These days it is well over 8%.
An astonishing number of college graduates, some of the best and brightest with many from science and engineering, now end up on Wall Street.
Here's just one example according to this New York Times article:
In 2007, 29 percent of M.I.T. grads went to Wall Street rather than Silicon Valley, at far higher wages, a disparity that continued even after the financial crisis.
Below are more excerpts from articles that describe the "brain drain" problem and what some are doing about it.
Stanford Daily: Stop the Wall Street Recruitment
As the financial industry's profits have increasingly come from complex financial products...its demand has steadily grown for graduates with technical degrees. In 2006, the securities and commodity exchange sector employed a larger portion of scientists and engineers than semiconductor manufacturing, pharmaceuticals and telecommunications.
The result has been a major reallocation of top talent into financial sector jobs, many of which are "socially useless," as the chairman of the United Kingdom's Financial Services Authority put it.
Some students are taking on the matter themselves.
Los Angeles Times: Getting brilliant Students to seek jobs beyond Wall Street
"The best minds of my generation are using their brainpower in ways that will not make society's problems better, and could make them worse," said Andrew Lohse, a senior at Dartmouth.
Lohse and students at Yale, Harvard and Stanford have recently written articles in their campus papers calling attention to the issue. And a new national campaign called Stop the Brain Drain is gathering signatures from students online and pushing for a change in recruiting practices on campus.
An op-ed on why the system nearly collapsed.
New York Times: Wall Street Smarts
"Smart guys had started going to Wall Street."
"Did you ever hear the word 'derivatives'? Do you think our guys could have invented, say, credit default swaps? Give me a break! They couldn't have done the math."
"When the smart guys started this business of securitizing things that didn't even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn't have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness."
It shouldn't be surprising why people go to Wall Street. The reason is straightforward enough. Incentives. How many students with substantial college debt would not find a $ 7,839/month internship ($ 94,000 annualized) tempting? The talent drain won't stop until the incentives have materially changed.
Finally, the Kaufmann Foundation has been studying the impact of this science and engineering talent drain on entrepreneurship.
Kauffman Foundation: Financialization and Its Entrepreneurial Consequences
...to pretend that we can have widespread entrepreneurial capitalism in the absence of a significant and active financial services sector—is to be fanciful. At the same time, however, financial services and entrepreneurial ventures compete in the economy for many of the same employees. Given that the social returns from entrepreneurial efforts generally are higher...this can be a source of allocative inefficiency in the economy, one with potentially material consequences.
Most frictional costs are explicit and measurable. I write about the importance of developing an approach to investing that reduces frictional costs. In the narrow context of producing successful long run investor returns it is a crucial factor.
Newton's 4th Law.
Yet, in a broader context, the more important frictional cost to society may be, though much harder to measure, all this "allocative inefficiency".