Equity and the ‘Flight to Quality’

When Silicon Valley Bank failed, I heard a good bit of speculation about large depositors fleeing small regional banks for large national ones.  It was a variation on the idea of a “flight to quality,” which is the term for people abandoning what they see as risky options in favor of more established ones.  In banking, “quality” is a bit of a misnomer: the appeal of the big banks isn’t necessarily that they’re well-run, but that they’re likely to be considered too big to fail.  The quality is at one remove, but the principle is the same.  It’s really a flight to perceived safety.

The flight to quality, even if “quality” is defined in questionable ways, strikes me as a pretty good approximation of what’s happening with higher education enrollments.

Contrary to our larger political debates, high tuition is not the primary deterrent to enrollment. For proof, just compare enrollments at community colleges over the last, say, five years, with applications at the most exclusive colleges and universities. (I say “applications” because the elites don’t expand to meet demand.) The Ivies are awash in applications, with many showing the highest rejection rates in their history; meanwhile, the sector with the lowest prices continues to struggle. If the story of enrollment decline were a story of people being priced out, the exact opposite would be true.

If the flight to quality were based on actual quality, it would be hard to object. One could argue that such flight was simply the market doing what it’s supposed to do. For example, there’s a credible argument to be made that part of what made the American car industry vulnerable to Japanese competition in the 1970s was that the competition simply built better cars. (Anyone remember the Gremlin? The Pinto? The Vega?) Yes, there were oil shocks, but you don’t need oil shocks to explain why someone would have chosen a Civic over a Pinto. Honda and Toyota didn’t start by competing on the high end; they started on the affordable end and gradually worked their way up.

Higher education isn’t acting like that. Instead, it’s as if the market abandoned Hondas and Fords and instead everyone went for Porsches. That may be a sign of many things, but price sensitivity isn’t one of them.

It isn’t about return on investment, either. It’s pretty well established at this point that very similar students who went to different places wind up with very similar outcomes. From an ROI perspective, a student is much better off as a nursing major at a community college than as an English major almost anywhere.

Flights to quality are usually signs of anxiety. In the case of current higher education, I think it’s anxiety about a bifurcated economy. Guaranteed paths to the middle class are fewer than they used to be, even as returns to the few are setting records. If an elite place offers a slightly better chance of breaking into the elite, some calculate, then it may be worth taking the shot.

If that’s correct—and it fits the facts much more closely than the “priced-out” narrative does—then students are responding rationally to an increasingly irrational political economy. Paths to the middle class are fewer, and less legible, than they were for earlier generations, and rewards to those on the very top are exponentially greater than they used to be. A more barbell-shaped economy eventually finds its way into higher education with a land rush at the top and students opting out altogether at the bottom.

From an equity perspective, a flight to quality is the last thing we should want. Arguing over who gets into Yale misses the point that Yale and its ilk are a tiny, if conspicuous, niche of higher education. Most Americans who go to college go to public institutions. For that matter, most Americans will never work in finance. An equitable society that only applies within the top 1 percent is a bubble, if not an oxymoron. Opening up more avenues to a good living would lessen the anxiety that’s driving the flight to quality and simultaneously build a fairer society.

Yes, community and state colleges need to be aware of the economic means of their students. More importantly, so does the polity as a whole.