Two Indicators: After Affirmative Action & why America overpays for subways

0:00This message comes from Capital One. Capital One offers checking accounts with no fees or minimum. What's in your wallet? Terms apply. See CapitalOne.com slash bank for details. Capital One N.A. Member FDIC. This is Planet Money from NPR. Sometimes when there is a big change taking place, a common response is, we don't know what's going to happen. Sometimes, though, we can say, hey, we have seen this before and something pretty similar has happened somewhere else and we should pay attention. Well, last week, we got one of those big, sudden societal changes. The Supreme Court ruled against Harvard College and the University of North Carolina, saying race cannot be used as a factor in college admissions and effectively ending the practice known as affirmative action.

0:50And so what effect will this decision have on students and schools and even the economy? Well, for some clues, we can actually see where this has happened before. We can look at California, which ended affirmative action in public colleges 25 years ago. What happened there gives us a sense of what's in store for us nationwide after the Supreme Court's recent decision. Hello and welcome to Planet Money. I'm Adrian Ma. Today on the show, we're featuring two episodes from our short daily podcast, The Indicator from Planet Money. In part one, we'll talk about the potential economic effects of the Supreme Court striking down affirmative action.

1:28And in part two, we'll talk about infrastructure, specifically why new subways don't get built very much anymore. Why it costs so much for America to build new stuff. We'll go underground to find that answer. And all of that is coming up after the break.

1:48This message comes from Apollo Global Management, who believes the global industrial renaissance is transforming the world. Over the next decade, industries like energy, infrastructure, and technology will need an estimated$75 to$100 trillion to modernize and meet demand. Long-term projects need long-duration capital. That's where Apollo steps in. With scale, flexibility, and a focus on growth, they're partnering with companies to drive the future, one innovation at a time. Learn more at thinkitnew.com slash renaissance. First up, affirmative action and the Supreme Court. So the justices in two cases ruled against Harvard and the University of North Carolina, saying that affirmative action and college admissions violates the Constitution.

2:37Zach Blemer is an economist at Yale who studies college admissions. And just to set the table, I asked him to start off by defining what we mean when we talk about affirmative action. So affirmative action is a very general admissions practice in which university admissions offices provide preferences on the basis of applicants' ethnicity and thereby increase enrollment primarily among Black, Hispanic, and Native American students. What policy wonks often call underrepresented minority students. And for schools, the goal of doing this is to create a more racially diverse student body. And it's worth mentioning that this is really just an issue for the so-called selective schools, not just your Ivy Leagues or whatever, but any school that gets a lot more applicants than they can actually admit.

3:26It's used in something like 25 states' public university systems and in hundreds of private universities across the country. At the same time, nine states, including California, have banned affirmative action in their public university systems. Now, Zach says for schools that do use it, an applicant's race or ethnicity can really make a difference in their chances of admitting different applicants. So imagine kids who have roughly a 1300 SAT score out of 1600 and a high school GPA like a 3.8 on a four point scale, a quite good high school GPA. You'll have many universities where students with those scores and grades, if they are white, are very unlikely to be admitted to the university.

4:09whereas if they're Black or Hispanic, are very likely to be admitted to the university. And that's going to vary for each school, but these admissions advantages can be considerable. Now, affirmative action really began to take hold at schools in the 1960s. Some were inspired by the civil rights movement. Others were pushed to do it by student protests. And it was during this time that California schools began to take up the policy as a way to increase racial diversity on campus. And Zach says for years, it worked. So consider the freshman class that came into Berkeley and UCLA, the two most selected public universities in California, in 1997.

4:49Around the state, something like 27 or 28 percent of high school graduates were either Black or Hispanic, and about 26 percent of students coming into Berkeley or UCLA were Black or Hispanic. Their student body, at least in terms of race, roughly reflected the high school graduating class. But 1997 was the last year that would be true. Because just the year before, California voters voted to ban affirmative action at public universities. So by 1998, public universities in California could no longer consider race as a factor in admissions. And not long ago, Zach decided he just had to study this.

5:29So this seemed like a goldmine to me just to study the relative ramifications of going to more selective universities for more and less disadvantaged students, those targeted or not targeted by race-based affirmative action programs. A natural experiment. Exactly. The end of affirmative action was a large-scale statewide natural experiment. Take those two cohorts of kids, the 97 and the 98 cohorts, follow them for 15 or 20 years and see what happens to them. And to see what happened to them, Zach got his hands on a whole bunch of anonymized data about these two groups of students, those who applied to college before the ban and those who applied after.

6:08And in this data, there was all kinds of information about applicants' race, where they got accepted or rejected, and even years later, how much they were making in income. So Zach did a deep dive into this data set, and when he surfaced, he came away with three main findings. So first, he found the immediate effect of ending affirmative action in California was a huge drop in the number of underrepresented minority students attending the most selective public universities. So, for example, in 1998, Berkeley and UCLA enrolled 40 percent fewer Black and Hispanic and Native American freshmen than they did just a year earlier.

6:46And Zach says this triggered a further cascading effect. Affirmative action ends, and Black, Hispanic, and Native American students on average go to slightly less selective schools. White and Asian students, meanwhile, on average get to go to slightly more selective schools, taking the slots of these Black and Hispanic students who had lost access to those places. So that was the immediate effect of the ban. Students from underrepresented backgrounds who might have gotten into that top-tier school just a year before wound up at less selective schools like UC San Diego or UC Irvine. But Zach's analysis did not stop there.

7:22His second finding looked at the long-run implications of all this shifting around. If you follow these students forward into the labor market, the typical student who, because of the end of affirmative action, had a little bit less access to more selective universities, ended up earning about 5 % less than they would have earned if they'd had access to more selective universities through race-based affirmative action. And that 5 % decline in earnings, by the way, Zach figures that was an average decline of about$2 ,500, maybe$3 ,000 a year. And interestingly, this did not happen to the white and Asian students that he was following who got rejected from that top super selective tier of colleges.

8:03In most cases, he says the white and Asian students experienced no decline or maybe just a very slight decline in their future earnings. And Zach thinks this may be because those white and Asian students generally came from backgrounds where they could get into and afford a private university education. And it may also be that the Black and Hispanic students, on average, came from less privileged backgrounds. And they just had more to gain from the education and the networks that were available to them at these schools. And so for at least this set of reasons and potentially others, it looks like access to more selective universities was just fundamentally more valuable to the Black and Hispanic students targeted by race-based affirmative action than it would have been for the white and Asian students who ultimately took their place after affirmative action was banned.

8:51I think one thing that's worth emphasizing here is this clearly isn't true for every single student. There are many Black and Hispanic students who come from high-income backgrounds that are very networked. There are many low-income white and Asian students who don't have that network. What I'm saying is just on average, Black and Hispanic students who gained access through affirmative action were driving substantially above average gains compared to the students who replaced them. They got more bang for their buck. Exactly. I think the best that I can say is social justice issues aside. So forgetting questions of equity.

9:23If your goal is just to maximize economic efficiency, just to identify an admissions policy that will spur economic growth, identify students who will be able to best take advantage of university resources, earn the highest wages, pay back the most in tax dollars, and otherwise succeed using a university's resources. That's what affirmative action did. affirmative action increased the total size of the economic pie of California universities. And so you can increase the total size of the pie by allocating seats to kids who were best able to take advantage of them. At least it did that before affirmative action was banned.

9:59And Zach predicts we're going to see a nationwide version of what happened in California. An immediate drop in enrollment for Black, Hispanic, and Native American students at highly selective schools, and in the longer run, over the next decade or so, an increase in what is already a pretty sizable income gap between white and Asian graduates of college and black, Hispanic, and Native American grads. Now, these may not be the outcomes that any particular school or politician or judge wants to see happen, but if history is any guide, it is what we are likely to see. Next up, we descend into the subway system of New York City to find out why transit costs in the U.S.

10:43are so high. Why we can't have nice transit things without paying 10 times what European countries pay for the same stuff. Darian and Woods picks it up after the break. Stay with us.

11:01This message comes from Superhuman, the AI productivity suite that gives you superpowers everywhere you work. With Grammarly, Mail, and Coda coming together, you get proactive help across your workflow so you can outsmart the chaos. Experience AI that proactively helps you go from to-do to done faster. Unleash your superhuman potential today. Learn more at superhuman.com slash podcast. That's superhuman.com slash podcast. In cities around the U.S., there are big plans for new public transit. California's dreaming of high-speed rail. Austin's planning for a light rail system. And Seattle is extending its bus and train lines.

11:46And there is one thing that American public transit projects like these have in common. Super high construction costs. And not just a little bit more expensive. As an example, one recent subway project in Manhattan was 10 times more expensive than in countries like Sweden or Italy. So the other day, I went to that really pricey subway project, 96th Street Station on 2nd Avenue, to figure out what was behind these soaring price tags. I waited for New York University professor Eric Goldwyn at the subway station. Eric and his co-authors recently released a big report comparing different countries' approaches to building transit.

12:26Eric arrived, of course, by subway. We're going to have a great time touring, I guess, this must be like the Sistine Chapel for urbanists. Yeah, something like that. How much does the station roughly cost? $837 million. All right, well, let's figure out why it's so expensive. Let's go for a tour. All right, let's do it. When you think about the cost of transit, the station design is critical. Eric Goldwyn talks about the case of the Second Avenue Subway Extension in New York. It's this series of three extra subway stations along the Upper East Side of Manhattan, and it opened in 2017. There, nearly 80 % of the construction costs were from building the stations, not from the train tracks or the tunnels built for the subway lines themselves.

13:13In fact, station design is one big explanation Eric found for high costs. So Eric and I went up to the station's underground mezzanine. What you see that they've done here is there are no columns providing support. It's one big cavern, right? So that means the volume of this station is much larger. And how long is it? 1 ,600 feet. Okay, so quick bit of math, 1 ,600 feet, 800 million. Yeah. That means every two feet, that's a million dollars right there. There you go. It's an expensive piece of infrastructure. But the full size of the subway station wasn't apparent just from walking around the public area.

13:56And then you can see all these doors right over here. What does that door say? So that's the scrubber room. And then another service space over there, right? It honestly just looks like part of the wall. But you're saying there are secrets behind that wall. That's what I'm saying. Nothing is sort of as it seems at the surface, right? There's a lot more going on than what you see when you swipe into these subway stations. All this back-end room for lockers and offices and storage added size to the subway station. It also added cost. And another clue to the high costs of this subway station came when we took the escalators up to the street and we saw this plaque built into the entrance.

14:36It was commemorating the station's opening. And like the credits before a movie, it had a list of its designers and architects, consultants and construction companies. So we have the contractors, EE Cruise and Tully Construction. And the labor costs in all of these companies pumps up the construction price tag. And that's the second big reason driving up costs. And then Skanska, Schiavone, Shea. Eric says that the U.S. has a tendency to outsource a lot more of the basic design work. These consultants boost white-collar labor costs, and this practice is in contrast to many European countries. But doing sort of preliminary engineering, early planning work, that is work that we think a transit agency should be capable of doing on its own.

15:23Now, Eric is quick to point out that having a list of companies doing the construction is normal around the world. contracting with private construction crews, contracting expert engineering firms for those super-specialized skills underground, totally normal. But Eric argues that when public agencies have more engineers and designers employed on staff, not only are hourly wages cheaper, but the public agencies can keep a check on designs and plans, and they've got more knowledge of, say, the soil type, and that reduces expensive surprises later in the process. And on the blue-collar side of things, Eric says that he found that the 2nd Avenue subway extension tended to use more construction workers.

16:06Now, of course, wages are just generally higher in New York than in most other places in the world, but that doesn't explain the vast gulf between New York and even other relatively wealthy places like Stockholm. And now that we're at street level, we cross the road to a nearby empty lot. We go to an area that, to Eric, represents the third major driver of costs, a lack of coordination between government agencies. So this is the playground. The agency in charge of building the subway, the MTA, had to negotiate and pay the New York City Parks Department $11 million for this playground area. Now, they did need to destroy it to make room for storing all their construction equipment.

16:49They put their tractors, they put their diggers, right? You probably had what's known as a hog house or a place for workers to go. And so it had all of this space that is still pretty derelict. To an outside observer, what happened might seem odd. Like you might be thinking, this is one part of the city government negotiating and extracting a deal with another. What's the point? And Eric says when he spoke to people abroad about this, it completely broke their brains. They could not comprehend what we were talking about. They were like, what do you mean that the MTA has to pay the city of New York?

17:27Like, why would they do that? It's all the same. And I would say, no, it's not all the same in the eyes of these different sort of jurisdictions and these different municipal agencies. They all have their own budgets and sets of issues that they're trying to satisfy. And in this case, the MTA is actually an entity created by the state, not the city. Eric says the situation of fragmented jurisdictions is especially strong in the US, and it contributes to various interest groups holding up work. And it's not just government departments. There is always a point for some organisation or a utilities company or a neighbourhood group to hold up construction, and that causes costly delays.

18:07And finally, that brings us to an approach to building that's common in America. Transit builders plan projects in a way that try to annoy as few people as possible. Like subway stations along this line were built by drilling really deep into the ground as opposed to shutting down the street for months and digging from the top. And drilling is expensive. I think the public is completely unaware of it. And I think our elected officials, they know what's going on, but no one is holding them to account over these types of issues. So we decided to call on up, Carolyn Maloney. She's a former congresswoman who represented this area.

18:45It absolutely was an issue. Carolyn Maloney was a huge champion of the subway extension. And one of the reasons it was built is that I worked on it every single day to put the pieces together. She says that part of her role was unifying all kinds of disparate interest groups to support the project. You've got to get the community behind it. The community boards had to pass resolutions supporting it. You had to get labor behind it. The chairman of the transportation committees, you had to get all of the interest groups behind it. And our expert, Eric, agrees that the kind of championing that Carolyn did, you know, bashing heads together, building and sustaining alliance, this kind of work is critical in the kind of environment that we have in the U.S., where there are so many veto points.

19:33All I can say is we finally got it built. That's the bottom line. I don't care how much it costs. It was vital for the economic interest of New York City. The trouble with not scrutinizing these price tags, though, Eric says, is that you end up with less transit getting built. And that's not the future that Eric or Carolyn want. Well, thanks so much for the tour of the 96th Street 2nd Avenue station. Sure, thank you. What better person to kind of guide me through this very, very expensive subway station? Happy to be the Virgil Tiodante. Well, I'm going to take the subway back home.

20:16That was Darian Woods, who co-hosts the Planet Money Indicator podcast with me and Waylon Wong. If you want to get at us, feel free to email indicator at npr.org with story ideas or questions. And finally, two great ways to support Planet Money and The Indicator are to, one, send an episode to a friend, and two, subscribe to Planet Money Plus. Why not? You can do that by going to plus.npr.org. This episode was produced by Corey Bridges and engineered by Robert Rodriguez and Catherine Silva. It was fact-checked by Sierra Juarez. VLA is The Indicator's senior producer. Cake & Cannon edits The Indicator.

20:51Alex Goldmark is our executive producer. And I'm Adrian Ma. This is NPR. Thanks for listening. Thank you.