Bryan Caplan  

Sociologists on Signaling

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From educational sociologist David Labaree's foreward to David Brown's Degrees of Control: A Sociology of Educational Expansion and Occupational Credentialism:
[C]redentialism is astonishingly inefficient.  Education is the largest single public investment made by most modern societies, and this is justified on the grounds that it provides a critically important contribution to the collective welfare.  The public value of education is usually calculated as some combination of two types of benefits, the preparation of capable citizens (the political benefit) and the training of productive workers (the economic benefit).  However the credentialist argument advanced by Brown suggests that these public benefits are not necessarily being met and that the primary beneficiaries are in fact private individuals.  From this perspective, higher education (and the educational system more generally) exists largely as a mechanism for providing individuals with a cultural commodity that will give them a substantial competitive advantage in the pursuit of social position.  In short, education becomes little but a vast public subsidy for private ambition.
The unintended consequences:
The result is a spiral of credential inflation; for as each level of education in turn gradually floods with a crowd of ambitious consumers, individuals have to keep seeking ever higher levels of credentials in order to move a step ahead of the pack.  In such a system nobody wins.  Consumers have to spend increasing amounts of time and money to gain additional credentials, since the swelling number of credential holders keeps lowering the value of credentials at any given level.  Taxpayers find an increasing share of scarce fiscal resources going to support an educational chase with little public benefit.  Employers keep raising the entry-level education requirements for particular jobs, but they still find that they have to provide extensive training before employees can carry out their work productively.  At all levels, this is an enormously wasteful system...
Which reminds me: Remember my educational signaling question on the Kauffman econ bloggers' survey?  Sociologist Fabio Rojas re-ran it (with one comedic revision) for his largely sociological audience.  Survey says:

socsig.jpg

The results for economists and sociologists are shockingly similar.  The two fields really do need to spend more time listening to each other and less time mocking each other.  I'm happy to go first.


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COMMENTS (19 to date)
Seth writes:

If education adds little or no value to productivity, what keeps some companies from hiring individuals without college degrees at a lower wage to gain a competitive advantage?

another Bob writes:

Seth,

Actually, I hire programmers in the US with less educational signaling and I get better margins on their work. But, it's difficult to find good hires because the smarter candidates bought the credential.

Most hiring managers can't make good choices because they are not experts in the field(s) in which they hire. So, they can't pick the gold nuggets out of the manure pile.

Offshore outsourcing is a great example of mass hiring from a population without big credential investment. It's working fairly well so far.

kvasek writes:

Bryan,

What are your thought on signaling if you look at different majors/schools?

Let's think about Med School vs. Business School. Signaling is clearly a big part of the former. Harvard Med will open many more doors than, say, BU Med. But then again each student needs to acquire a lot of human capital. Signaling will only get you so far.

Meanwhile, I think of Business Schools as almost only signaling. Improvement in human capital is almost nonexistent. Some justify existence of Business Schools by the ability to network. In that case, it might make sense to open a bar called Harvard Business School and only allow employees of GS, MS, JP Morgan and other big banks to enter.

undergrad writes:

Higher education is not just human capital and not just signaling. It's also lots of partying, dude!

Tom West writes:

In short, education becomes little but a vast public subsidy for private ambition.

The trouble is that the obvious follow-through is to stop subsidizing education. And the problem with that is the assumption that businesses will stop requiring education as a signalling benchmark.

In an era of 100 job applications for every job, if you're trying to cut 500 resumes to 100 resumes, then it's in fact more useful if you can discard the 400 who don't have a BA than if you can only discard the 200 who don't have a BA.

The net effect is that you make it harder for those who don't have deep pockets to succeed, reducing social mobility.

In the end, one of education's main good is that it allows lower-class individuals (who somehow make it through) to attain credentials that allow them to avoid getting filtered out before ever reaching the interview stage.

Jehu writes:

There's a simple answer if you're not horrified by disparate racial impact. Just dump Griggs and related cases and allow people to use whatever kind of test they like for screening while at the same time stopping educational arms race subsidies. Oh, and at the same time, make it far harder to sue people for giving references with non-zero information content.

D writes:

Sociologists are often blank slaters.

I'd love to see the results from psychologists who do psychometrics or from behavioral geneticists.

d writes:
"what keeps some companies from hiring individuals without college degrees at a lower wage to gain a competitive advantage?"


http://en.wikipedia.org/wiki/Griggs_v._Duke_Power_Co.

jseliger writes:

Employers keep raising the entry-level education requirements for particular jobs, but they still find that they have to provide extensive training before employees can carry out their work productively. At all levels, this is an enormously wasteful system

I still wonder how the signalling versus skills argument plays out across majors; it seems to me that, at least at the higher education level, different majors and different universities are providing vastly different things, even if they all grant a bachelor's degree. Some fields, like computer science, seem like classroom skills translate very well into jobs, while others, like business, don't seem to, and seem primarily about signaling. Perhaps the popularity of the latter should tell us something about what students seek.

Tom West writes:

allow people to use whatever kind of test they like for screening while at the same time stopping educational arms race subsidies

Why wouldn't businesses continue to use a BA or BSc resume filter? It's essentially a free half-decent filter. Except without educational subsidies, it will filter out the those who didn't choose middle class parents, even if they're capable of doing the work to get a degree.

fawful writes:

Tom:

1. Businesses don't want to miss out on talented people without degrees. But disparate-impact laws make it illegal to give a simple IQ/personality test, so they rely on the government approved B.A. credentialing system as a legal IQ/conscientiousness proxy.
2. College degrees are actually a pretty lousy filter, compared to what psychometricians are capable of devising. If you have a B.A. in psychology from Central Michigan University, and you're applying for a job in Phoenix, how should the employers know how hard it is to get that particular degree at that particular school? I'm pretty sure it isn't a diploma mill, and I'm pretty sure it isn't Ivy League, but thats all I can say for sure. An IQ test/personality test gives much more precise information.

Wonsil writes:

Seth,

HR Departments are a big reason for credentialism. In David Packard's "The HP Way", Mr. Packard believed that the HR department removed the vital decision makers from the employment process and in order to preserve their jobs, HR departments became good at checking credentials.

Paul writes:

Some good points there. I certainly don't need a Ph.D. to do my current job, but I needed it to get the job.

Tom West writes:

fawful, I'm not thinking about the high end job market, where, to be honest, the degree probably involves enough useful job skills that it's pretty much mandatory anyway.

However, there is a large segment of lower-middle class jobs (think customer service jobs, low-end clerical work etc.), for which 2/3 of the applicants will do adequately. (Do we really need the best darn DMV clerk out there?)

Other tests may well do a more precise job, but honestly, a degree is a "good enough" filter that I strongly suspect it would continue to be used, even if without subsidies the number of diploma-holding applicants were halved.

(And, I have to admit, I am suspicious whether generalized IQ/personality test results really correlate to eventual hires any better than the diploma requirement. My gut tells me previous experience in a related job is probably the only truly relevant criteria. The rest is just getting to 10 or so resumes that you can actually interview without losing too much of the wheat.)

Glen S. McGhee writes:

I am enheartened and encouraged by the responses to Seth's question. They are pointing in the right direction.

A little history would help, I think. The early 1900s in this country saw the emergence of white collar workers, and the bureaucratic means of controlling them. Human resource departments were the result, and quickly the innovation spread, mainly as a symbol (i.e., a *signal*) of corporate legitimacy and prestige. If you did not have an HR department processing job applications (another recent innovation), then you were not a real company, and you could not persuade stockholders to buy stock in your company.

WWI significantly accelerated the trend, on a grand scale.

Part of the answer to Seth's question, then, is the organizational field itself, and its emergence as an independent bureaucracy. Rationalization of labor in this fashion (credentials, job applications) has the chief benefit of diffusing the moral responsibility for hiring or for excluding workers -- the difficult decisions can now be handled on the basis of a piece of paper, and nothing more.

Seth writes:

another Bob & Wonsil - Thanks for the responses.

another Bob - Your 2nd paragraph suggests something other than signaling and credentialism in education.

Wonsil - I'm with you. I see that very thing with HR departments I've worked with. But, HR dept's act the behest of company leaders. Why wouldn't company leaders tell them to relax on the credentials if there was an advantage to be gained?

Floccina writes:

A good question might be "how many business people or engineers take classes just to learn something with no degree path".

Glen S. McGhee writes:

re Floccina, WHY do "business people or engineers take classes" WHEN most learning (i.e., the accumulation of human capital)occurs outside any "degree path".

Try this experiment: next time you spend time with a professional, ask them how much of their professional skills did they learn on the job? My Vet replied: "99%" and he remarked that the top learners in his class made the worst vets!

Jerry Heverly writes:

Can you cite your evidence that businesses are raising the entry-level education requirements? My experience is just the opposite. I think it's true that in certain occupations applicants bid up the entry-level specs but that is definitely not the same phenomenon.

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