In the September/October 2014 issue of the Washington Monthly Amy Binder explores the reasons that so many graduates from our most elite colleges and universities are pursuing careers on Wall Street. At first, it seems perplexing. Very few of the freshmen kids arrive on campus thinking that a job working with credit default swaps or hostile takeovers is in their future. The professors are, if anything, unhappy with the high percentage of their students who go into finance. And, yet, the numbers do not lie.
In 2007, just before the global financial meltdown, almost 50 percent of Harvard seniors (58 percent of the men, 43 percent of the women) took jobs on Wall Street. That number contracted sharply during the Great Recession, but after 2009 it began rising again. Among this year’s graduating class at Harvard, 31 percent took jobs that will channel their energies into derivatives, mergers, and often destructive outsourcing. And many more tried out for such positions. According to a study by the sociologist Lauren Rivera, a full 70 percent of Harvard’s senior class submits résumés to Wall Street and consulting firms.
Meanwhile, among Harvard seniors who had secured employment last spring, a mere 3.5 percent were headed to government and politics, 5 percent to health-related fields, and 8.8 percent to any form of public service. Only high-tech fields captured the interest of graduating seniors at anywhere near the level of finance and consulting…
So, what happens to these students between the time they move away from home and into their dorms, and when they begin earnestly seeking post-graduation employment in their senior year?
To gain insight into this question I, along with two graduate students, Nick Bloom and Daniel Davis, interviewed sixty students and recent alums at Harvard and Stanford. Although not based on a random sample, our study included students from a variety of backgrounds, majors (called “concentrations” at Harvard), and career plans— or actual first jobs, in the case of alumni. Our research shows that students don’t just gravitate automatically to jobs in finance and consulting. Rather, this is in large part a story of universities helping to organizationally manufacture students’ aspirations for these positions.
It began with a decision made by Wall Street firms in the 1980’s to recruit heavily from the universities with the best reputations (brand equity) as a way of impressing potential clients. To accomplish this, they built relationships with the career services organizations at our top schools, which gave them more prominence at jobs fairs and more access to students’ mail (and then email). They secured the best banquet halls and reserved rooms for conducting extensive interviews. In the process, students learned about jobs they previously knew nothing about and had never aspired to, and these were very good paying jobs.
Most freshmen remain reasonably insulated from recruiters, but once students come back to school as sophomores they find it impossible not to notice their older peers’ “stampede to start applying” for jobs on Wall Street, as Nathan, a Harvard alum, put it. Whether observing seniors going through recruitment for the two-year analyst jobs post-graduation, or juniors going through recruitment for coveted summer internships (which with luck and hard work can be converted to an offer for an analyst position the following year), younger students take notice.
The result is that a fierce competition begins between students to land these financial services jobs. Even classwork takes second place, as students spend more and more time in the career services department doing endless interviews.
Noelle’s description of her own successful navigation of this stage of the process at Harvard mirrors the experience of many:
You do maybe one interview onsite, two interviews onsite, maybe one phone interview, and then they fly you out to New York, and that takes up a lot of time. I mean it’s great. You get airplane miles, you get paid for your hotel, they’re treating you like royalty. You get great meals, you get reimbursed, everything like that. But the thing is that you miss so much class. There are kids who are literally flying down to New York three times a week for three different interviews. It’s nuts. And it’s really stressful. It’s really competitive. I’ve heard stories of roommates who don’t talk to each other because they’re competing against each other for the same jobs.
Whatever you think of Wall Street or our Ivy League schools, there’s a social cost when so many of our most promising young adults eschew jobs in the public sector or in more productive sectors of the private economy. But these kids are going to Wall Street less because it fulfills some kind of private calling than because Wall Street and these institutions of higher learning have basically colluded to move them in that direction. For other sectors to compete for top talent, they’ll need to study what Wall Street has done and emulate it.