survey report either new employment or achieving prerequisites for an academic program. The report also found that economically and academically disadvantaged individuals could benefit most from MOOCs. Although MOOCs may not be the complete solution social mobility, the report shows early hope for technological innovation that is improving social mobility, both within developing countries and OECD nations (Chuang et al., 2014. HarvardX and MITx: The First Year of Open Online Courses). Most academics agree that MOOC’s are still in an early development and adoption phase. There are some members of the academic community with legitimate concerns regarding online learning. Some academics question the social impact of learning in isolation, whilst others point to low completion rates and short-lived funded projects that are not sustainable. The Higher education system 10 years from now may look radically different. Harnessing technology has the potential to widen participation and simultaneously drive the cost of obtaining a degree down. Stuart Butler, a senior fellow and an expert on the future of Higher Education and economic mobility said, “If you have a higher education system that actually does provide students with the skills they really need at a much lower cost than today,” he says, “that’s good for everybody, and good for the economy.” – Stuart Butler: 8^th May 2015. MOOCs, college costs, and the future of higher education.

Conclusion.

The Higher Education system in America has unique characteristics, both in terms of its size, autonomy and diversity of institutions and students. The absolute impact on Higher Education’s effect on social mobility is a mixed picture. Trends indicate that 13% less of lower-income households are accessing Higher Education in America, whilst at the same time those that do, are significantly increasing their earning potential (Reeves et al., 2013). The high cost of a college degree and the lack of comprehensive finical aid, threatens the most deprived Americans from enrolling on educational programs. Associate Degrees appear to offer a tangible benefit for those on the bottom rung of the socioeconomic ladder, providing a lower financial barrier and a significantly increased chance of upward mobility. Although education and specifically Higher Education plays an import role in social mobility, a larger determining factor on an individual’s ability to generate income lies in a number of factors beyond their control. A person race, parents and geographic area are much more likely to determine their social standing and chance of progressing up socioeconomic groups. Whilst external factors weigh heavily on an individual’s chance to succeed, statistically, you have a much greater chance of improving your income with 4-year college degree. Even attending a college and not completing a credential can boost income potential (Baum et al 2013). Compared to other OCED counties tuition fees are high in the U.S, but they do generally provide a high return on investment. Whilst education remains the best way for individuals to move up the economic ladder, the gaps between the rungs are widening. With an overall increase in the number of students attending and graduating university in America, the value of a degree and its impact on earnings will shift. As technological advances appear throughout traditional and manual industries, automation threatens typically unskilled and poorly qualified workers. Higher Education as vehicle for social mobility also remains an import ideology within society. Irrespective of the actual value, the perceived value of education to “better ones self” remains an important social construct. The cost of Higher Education remains a significant barrier. Supporting low-income students with better financial aid information prior to enrolling has the potential to encourage more young people from this socioeconomic group to enrolee. Reaching and motivating this group has the potential to impact international and intragenerational social mobility America. Low cost interventions;

• An increase of just $1,000 of financial aid per student could increase college enrolment of the lowest quintile of society by 3-6% (Deming and Dynarski 2009).
• By simplifying and supporting low-income households with the financial aid process, could lead to an increase in enrolment by 8% and would cost less than $100 per student (Bettinger et al. 2009).
• To employ student mentors to support new students in their first year, would cost $10,000 less than current scholarship programs per student, and could positively affect attainment rates (Bettinger and Baker 2011).
• By sending personalised college information to high-achieving, low-income students, could lead to an increase in enrolment by 30 percentage points (Hoxby and Turner 2013).

Ultimately, those born into high and low quintiles of American society start with similar abilities, but statistically have very different chances of success. The evidence for Higher Education as an enabler for social mobility is overwhelming, although it is not a guarantee to get out a poverty; it is the single best investment an individual can make for intragenerational social mobility.