What’s more important: a college degree or being born rich?

I previously shared data from Pew’s Economic Mobility Project about social mobility (I, II). As far as income mobility goes, you are 10x more likely to wind up in the richest fifth as an adult if you were born there than if you were born in the poorest fifth.

As far as wealth mobility goes, you are more than 5x more likely to wind up in the wealthiest fifth as an adult if you were born there than if you were born in the least wealthiest fifth.

One convenient way to describe what’s going on is that rich kids are more likely to get a better education, which translates into being richer and wealthier as adults. It is certainly the case that richer kids are more likely to get a college degree, and it is certainly the case that getting a college degree leaves you much better off on average than not getting one. But this does not explain the full picture of social immobility. Take a look at this super-complicated chart, which I will describe below.

This is basically the same graph as the income mobility one above, except it breaks down income mobility both by a kid’s economic starting point and education. So the red bars all go together and show where kids born into each income quintile who do not graduate college wind up as adults. The blue bars show the same thing, but for kids who do graduate college.

Look at the red bar furthest to the right. That is the bar describing where kids born into the richest fifth who do not get a college degree wind up. Notice that 25% of those kids still wind up in the richest fifth. Now look at the blue bar furthest to the left. That is the bar describing where kids born into the poorest fifth who do get a college degree wind up. Notice that only 10% of those kids wind up in the richest fifth.

So, you are 2.5x more likely to be a rich adult if you were born rich and never bothered to go to college than if you were born poor and, against all odds, went to college and graduated. The disparity in the outcomes of rich and poor kids persists, not only when you control for college attainment, but even when you compare non-degreed rich kids to degreed poor kids!

Therefore, the answer to the question in the title is that you are better off being born rich regardless of whether you go to college than being born poor and getting a college degree.

  • Hi

    I wish people like you understood what “Economic value” means. What does $10,000.000.00 of wealth mean? Obviously it is bound to a US dollar, whose value fluctuates daily, but what the dollar its value? Why is the the flat above central park worth 10 million dollars? Lets do a thought experiment about extreme wealth redistribution like you talk about in your comment. In this thought experiment, lets assume that there is a worldly disaster on a biblical scale that justifies the thought process to redistribute wealth on this scale in order to provide support for those in need. So the best intentions are in mind:

    You live in the year 2030. Image you are a completely selfless person who only has others and the environment in mind. And you just inherited the 10 million dollars apartment. You decide to sell it in order to put all proceed towards feeding the hungry. This move made you somewhat famous and you decided to go into politics in hopes of being elected. You strike a cord with people like ‘Defining Quality’ and many others and you are soon elected president in year 2032. You implement a law to cap wealth at 10million dollars and all wealth north of that is siezed by the state in order to feed the hungry and save the planet. In your speech to the world to talk about your new law and the justifications behind it, you talk about how no one “needs” a 10 million dollar apartment. Any ridiculously expensive homes will be taken over by the state in order to feed the hungry.

    The 10 million dollar apartment next door to the one you sold was given to your brother. After the sweeping law that you put in place what is the value of that now? The value of the apartment certainly would not be 10 million. Because of the law, and the state taking over the 10 mil apartment, they are not turning around and selling it for 10 mil cash which is then turned into 10 mil worth of food. That apartment is taken over and is now worthless. The value of most things has just plummeted. Where did that value go? Well, if wealth is capped at 10million dollars, any item that was bought by a person or family that was near or more than 10 million dollars, simply has no use anymore. All large farms are worthless, many things are of no value any more. Trillions of dollars of value was just eliminated from the US economy. In order for value to remain at its true point, it has to be secure.

    Now the Government just seized, lets say, 10 trillion dollars worth of cash and assets. How much is that worth is 2030 dollars? Billions at the most, maybe millions. Who would the Gov sell the assets to?

    Lets look at the economy, large portions of the construction market, all luxury good producers, and many other markets were just eliminated. Unemployment numbers just rose by 8 to 9 figures. Nearly every single business in the US will be showing a loss for multiple years, therefore no tax will be paid from them during this time. You can’t really fathom what would happen to the economy. It would ultimately implode. We give the US dollar its value, with our trust. If the Gov can take what it wants, then we lose faith in the dollar and its value disappears. Taking wealth over 10 mil from everyone does not = having all of that money and being able to distribute it and use it. Taking that wealth essentially destroys the wealth. It is better to create a rich environment that generates wealth/value, and taxing it at a fair rate and putting the proceeds toward noble causes. Forcibly taking it or taxing at an unfair rate will yield either no proceeds or significantly less.

    Wealth as you know it, only exists in this economic system that we live in.