John Cassidy writes: Promoters of higher education have long emphasized its role in meeting civic needs.

In the fast-growing for-profit college sector, which now accounts for more than ten per cent of all students, vocational degrees are the norm.

No idea has had more influence on education policy than the notion that colleges teach their students specific, marketable skills, which they can use to get a good job. Economists refer to this as the “human capital” theory of education, and for the past twenty or thirty years it has gone largely unchallenged.

So what purpose does college really serve for students and employers?

And, while college graduates are still doing a lot better than nongraduates, some studies show that the earnings gap has stopped growing. The figures need careful parsing. If you lump college graduates in with people with advanced degrees, the picture looks brighter.

Many students and their families extend themselves to pay for a college education out of fear of falling into the low-wage economy. That’s perfectly understandable. But how sound an investment is it? One way to figure this out is to treat a college degree like a stock or a bond and compare the cost of obtaining one with the accumulated returns that it generates over the years. (In this case, the returns come in the form of wages over and above those earned by people who don’t hold degrees.)

So what purpose does college really serve for students and employers? Before the human-capital theory became so popular, there was another view of higher education—as, in part, a filter, or screening device, that sorted individuals according to their aptitudes and conveyed this information to businesses and other hiring institutions. By completing a four-year degree, students could signal to potential employers that they had a certain level of cognitive competence and could carry out assigned tasks and work in a group setting. But a college education didn’t necessarily imbue students with specific work skills that employers needed, or make them more productive.
Kenneth Arrow, one of the giants of twentieth-century economics, came up with this account, and if you take it seriously you can’t assume that it’s always a good thing to persuade more people to go to college. If almost everybody has a college degree, getting one doesn’t differentiate you from the pack. To get the job you want, you might have to go to a fancy (and expensive) college, or get a higher degree. Education turns into an arms race, which primarily benefits the arms manufacturers—in this case, colleges and universities.

Increasingly, the competition for jobs is taking place in areas of the labor market where college graduates didn’t previously tend to compete. As Beaudry, Green, and Sand put it, “having a B.A. is less about obtaining access to high paying managerial and technology jobs and more about beating out less educated workers for the Barista or clerical job.”
Obtaining a vocational degree or certificate is one strategy that many students employ to make themselves attractive to employers, and, on the face of it, this seems sensible. If you’d like to be a radiology technician, shouldn’t you get a B.A. in radiology? If you want to run a bakery, why not apply to Kansas State and sign up for that major in Bakery Science?

Perhaps the strongest argument for caring about higher education is that it can increase social mobility, regardless of whether the human-capital theory or the signalling theory is correct. A recent study by researchers at the Federal Reserve Bank of San Francisco showed that children who are born into households in the poorest fifth of the income distribution are six times as likely to reach the top fifth if they graduate from college. As the economist Lawrence Summers and two colleagues showed in a recent simulation, even if we magically summoned up college degrees for a tenth of all the working-age American men who don’t have them—by historical standards, a big boost in college-graduation rates—we’d scarcely change the existing concentration of income at the very top of the earnings distribution, where C.E.O.s and hedge-fund managers live.