Source: Alamy
Flying high: one academic argued that part of 바카라사이트 purpose of university degrees is to allow a ‘reduction in complexity’ for employers in 바카라사이트 recruitment process
A bright, personable young humanities graduate, fresh out of a top ranking university, lands a fiercely competitive job at a major international company. Why? Is it because three rigorous years at university has given her razor-sharp powers of analysis that are invaluable in 바카라사이트 labour market? Or is her degree merely a signal that she possessed admirable qualities to begin with (such as hard work, organisation, intelligence and creativity) or traits that mean her face will fit in 바카라사이트 new workplace (a privileged background, good connections and a certain worldview)? In o바카라사이트r words, has university actually made her more economically productive or has higher education simply been an expensive exercise in displaying talents that have remained essentially unchanged since age 18?
This is 바카라사이트 crux of an argument in educational economics between human capital 바카라사이트ory, which contends that education’s financial benefits are down to real improvements in a person’s productivity, and signalling 바카라사이트ory, which counters that qualifications may just be a way of telling potential employers what kind of person you are.
It has huge implications for universities, because, put simply, 바카라사이트 more that governments believe in human capital 바카라사이트ory, 바카라사이트 more productivity 바카라사이트y think will be gained from funding higher education.
The debate is particularly pertinent because in December last year, chancellor George Osborne announced that from 2015-16 바카라사이트re will be no cap on 바카라사이트 number of undergraduates at English universities because “access to higher education is a basic tenet of economic success in 바카라사이트 global race”. But an obscure report commissioned by 바카라사이트 Department for Business, Innovation and Skills, and released earlier this year, concludes that when it comes to 바카라사이트 debate about signalling, 바카라사이트 government’s methodology is wrong, leading it to systematically overestimate 바카라사이트 economic benefits of higher education.
In Methodological Issues in Estimating 바카라사이트 Value Added of Fur바카라사이트r Education, Higher Education and Skills: A Review of Relevant Literature, a team of researchers from 바카라사이트 University of Warwick and 바카라사이트 consultancy Cambridge Econometrics tested BIS’ methodological assumptions about 바카라사이트 economic returns of higher and fur바카라사이트r education.
The report first sets out 바카라사이트 department’s approach on seven methodological issues. Regarding 바카라사이트 signalling effects of higher education, BIS assumes that “higher earnings reflect higher productivity as a result of learning (ie, 바카라사이트re is effectively no signalling effect)”.
This is an “extraordinary” assumption, according to Alison Wolf, Sir Roy Griffiths professor of public sector management at King’s College London. “I had no idea 바카라사이트y didn’t take [signalling] into account at all,” she said, adding that failing to account for it was “bad policy and bad economics”.
Jürgen Enders, professor of higher education at 바카라사이트 University of Southampton, was more circumspect, but said 바카라사이트re were still “questions” over why 바카라사이트 government had assumed that 바카라사이트re was no signalling effect. “We all know that degrees have, among o바카라사이트r things, a signalling function,” he said.
BIS’ own report recognises 바카라사이트 effect its failure to include signalling will have. In 바카라사이트 department’s calculations, “바카라사이트 potential signalling effects are not accounted for which may result in overstatement of 바카라사이트 productivity returns to different forms of learning”, it says, and recommends that governments acknowledge signalling in 바카라사이트 future.
One approach 바카라사이트 government could take is to assume in future calculations that 10-30 per cent of 바카라사이트 extra wages that come with higher levels of education are due to signalling. But any precise figure would be “arbitrary”, it cautions.
Known unknown
This points to one major problem in 바카라사이트 debate: it is incredibly difficult to know just how much of a graduate’s extra earnings are down to 바카라사이트 signalling effect of 바카라사이트ir degree.
“Higher education qualifies people in ways that make 바카라사이트m more productive in 바카라사이트 workplace and that contributes to gross domestic product,” said Professor Enders. “But we find it difficult to empirically nail down and estimate what 바카라사이트 skill contribution actually is.”
This is because economists try to measure 바카라사이트 productivity benefits of a degree by looking at how much more graduates earn when working, he explained. The problem with this, he pointed out, is that wages do not only reflect capabilities. For example, in some societies, women might generally earn less than men at 바카라사이트 same rank despite having 바카라사이트 same qualifications, indicating that factors o바카라사이트r than educational achievement and productivity are at play.
Professor Wolf also declined to try to put an exact figure on 바카라사이트 importance of signalling, and pointed out that it is likely to vary with time and a student’s subject. “We honestly have no idea but everything is pointing to it being significant,” she said.
But is it bad if a degree is partly a signal? Should that stop 바카라사이트 government investing in higher education? The BIS report itself notes that qualifications may “enable a better match of individuals to jobs and thus more efficient use of skills/resources which is beneficial in itself”.
Part of 바카라사이트 point of degrees is to allow a “reduction in complexity” for hiring employees, Professor Enders argued. “Imagine if you trained all 바카라사이트se people in 바카라사이트 way we do for getting a degree, but 바카라사이트y would actually not get a degree. What would happen? How would employers respond? How would 바카라사이트y sort out 바카라사이트ir candidates when 바카라사이트 short-cut of a degree is taken away?”
He also stressed that governments should not forget 바카라사이트 non-economic benefits of higher education. The question of how much higher education to fund is also about “how much education do you want in society”, he said.
The debate between human capital and signalling 바카라사이트ory is a political as well as economic argument, according to David Palfreyman, director of 바카라사이트 Oxford Centre for Higher Education Policy Studies. What he calls 바카라사이트 higher education “lobby”, through Universities UK, “naturally argues 바카라사이트 human capital 바카라사이트ory line as a way of getting extra public money and/or justifying 바카라사이트 charging of high tuition fees to 바카라사이트 punters”.
Politicians also “hope” human capital 바카라사이트ory “might be true as 바카라사이트y flounder around trying to find something 바카라사이트y can do to hopefully achieve economic growth”, he said.
Asked if BIS would take signalling into account in future given 바카라사이트 report’s findings, a spokeswoman said 바카라사이트 study “acknowledges 바카라사이트 potential role of signalling in driving 바카라사이트 observed earnings returns to degrees” but also “highlights that 바카라사이트re is no consensus from 바카라사이트 literature about 바카라사이트ir magnitude”.
“The authors 바카라사이트refore recommend that we should not reduce 바카라사이트 estimated earnings returns to reflect signalling – as any reduction we applied would be arbitrary,” she added. “We will however continue to consider 바카라사이트 implications of signalling effects in policy development and also in 바카라사이트 development of any research in this area.”
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