THE FOLLY OF UNIVERSAL COLLEGE.  In a world of costly information, a credential that has no information content is potentially inefficient.
Lastly, it would be an imprudent use of scarce resources to direct them towards an unreasonable goal that would, if achieved, hopefully bring us to a pooling equilibrium in the labor market in which everyone has a degree and employers can’t decipher good prospective employees from bad ones. My intuition suggests that this would be a short lived equilibrium, as employers would just up the ante by requiring more advanced degrees for jobs that already don’t require special skills. We may already be near this state anyhow, so why continue to pour money down the drain and make matters worse?  The real question is: Has the welfare of society improved as a result of increased government intervention in postsecondary education? The line of research discussed above appears to suggest that the answer is no.
Economics, however, is about tradeoffs, and a provision of higher education in such a way that more productive workers self-identify has costs of its own.
 One economic theory – education as a signaling device – suggests that increased subsidization of college may actually increase income inequality, an effect that is opposite that typically preached by proponents for greater college subsidization.
This conclusion sounds counter-intuitive, but it's analogous to the lemons principle.  (Your car does not lose a third of its value the minute you drive it off the lot.  Prices of relatively new used cars reflect the preponderance of defective cars being traded in.)
[E]mployers use college education as a screening mechanism to signal the ability or productivity level of a prospective employee, arguing that as more workers attend and complete college, there are fewer high ability workers in the non-educated pool. This results in downward wage pressure on the low-educated pool, as such workers have little chance of gaining employment in middle income jobs since a larger percentage of workers attend college. Meanwhile, those receiving a college education gain employment (hopefully) in middle income jobs, many of which do not require college level training. Many of these jobs were previously staffed by non college graduates, but the employers are now able to hire someone with college education due to an increase in the supply. 
The analogue to the preponderance of lemons in the relatively-new used-car pool is the preponderance of completely unprepared individuals among the never-college-educated.
[G]overnment policies (i.e. – federal financial aid) have reduced the financial constraints of attending college, thereby boosting the supply of college educated workers while simultaneously reducing the average ability level of the non-college educated worker pool. They conclude that this has increased the wage gap between the college and non-college educated workforces, increasing income inequality.  Paul Krugman reached a similar conclusion in a paper using signaling theory, suggesting that “anything that encourages good workers to get educated can set in motion a cumulative process of growing inequality.”
This body of research suggests another unintended consequence of government intervention. Policy designed with the intention of encouraging college participation among the relatively less well-to-do may actually have deleterious effects on the lower end of the income stratum. Those who fail to gain any college education (whether it due to ability, preference or other circumstance) are relegated to the lowest paying jobs in society, as they are systematically screened out of consideration for better paying jobs via the mechanism described above. Meanwhile, the number of workers obtaining some college education (and accumulating debt along the way) continues to grow, increasing the supply and resulting in lower wages for jobs that use college education as a screening device, but may not require special skills. This theory may help explain why more “than one-third of current working graduates are in jobs that do not require a degree, and the proportion appears to be rising rapidly.”
That modeling suggests a relatively simple model, in which there is one type of college and one dimension of skill.  Reality, however, gives more than one type of college, more than one dimension of skill, and a different kind of separating equilibrium.
Where once the university was a brief haven from the pressures of economic competition, it now puts itself in service to those imperatives. Job training is what [the California State Universities] do now—only we do it less efficiently, and more expensively, than vocational schools like National UniversityDeVry, and the University of Phoenix.
The separating equilibrium arises as the individuals who aren't even up to California State's standards get screened out, but screened out more expensively.  (If that sounds like employers looking for masters' degrees or graduates willing to do an unpaid internship as an alternative, it is.)
Colleges and universities have skillfully promoted the seductive notion that everybody should go to college—indeed, that all have a right to go to college. For decades, the number of students taking remedial courses has been rising; in the CSU system, it is now more than half the entire student body. These courses were once prerequisites for attending a university.
Money mis-spent, first on the high schools, then on remediation (I understand the new term of art is developmental.  Pig.  Lipstick.  Lipstick. Pig.)  That's what's seen.  A commenter at Phi Beta Cons points out that, where there is excess demand for the Ivies that turns into excess demand for the state flagships, there will be individuals in the California State University system who, while rejected by Berkeley or UCLA (motto: On! Wisconsin!) ought not be viewed as Berkeley's rejects.
Many students who could succeed at UC, or even more elite places, do not get in for a variety of reasons. Remember, elitist schools want to know much more than one's intellectual accomplishments (or performance, in performance disciplines). Or, one could be admitted, but not be able to go.

Now imagine how it feels for such a student to go to a lesser place, where many of the students are remedial and have conduct to match it. For this, the good student studied hard? And, in this grade-inflated college culture, excellence is lost, perhaps even degraded if the instructors have their own agendas that reward conforming mediocrity. The difference in experience is a lifetime penalty.
The land grants and the mid-majors are in the same business as the Ivies and the flagships, and they ought act accordingly.  "Excellence is lost" summarizes in three words what "exile to an academic gulag" does.

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