I have never understood the obsession with going to university, nor the efficacy of having ~40% of Australians aged between 25 and 44 years obtain a bachelor degree or higher.
In most cases, a university degree has become a prerequisite to gaining a job not because of any particular need or skills learned, but because employers use it as a ‘signalling’ tool to sort job applicants.
Bryan Caplan – a professor of economics at George Mason University – explained how this signalling process works:
“Why is it that employers would pay all of this extra money for you to go and study a bunch of subjects that they don’t actually need you to know?”. The answer is “signaling”…
Yet the system as a whole is dysfunctional, he argues, because the signaling game is zero-sum. He illustrates the point with another analogy: If everyone at a concert is sitting, and you want to see better, you can stand up. “But if everyone stands up, everyone does not see better.”
The advantage of having a credential, that is, comes at the expense of those who lack it, pushing them to pursue it simply to keep up. The result is “credential inflation.” Today a college degree is a prerequisite for jobs that didn’t previously require one—secretary, rental-car clerk, high-end waiter…
A college degree doesn’t signal the same intensity of work ethic as it did then, but because of the zero-sum nature of signaling, those without degrees look lazier than before…
Sadly, developed nations drunk the Kool Aid that a university degree was required to perform jobs that were previously performed just fine without a degree.
The result was that people without degrees no longer qualified for many high paying jobs.
Thankfully, tight labour markets are changing the situation, as explained by VOX in relation to the United States:
For decades, more and more job postings have reflexively required college degrees. Now it’s finally being recognized this was a mistake…
Between 1980 and 2012, jobs requiring high levels of social interaction grew by nearly 12 percentage points as a share of the US labor force, according to Harvard education researcher David Deming. As a hiring proxy for this, companies started to turn to four-year college degrees.
These trends accelerated during the Great Recession, when employers had a labor surplus to choose from. Of the 11.6 million jobs created between 2010 and 2016, three out of four required at least a bachelor’s degree, and just one out of every 100 required a high school diploma or less…
One of the researchers’ most revealing findings was that millions of job postings listed college degree requirements for positions that were currently held by workers without them. For example, in 2015, 67 percent of production supervisor job postings asked for a four-year college degree, even though just 16 percent of employed production supervisors had graduated from college. Many of these so-called “middle-skill” jobs, like sales representatives, inspectors, truckers, administrative assistants, and plumbers, were facing unprecedented “degree inflation”…
Between 2017 and 2019 roughly 46 percent of “middle-skill” and 37 percent of “high-skill” occupations no longer asked for a bachelor’s degree, and instead had job postings listing technical and social skills instead. The report concluded that based on the trends they were observing, an additional 1.4 million jobs could open to workers without college degrees in the next five years.
“Jobs do not require four-year college degrees,” the report’s authors wrote. “Employers do.”
This “credential inflation” has resulted in more people studying at university.
In the process, vocational training has been demoted, which in the case of Australia has resulted in skills mismatches, shortages and lower productivity, as noted by the Mackenzie Institute:
…the institute condemns the 2008 Bradley review – which spawned Australia’s recently abandoned demand-driven system of higher education funding – for producing a glut of graduates and exacerbating the funding decline in vocational training, particularly among public technical and further education colleges.
The paper blames the Bradley review for cultivating one of the worst skills mismatch profiles in the world…
“Australia has never had more graduates than now, yet we have a sluggish economy, stagnant wage movement and low productivity. Many of the occupations that provide low return to graduates would once have been taught in VET with better outcomes, and at a much lower cost”…
A bit like racial profiling used by police, university became a sorting tool for employers, and one they don’t pay for.
The results were predictable.
The record number of people attending university degraded a degree’s value, since almost everyone now has one.
In turn, even the more basic entry level jobs started to require a university degree, despite the fact that these jobs had traditionally been performed just fine by those with only a high school diploma.
Funding was then diverted away from vocational training and TAFE, which suddenly became uncool.
Sure, a university education is needed in specialised skilled professions like doctors, nursing, teaching, engineering, and the like. But it is questionable for many generalist professions that in earlier generations never required a degree.
Thankfully, the tightest labour market in half a century finally seems to have changed the “signaling” dynamic (at least in the short term), with employers now willing to employ those without a degree and less experience.
This is a good outcome, since it reduces the unnecessarily wasteful process of “credential inflation”.
