Commentary: One of the enduring debates is how education contributes to worker incomes. There are two views. One is that education creates human capital. The other idea is the education, like the peacock’s tail, is about signally fitness, in this case about fitness for work rather than fitness for the role of a peak hen’s husband.
The human capital argument is the traditional argument that has long been told by teachers, professors and other educators, that education is about acquiring skills. That education takes students and pours knowledge into them and the student becomes more productive. And employers are willing to pay for this productivity.
The second view that education is about signaling argues that want workers with particular characteristics, which are the same characteristics that are possessed by good students capable of finishing college. It’s not that educations creates these skills, but that people who have the skills to start with, are the ones who do well in school. School, though the forge of the market place, has morphed to serve as signal of skill possession.
School doesn’t really improve skills, but rather has the student jumping through hoops and by successfully doing so, you demonstrate to the employer that you are the type of person who will jump through hoops to achieve a goal.
By the very fact that school is expensive and difficult, is exactly what makes it a useful signal. If it was cheap and easy, then anyone could obtain a degree and it wouldn’t be much of a signal.
Employers like education as a signal as the cost is borne by the employee, but the benefit in terms of screening potential employees accrues to the employer.
Obviously, the two views of education—that it creates human capital, that it serves as a signal—are both true to some extent. Many well-done studies have shown that Pre-K education provides enormous social value. And who could argue that reading, writing and arithmetic aren’t important skills. At the same time, wo can argue that a degree from a prestigious school isn’t of more value than one from a more run of the mill school, even if both follow the same curriculum and use the same books.
The question is not is one right and the other wrong, but to what extent is signal important and to what extent is skills acquisition. The answer is important as the two theories imply radically different policies.
Keep in mind, signaling is wasteful; it is the peacock’s tail. Something done to prove that you can do it, therefore, are fit. The peacock would be better off if he could signal is fitness with a smaller tail. The can’t because the other peacocks have tails also, so a small tail losses out. Similarly, the student who tries to signal there two years of college will lose out to the student with four years. The bachelors will lose out to the masters.
If the peacocks could just agree to grow smaller tails, they all would be better off. Similarly, if the students could all agree to not attend college they could be better off, if signaling the main function of schools. That means less funding for colleges and less access.
The problem is that we know that education is not just or even mainly about signaling. One of the things you often hear is that education is about creating critical thinking skills. And in fact, we succeed at this. A recent meta study, that summarized a number of other studies, found that each year of schooling added about three points to IQ. And IQ, or, as it is more correctly called, general intelligence has been shown to add to earning capacity precisely because critical thinking skills are so important in workplace success.
New technologies make the work place a more demanding environment now than in the past. Critical thinking is, well, critical for navigating that environment. Education is the only systematic way we know of for improving critical thinking skills; we need to take advantage of this. It is not just about signaling.
Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He has been teaching critical thinking skills for 34 years. The opinions expressed may not be shared by the regents and administration of NMSU. Chris can be reached at chrerick@nmsu.edu.