Bohanon: Skills or Sorting — What Do We Do at a University?

January 21, 2013

by Cecil Bohanon, Ph.D.

College graduates earn more than high-school graduates. College graduates with actuarial-science degrees earn more than college graduates with culinary-arts degrees. We all know why: Higher education gives students valuable skills that translate into high-paying jobs. College level skills that are more valuable (at the margin) command higher salaries, so acquiring science and math skills through related majors lead to more remunerative job prospects than other skill sets imparted from other majors.

This is what most of us in higher education like to believe — we increase worker productivity.  A number of implications flow from this education-as-skills view of higher education. The key to economic growth is to get more students in college and into the right majors. Public spending on education is a good investment of public funds.

But there is another view, another explanation for the above-mentioned statistical facts. College graduates earn more than high-school graduates because they are on average more intelligent, persistent and capable. The actuary major earns more than the culinary-arts major because she has more kilowatts than her culinary-arts counterpart. University education along with differentiation among majors actually adds little to skill sets.

Rather it is a giant, costly and over-hyped sorting mechanism. It reliably identifies those with high potential for workplace productivity from those with less potential. Yet aptitude tests, achievement tests and specialized short-term programs could serve the same function as effectively and at much lower costs.

At the top of the pyramid are the Ivy League schools where the smartest and most capable students congregate. It isn’t surprising that these highest IQ students earn the most money as middle-aged adults, but their earning has little to do with what they learned from their esteemed professors in Cambridge, Mass. Put another way, had the Harvard freshman class of 20 years ago spent four years in a Caribbean resort village with books, Internet connections, personal connections and an adequate number of bars and grills, their earnings would be little different than what they are now.

Indeed, a lot of campuses are looking like Caribbean resorts with parquet-floored dorms and exercise centers that include rock-climbing walls. In this view, the key to economic growth is not an expansion of traditional college-level opportunities; in fact, public spending on universities is likely misguided. This view, of course, infuses with horror the heart, mind and soul of any college professor or administrator.

So which is it, skills or sorting?

I suspect the truth is some of both: Higher education adds skills and also sorts students by preexisting ability. I do not know enough about the nuances of the research to offer a definitive answer to the question of which is the most important. Moreover, as James Madison advised, I should not be the judge of my own cause. I hope quite desperately that we do add real skills; I like to think I am more than a well-paid screener.

In any case, I also suspect that the changes that have come to the higher-education landscape in the last decade are just the beginning. Online skills certification will replace much of reason for a traditional classroom. The residential undergraduate experience will survive only if it offers something of value that can’t be provided online. Colleges and universities will be increasingly focused and differentiated.

Those of us in the ivory tower will live in interesting times.

Cecil Bohanon, Ph.D., an adjunct scholar of the foundation, is professor of economics at Ball State University.

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