Educational inflation: A looming catastrophe

College has become unaffordable, while the value of a degree has steadily dropped. People are required to earn degrees for jobs that are currently fulfilled by people who don’t have degrees. They need to decorate their resumes with growing amounts of extracurricular activities to prove they’re hypersocial perfect job candidates, from student associations to voluntourism vacations in Africa, never able to simply spend a night at home like a slob.

The consequence of this phenomenon of social excessive complexity is that young people now start out their lives with debts, in cities with housing prices so high they can’t afford to start families. Governments then try to fix their demographic pyramids by importing migrants from other nations as a band-aid solution, while the pension schemes grow gradually unaffordable.

This won’t shock anyone, it’s an observation that many people have made. What’s less well known however, is that cycles of overeducation similar to ours have happened in history multiple times.  The sociologist Randall Collins has pointed out that medieval England had more young people studying at universities than 19th century England did. In China we’ve seen periods where men from the gentry spent until their forties “studying”. In 18th century Germany and France, we witnessed revolutionary movements that sought to abolish the universities for this reason.

The number of people attending college has grown tremendously in recent decades. In 1950, 5% of Dutch adults aged 18-25 attended higher education. By 2011, we were looking at 40%, an eight-fold increase. We have moved beyond the point of diminishing returns. In fact, the argument can be made that college now serves to mask technological unemployment. Every year someone spends at college is a year they’re technically kept away from the labor market, while new jobs emerge to educate people in college. Collins noted a form of socialism might come about, where effectively the whole population is housed in college, while computers and robots perform all genuine labor. If people could have the free college education they desire, this would seem to me the most likely outcome.

There are argument made in an attempt to justify the self-perpetuating problem of degree inflation, but they don’t tend to hold up. For example, technological advances are suggested as rendering more education necessary. However, in the field where we see the most innovation, IT, most programmers in surveys claim to be primarily self-taught. The colleges deliver education that is outdated, as the programming languages continue to evolve and the job market changes rapidly. We might argue society has gotten more complex, but this too is a dubious argument. Consider that when my father worked at an office, he had to be adapt at using MS DOS, without access to Google to search for explanations if something were to go wrong. Today’s office environments can hardly be considered more challenging than those back then.

Bryan Kaplan has become noted for arguing in favor of the “signaling theory” of college: Society values college degrees, not because of the knowledge learned in college, but because a college degree signifies the particular candidate is well fitted for an office environment. If you can spend four years of your life voluntarily engaged in activities that don’t directly benefit you in the near term, you’re likely to be a disciplined person. If you managed to sit through group projects, you’ll manage to sit through office meetings. If you managed to consistently show up in time for your exams, you’ll manage to do so once you have important meetings with clients too.

According to this explanation, a college degree is valuable not because of whatever it is you learned, but because of the fact that it requires a particular combination of conscientiousness, agreeableness and sufficient intelligence to comprehend whatever labor you’re tasked with. Evidence in favor of this explanation is the fact that many jobs ask for a generic four year college degree, as if it doesn’t really matter whether you’re an expert in sociology, English literature or cultural anthropology. As a college degree becomes costlier to attain, it also increasingly starts to signify another important metric: Social class. Asking for a college degree is a surprisingly effective way of filtering out people from the lowest socioeconomic backgrounds.

Historically, the outcome of situations like these seems to have been a relatively sudden dramatic decline in the value of university education. Attendance of institutes of higher education reaches a peak and starts to decline rapidly. Collins has documented some historical examples in his book “The Sociology of Philosophies – A Global Theory of Intellectual Change”. Intellectual currents outside of the cultural mainstream rapidly rose to the forefront and attracted people who had no desire to participate in the overcrowded intellectual establishment of their era.

If we look at Italy today, we notice an example of what may lie ahead. In Italy, two populist political parties have formed a political coalition that now happens to rule the nation. On the one hand there are the right wing nationalists of what was formerly known as the Northern League. On the other hand, there is the peculiar five star movement started by comedian Beppe Grillo. These two parties are noteworthy for one thing in particular: Both of them are led by politicians who dropped out of college. Luigi Di Maio of the five star movement studied engineering, before switching to jurisprudence and eventually dropped out to take on a series of odd jobs. Today he is Italy’s labor minister. Matteo Salvini started out studying political science, switched to history and eventually dropped out. He leads Italy’s Northern League and serves as minister of interior.

If we consider credentialization’s harm to the economy, we find that it may explain economic phenomena that presently appear to have no good explanation. Consider three unresolved mysteries: Economic growth has consistently underperformed expectations. Innovation is lackluster in every sector of the economy except IT. Costs are rising in economic sectors like healthcare, for reasons that remain unclear. All three unresolved mysteries start to make sense in light of credentialization.

If college functions as an expensive four year version of a personality test paid through government subsidies, it goes a long way towards explaining lackluster economic growth: Resources are being misallocated in a dramatic manner. If you now need a four year college degree to become a personal assistant to your middle-aged boss who’s really just looking for a cute young thing to bring coffee to his desk, your four years studying “communication” were spent in vain. If innovation is lackluster, it may be because of barriers to entrance we’ve put up everywhere. Any anonymous guy on the Internet can start his own blockchain. You’re not going to test new pharmaceuticals on sick people without a Phd however.

If costs are rising in many different economic sectors, degree inflation delivers an interesting explanation. If you need a specific degree to feed elderly with dementia or help them to the toilet, such low skilled jobs may deliver salaries exceeding those of jobs that don’t require specific training. Higher salaries translate to higher costs, while mandatory on the job training similarly raises costs. People used to have the option to switch careers. As barriers to entry for every job tract grow, people who figure out that nursing the elderly is not their big passion in life after all find themselves forced to continue doing their job as the only alternative available to them may be to become mailmen. We would thus expect job dissatisfaction to grow worse, leading to worse performance and more errors.

The interesting aspect to this problem is that there seems to be no clear corrective mechanism that could resolve it. College degrees require growing debts to attain them. Laws could be implemented against discrimination based on educational attainment, but this would hasten the collapse of the student debt bubble, as more graduates would become unable to pay off their debts. Nations that individually seek to prevent credentialization would also place their own population at an international disadvantage on the job market.

Companies that individually seek to address the problem face a similar problem, as many competing companies market themselves through the qualified status of their personnel. In career tracts where jobs are limited, workers have an incentive to raise the barriers to entry. Just as big companies tend to like legislation that’s costly to comply with, as it hurts their small new competitors, established employees in a career path may seek to raise the barriers to entry to improve their own bargaining position. Thus college degrees turn from optional boons into requirements, often legally enforced by a government decree.

The most likely outcome to me seems a broad crisis and a cultural pole switch of sorts, where the population loses faith in its intellectual establishment and takes on a mentality that its critics would perceive as anti-intellectual. It seems to me that Italy is a potential canary in the coal mine.

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