Bryan Caplan  

Defensive Education

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Arnold Kling pointed me to Lester Therow's 1972 Public Interest piece on "Education and Economic Equality."  In Therow's lingo, the "wage competition view" roughly equals the human capital model and the "job competition view" roughly equals the signaling model.  It's a mixed bag, but has some gems, especially:
There is, then, a need to be much more agnostic about the productivity impacts of education than public rhetoric would indicate to be our present inclination. In the wage competition view of education, additional education for someone with more education than I can never hurt my prospects. If anything, it must raise my potential earnings. From the job competition point of view, however, education may become a defensive necessity. As the supply of educated labor increases, individuals find that they must improve their educational level simply to defend their current income positions. If they don't, others will, and they will find their current job no longer open to them. Education becomes a good investment, not because it would raise people's incomes above what they would have been ff no one had increased his education, but rather because it raises their income above what it will be if others acquire an education and they do not.  In effect, education becomes a defensive expenditure necessary to protect one's "market share." The larger the class of educated labor and the more rapidly it grows, the more such defensive expenditures become imperative. Interestingly, many students currently object to the defensive aspects of acquiring a college education. This complaint makes no sense from a wage competition point of view, but it makes good sense from a job competition point of view.
Simpler version: When someone with degree X hears that more people are getting degree (X+1), how does he usually react?

Reaction #1: "Great!  The supply of the labor I buy is going up, and the supply of the labor I sell is going down."

Reaction #2: "Noooo!  It's going to get harder to get hired or promoted unless I get degree (X+1) too."



COMMENTS (10 to date)
Robert Rounthwaite writes:

I think the question should be
"When someone with degree X hears that more people are getting degree (X+1), how should he usually react?"
We know that when women entered the workforce, people had Reaction #2: It's going to get harder to get hired or promoted.
These reactions are misleading -- most have the same reaction to immigration and to productivity improvements as well
Productivity is the real issue here -- are you more productive because you are more educated?
I know that I learned a lot of practical things during my years in college -- not all in class, but nearly all either in class or because of the freedom to explore that came from not having started my "real" life. But I'm an engineer/scientist, so possibly quite atypical.

Himanshu Sanguri writes:

My experiences say that academic degrees do have some influence in job competition and promotions, but mostly at the entry levels. I am in agreement with Reaction 2 becuase mostly, people evaluate their academic degrees by the comparison of the premium invested and returns available in the market. However, kind of job and nature of skill set can not be discounted but over all, the above stated behavior is consistent in most of the markets and job areas. To illustrate, from last 10 years, India and China have witnessed a massive movement of their native under graduate employers migrating to USA only for MS and MBA degrees on education loans. Why they do so,despite of the fact that both the economies are growing and offering ample of job opportunities. Just for the sake of quality higher education? I don't think so.

Anonymous writes:

I agree with the second reaction that degree (X+1) has become a defensive necessity, amid the growing number of people with degree (X).
I say this when you view education from the wage earning point of view. However, when you compare the degrees (X) and (X+1) then it should be done in a similar education system. For example - the Bachelor's in Technology degree is considered as graduate in India but as Undergraduate in US. I believe the purpose of education in any field
is to raise mental level of a student and develop a level of expertise in a particular field. Whether that level of expertise is developed
through degree (X) or (X+1) is subjective and varies from individual to individual.

Cryptomys writes:

It's Lester Thurow, not Therow.

Other Anonymous writes:

I think few people would dispute that reaction #2 is what actually happens. But I don't think that this represents strong evidence for the signalling model.
People with degrees, in any society, usually care a lot more about their relative status whithin their society than about their absolute income. If this is true, a person would prefer that as few people as possible would get a better degree than theirs, even if in absolute terms they would become richer.

Ken P writes:

There was a series on marketplace recently called Consumed. One of the programs touched briefly on education and I believe compared it to an arms race.

I think the human capital model requires that entrepreneurs take advantage of the new skills available for new endeavors. What seems to happen more often is that existing companies choose more highly educated workers to fill the same positions previously filled with lower levels of education.

Kevin writes:
Simpler version: When someone with degree X hears that more people are getting degree (X+1), how does he usually react?

Reaction #1: "Great! The supply of the labor I buy is going up, and the supply of the labor I sell is going down."

Reaction #2: "Noooo! It's going to get harder to get hired or promoted unless I get degree (X+1) too."

People mostly react with number two; this doesn't tell us whether the signaling model is true or not, though. People are stunningly economically illiterate, or so I've read.

MingoV writes:

Anonymous wrote: "I agree with the second reaction that degree (X+1) has become a defensive necessity..."

That depends on where you work and what kind of job you have. Some workplaces value experience and track records more than diplomas, so getting an extra degree is unnecessary. But, others care about pieces of paper more than performance. My advice would be to leave such a workplace rather than add a degree, but that won't be possible for everyone.

The kind of job matters because credentialing organizations can bump up degree requirements and fail to "grandfather in" those with existing credentials. A good example of this is K-12 teaching. Many states bumped the credentialing requirement from a bachelors degree to a masters degree. Teachers with only a bachelors degree had to get a masters degree within a specified time.

Jordi DLT writes:

[Comment removed for lack of clarity. Editing declined by commenter.--Econlib Ed.]

Glen S. McGhee writes:

I stumbled over the first sentence:

"There is, then, a need to be much more agnostic about the productivity..." because this assumes too much about the distribution of what is produced.

My take (prove me wrong, please) is that GDP only matters for corporations and companies, and those with equity. It matters not at all for the little guy whose labor these mammoths feed upon daily.

GDP, to my mind, is under-institutionalized, under-socialized. Where is the theory explaining why efficiencies matter TO ME? I'm waiting ..

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