The campus of University of Southern California in Los Angeles. Image Credit: NYT

The US college-admissions scandal — in which rich people paid bribes to get their kids accepted — strikes at the heart of cherished American ideals of fairness and meritocracy. But it also reflects a deeper problem: the blocked transition to a new, more diverse elite.

Although the alleged bribery happened at some of the world’s most prestigious institutions — including the University of California, Yale University and my own alma mater, Stanford — by itself it doesn’t prove that meritocracy is a complete sham. It involved only a small per cent of elite school spots, which are themselves only a small fraction of the higher education system. Also, people have been charged with crimes. This will discourage similar tricks in the future, and will reduce the prestige of the institutions involved. From now on, employers looking over the resume of a Yale or Stanford graduate might wonder whether they got admitted because of real skill or rich parents.

But outright bribery is just the tip of the iceberg. Far more extensive and entrenched is the legacy admissions system, which is perfectly above-board and legal. Harvard University, for example, is one-third legacies. And the admissions process itself is just one link in a long chain of factors that give rich kids privileged access to college: exclusive schools, test prep, tutors, expensive consultants. These factors help explain why rich kids with low test scores are more likely to graduate college than poor kids with high test scores:

When the rich hoard the top spots in the university system, students from low-income and disadvantaged minority backgrounds suffer. In a pair of papers, economists Stacey Dale and Alan Krueger found that admittance to an elite university tended to benefit black and Hispanic households, and households with lower educational backgrounds, much more than other kids. In other words, all those tutors and donations and bribes are earning rich kids only a modest return in terms of future earnings, while shutting out poor and minority kids for whom a spot at Yale could easily make the difference between success and failure in life.

These “dream hoarders”, as Brookings researcher Richard Reeves calls them, are pernicious in other ways that are hard to measure. Perhaps most important, they have racially ossified the American elite. The children of rich Americans are mostly white, since their parents and grandparents got rich when the country was mostly white (and when structural racism kept black people, by far the biggest minority at the time, out of the elite). But the young up-and-coming talent of America is mostly not white.

As Harvard Business School economist William Kerr documents, the US has benefited massively in recent decades from substantial flows of high-skilled immigration. Most of that influx has come from Asia and Africa. But smart kids with parents from the Philippines, India or Nigeria don’t tend to have the money and connections to buy their way into top colleges. The barriers are even higher for kids of working-class immigrants, many of whom hail from Mexico and other Latin American countries. They don’t just lack connections and money: Their parents and community members typically lack the education and experience needed to point them in the direction of Harvard, much less help them get in. For black Americans living in poor segregated neighbourhoods, the challenges are often even steeper.

Tons of talent is going undiscovered in the US, while the elite is overpopulated with rich, well-connected mediocrities. That would be bad enough in any society. But because it comes at a time when America’s racial composition is rapidly changing, it looks even more starkly unfair. Just as Jewish Americans were shut out of the elite for decades after they arrived en masse on American shores, non-white Americans are being shut out today.

Exclusion is bound to produce frustration among the country’s young strivers. Social media is already full of small signs of this anger. Even the lawsuit alleging anti-Asian discrimination at Harvard is not really about affirmative action (as some claim), but about the unfair advantages being monopolised by a rich white elite. If left unaddressed, this mismatch between an ossified, wealthy, mostly-white old guard and a population of frustrated, young, largely poor non-white achievers will keep festering, much to the detriment of the nation.

The solution is to encourage a changing of the guard. Eliminate legacy admissions at colleges, and try harder to discover talented students in poor and disadvantaged communities. Companies can help by casting a wider net in their hiring and recruiting, paying less attention to Ivy League names on resumes, and going out of their way to look for talent among people who come from different demographics than the existing executives. At the government level, more equal funding for state schools would also help a lot.

— Bloomberg

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.