Socio-economic stratification, meritocracy & decision bases

In a section of their recent survey of America titled "Middle of the class", The Economist says the following:
The second reason for pessimism [about the likelihood of decreasing mobility] is that mobility may continue to decline because it is rooted in fundamental changes to the economy. These explain both the big rise in income inequality and the smaller shift in social mobility. Over the past 25 years, globalisation has increased rewards for intellectual skills, pushing up the value of a degree. The income gap between college graduates and those without university degrees doubled between 1979 and 1997.

This has gone hand in hand with changes in the nature of work. It used to be possible to start at the bottom of a big firm and work your way up. But America's corporate giants have got rid of their old hierarchies. Lifetime employment is at an end, and managers hop from job to job. That makes a degree essential. In the 1930s and 1940s, only half of all American chief executives had a college degree. Now almost all of them do, and 70% also have a higher degree, such as an MBA. People with a university degree are now more likely to move up an income bracket than those without. This is a big change since the 1970s, when income rises were distributed equally across all educational levels. America is becoming a stratified society based on education: a meritocracy.

But what if education itself becomes stratified?
The Economist is right to ask this question, and they answer it with data that points to growing stratification in education. What seems obvious to me, having spend most of my life in or around educational institutions, is that the explanation for decreasing mobility may lie as much in "changes in the nature of work" as with increasing stratification in education. While this is a lot speculative, I suggest that the move from a "work your way up" system to a "meritocratic" system has replaced better decision making with worse regarding advancement — or, more precisely, has given those making decisions about the advancement of others a poorer basis for making them.

Under the "work your way up" system, the relatively limited pool of talent available within a company allows managers to have fairly extensive experience with those whom they evaluate, thus giving them a good basis for deciding whom is the better candidate for advancement. Among the fairly small number of candidates, managers generally have good grounds for preferring one candidate to another.

On the "meritocratic" system, on the other hand, information for evaluating candidates is much more limited, and there is most always a surplus of well-qualified candidates for any position. Given this impoverished basis for evaluating candidates, it is no surprise that managers employ various proxies in order to make their decisions, such as where the candidate went to school or for which companies she has previously worked. But, as should be obvious, these are often poor proxies indeed, providing information only weakly correlated with the candidate's potential. Where a candidate went to school says little about her knowledge and skills (how hard is it to get As at Harvard?), but it may say a lot about where she happened to go to high school or who her parents happened to be; similarly, previous work history may reflect the sort of businesses that recruited at the candidate's university or that she had a fortuitous connection.

Now, managers (I suspect) are well aware of the limitations of this selection process. (Graduate school admissions committees certainly are, though they are loathe to admit it.) The system in which they operate doesn't allow for anything better. Contrary to The Economist, however, these limitations would still exist even if education wasn't stratified in the least, so long as the information available to managers deciding whom to hire is insufficient to effectively distinguish between better and worse candidates. You can't have a "meritocratic" system without the ability to distinguish merit.


Blogger Andrew Chen said...

Ah, so true. <sigh> So who is in a position to change this other than the ones who already benefit from it? Okay, that's it, I pledge never to get another degree! In fact, I think I'll start a degree-free learning program.

21 July, 2005 03:02  

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