Class Matters: Class of Origin, College Rank, and Variation in Earnings With a Bachelor's Degree

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Abstract

Purpose of study
In this study, I examine the variation in 1992-1993 four-year college graduates’ ten year post-graduation earnings as a function of their parents’ socioeconomic status and college’s rank. I also compare variation in 1992-1993 and 2007-2008 graduates’ earnings one year after graduation in order to explore change over time in the relationship between class of origin and post-graduation earnings. I seek to explain the social class-based gaps in post-graduation earnings with institutional and individual student characteristics using data from the NCES’s Baccalaureate and Beyond Longitudinal Study, Integrated Postsecondary Education Data System, and the Barron’s Admissions Competitiveness Index.

Study design and methods
I employ three statistical approaches: Ordinary Least Squares regression (OLS), Hierarchical Linear Modeling (HLM), and Propensity Score Matching (PSM). When estimating the relationship between a degree from an elite institution and earnings, I use propensity score matching in order to match respondents on their propensity to attend an elite institution. I also account for the multilevel nature of the data. Hierarchical linear modeling allows me to account for clustering of earnings outcomes within colleges. I include OLS regression because it is common in studies that predict earnings after college graduation, and it is a straightforward approach. The OLS estimates serve as a base with which to compare my PSM and HLM estimates.

Findings and policy implications
Among the 1992-1993 cohort, graduates of elite socioeconomic origin out-earn all others by at least 12 percent ten years after graduation. Among graduates of least-selective, moderately-selective, and elite colleges, elite socioeconomic origin is associated with higher earnings even when accounting for GPA, major, and institutional expenditure on academic services, student services, and instruction (Table 1). At the same time, low-SES origin students receive an earnings premium from attending an elite college, though the reasons remain unobserved (Table 2). The findings suggest that when low-SES students attend an elite college, they gain capital and career opportunities that they would not at a lower-ranking institution, but not enough to level the playing field on the labor market with students from an elite socioeconomic background.

Regarding change over time, the findings demonstrate that there is a class-based post-graduation earnings gap just one year after graduation among the 2007-2008 graduates, but not among the 1992-1993 graduates. This result indicates that having parents with a high socioeconomic status, or perhaps the resources associated with having such parents, was more important to “getting ahead” in regards to income in 2009 than it was 15 years earlier. Two economic and demographic changes that are important in explaining this phenomenon are the start of the economic recession and the increase in the proportion of the population that has a bachelor’s degree. I recommend national, state, and institutional policies to increase access to elite institutions. More importantly, I recommend that colleges provide excellent career and graduate school counseling for all of their students, including programs and practices to help their low-SES students be more competitive on the labor market with high-SES students.

Author

• Serena Eliz Hinz, RTI International