The Case Against Education: Why Do Employers Tolerate It?

by NaiveTortoise1 min read10th Jun 201811 comments


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In which I explore the question of why employers don't exploit the fact that education is mostly signaling by finding better (read: cheaper and faster) proxies for intelligence, conscientiousness, and conformity.

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Given a choice between managing a team of 10 recent college graduates vs a team of 10 different unique autodidacts, I'd choose the former. So it seems like education isn't mostly signaling. It's more about turning people into standardized employees, which is useful for the same reason standardized parts are useful. There might be cheaper ways to do that, though.

Do you think education makes college graduates into standardized employees though? In my experience, watching other standardized employees had more influence on me becoming a standardized employee than going through college.

I’d also argue that what you described is at least partly signaling. The group of “10 unique autodidacts” will, on average, be less conformist than the group of 10 recent college graduates prior to either group undergoing the experiences that define them in this hypothetical. The fact that they decided to become autodidacts is a signal of that pre-existing tendency, admittedly reinforced by whatever experience had not following the standard track.

To now argue against myself, I agree with the underlying point that I failed to discuss why hiring often does (and should) optimize for not making mistakes rather than finding optimal individuals.

All good points.

Maybe the key trait isn't conformity (which is easy to test in an interview), but reliability (which is impossible to test in a short time). And people aren't very reliable by nature; it seems to me that school makes many people better at not flaking, not just helps them signal non-flakeyness. That would also partly explain the sheepskin effect, because anyone who studied 3.9 years instead of 4 is clearly flakey.

I think it might be helpful to taboo the term "standardized employees" here, because I strongly suspect that you and cousin_it are defining the term differently.

cousin_it seems to be suggesting that education tends to produce people who have a similar skillset or body of knowledge. This is what having a degree implies; that one has attained a certain level of knowledge that an educational institution has deemed acceptable to qualify for receiving the degree. This is part of the reason why employers look for various degree levels, as the level of degree implies a certain level of knowledge necessary for the job that the employer will not need to take the time to impart themselves.

You, on the other hand, seem to be referring to how one acts on the job as the primary meaning of "standardization". Ability to conform is, to a certain degree, a useful trait in most jobs, but it isn't necessarily a trait that is imparted via formal education. Further, one's ability to conform usually has very little to do with one's ability to actually perform the job in question, since lacking the knowledge that forms the basis of the job is not something that can necessarily be covered up by conforming.

This puzzle is related to (and much simpler than IMO) the bigger puzzle of employment generally. What is the fundamental economic reason that a person accepts a fixed amount per hour or per year, and that an employer agrees to pay regardless of outcome. Why don't we see a lot more piecework and medium-term contracts?

There are a few reasons the education racket is a stable(-ish) equilibrium:

1) Employers don't individually pay for the signaling. Finding a cheaper signal helps those candidates who can spend less on school, but doesn't much help the employer who uses it.

2) Finding a more accurate signal benefits employers, but it doesn't remove the utility of education as a signal, it just augment it. In fact, MOST employers layer lots of other signals on top of education.

3) Most employers are products of education systems, and believe in the skills/knowledge theory more than they recognize the signaling theory.

4) The conformity requirement cuts both ways. Smart people who'll make good employees have to show they're able to act in accordance with expectations. And once that's baked in, they're likely to choose employers who don't challenge them on those dimensions. So it's a huge risk for an employer to defect from this selection mechanism.

I agree that this is a larger and more complex puzzle, which is in fact why I avoided addressing it in my post. That said, I want to address some of your points, with which I mostly agree, individually.

Regarding 1), this is true but, all else equal, you'd think that employers would still have incentives to find cheaper or quicker work-arounds for extracting the same signal (see my discussion of Google hiring directly out of high school in the post). I suspect they don't because of the other reasons you mention in your comment.

I agree that 3) and 4) play large roles that are hard to model in economics studies. While I haven't read it, I wonder if Tyler Cowen's "The Complacent Class" discusses this.

Employer's incentives to signal are my chief suspect. People who do hiring want an easy way to defend their decision: credentials are the obvious solution; no one actually tracks how their decisions turn out anyway. I think Caplan mentions this, though I do not recall - perhaps it was in another review of the book I read instead.

However, my real suspicion is that medium to large companies are mostly indifferent to outcomes, and as a consequence actively prefer ambiguity. One reason is because principal-agent problems are huge and increasing, owing to the number of principal-agent layers everything goes through. For a tangible example, consider warranties - lots of companies now subcontract warranty fulfillment. I have had exactly 0 good experiences where warranties were handled by another company, because that company's incentive is to deny everything. Subcontracting is a plague upon the face of the earth.

Another reason would be the nature of publicly traded companies: success is defined in terms of an increase in stock price, and stock price depends wholly on investor confidence. Which means publicly traded companies are fundamentally confidence games. As a consequence, the only time company leadership is incentivized to improve clarity is when they are already certain the company is doing very well. By contrast, companies with mediocre and poor performance are still trying to increase investor confidence, and uncertainty which permits confidence is preferable to clarity which destroys it; it seems like they are incentivized to add noise. Since these are the incentives that govern how strategy is chosen, this problem rolls on down the organization.

Your post is mostly good, but I question your claim that majoring in English discourages conformity. My impression is that English departments reward conformity to a set of norms that somewhat conflicts with mainstream norms. I can imagine this being a valuable signal for unpopular professions.

This is a good point, but I'm not sure how to productively integrate it into my discussion of conformity yet. It seems like the higher level point this points to is that conformity exists along many only partially interacting axes (in this example, the type of conformity being an English major shows is different but not *entirely* different from the type of conformity being an Economics major shows).

Unfortunately, going from a one-dimensional model of less to more conforming to a multi-dimensional one where you can conform along many axes makes this even harder to discuss and investigate... To do so, I suspect I'd need to narrow down my investigation to one industry within which conformity mostly varies along a single dimension.

I think this conundrum goes away once you recognize that employers are looking for signals of conformity/conscientiousness _AND_ for signals of other capabilities. Degrees in English and Economics may both show the ability to understand and follow ambiguous social rules, but Economics _ALSO_ shows some ability in math.

And, of course, you then run into the problem you state - employers are looking for different specific dimensions of conformity, creativity-within-bounds, and technical aptitude.

The one who has student loan to pay is less likely to quit job.