Wednesday, December 27, 2006

The Great Credentialing Scam

By Richard Vedder

Taking a few days respite from the daily rhetoric of higher education, I ventured with my wife into a cellular phone store yesterday, trying to cope with a technology better understood by persons whose age is, roughly speaking, the square root of my own. One of the young clerks was talking about his on-line university training, so I joined in the conversation. The fellow, a veteran who looked to be in his early to mid 20s, said he was going to college for only one reason: to make money. I asked him if he was learning anythng in his on-line training and he answered "Yes,a little" but went on to add he is studying only for the piece of paper certifying him to be a college grad --a piece of paper possibly worth hundreds of thousands of dollars. He complained about each course he was taking was costing $1,000, but made a calculation that there was a high probability that, if successful in graduating, the degree would pay a high rate of return on his investment. Similar calculations are made daily by millions of young Americans.

Therein lies much of the confusion in the debate over college costs. The credentialing value of college arises from high information costs of learning the capabilities of prospective employees --aggravated by the Griggs v. Duke Power Supreme Court decision of about 35 years ago that made it difficult for employers to learn much about prospective job applicants. Colleges have played this advantage (namely that a diploma usually means the holder is at least literate, fairly intelligent, and fairly well motivated) to the max. They have raised tuition a lot because they can --the college/high school earnings differential and loan and grant programs permit it. A lot of people, like my sales clerk, are not interested in the socialization/consumption side of higher education. We need to ask: what is the social, as opposed to private rate of return on education that occurs for the sake of credentialing? Can the strictly credentialing function be performed much cheaper through alternative approaches --examinations, IQ tests, etc.? What is the rate of return on public and private investment in the social dimension of higher education? The answers to these rate of return questions may be radically different. How much of "learning" in college is the attainment of needed skills (e.g., accounting, engineering skills) that are not readily learned on the job? And how much of it is merely an academic form of some endurance race, where the mere completion of the race denotes certain desirable character traits?

My sidekick Bryan O'Keefe, the Whiz Kids, and I are starting to return from a Christmas break refreshed and ready to face the new year. A somewhat belated best wishes to you for the holiday season, and for 2007. We expect CCAP to expand and grow as it completes its first year as a voice for reform in higher education. One year ago, the idea for it did not even exist.


David said...

Educational credentials bear an increasing resemblance to stock certificates (or tulips) in a bubble--things that are valued for the circular reason that they are valued. See my post An Academic Bubble.

Sherman Dorn said...

While I am concerned about credentialism, it's for different reasons (see David Labaree's How To Succeed in School without Really Learning). I'm confused, though, why Griggs is related to the credential use of college, since the decision ruled both credentials (high school completion in the case of the case at hand) and so-called IQ tests invalid under Title VII without evidence that they were reasonably related to employment needs.

If employers choose to use college credentials as a requirement, it would stand to reason that they find it a lower legal risk, meaning they think they can justify the use to a course in case of disparate impact. And besides, plenty of employers do use skill-specific tests for entry-level employees. Some are explicit, such as typing tests. But some are more subtle: Requiring computerized applications for many companies screens out those who cannot maneuver their way through a computer form.

Sherman Dorn said...

That comment should read, "...justify the use to a court..."