In the The Chronicle of Higher Education, Richard Vedder recently wrote that the United States may be over-investing in education. Andrew Sullivan subsequently published a reply in The Atlantic. From the initial article:

All told, some 17,000,000 Americans with college degrees are doing jobs that the [Bureau of Labor Statistics] says require less than the skill levels associated with a bachelor’s degree.

The author includes the following chart:

Source: The Chronicle of Higher Education

This strikes me as consistent with the signaling model in education, à la Charles Murray and Bryan Caplan. In short, it says that it is difficult to distinguish between the skill sets of workers initially (i.e., by visual inspection), and having a college degree provides a way for a person to “signal” to potential employers that he or she is a higher quality candidate. Good grades can signal many traits about a person that an employer may find attractive — that he or she is conformist, obedient, smart, dedicated, motivated, hard-working, etc.

Central to the signaling model is the fact that, in most higher-education classes, a student learns no job skills. I have a bachelor’s degree in French, so I have personal experience with this. Although I enjoyed my French classes and found them very challenging and fulfilling, I did not learn any skills that I use professionally — with the possible exception of having the ability to read Frédéric Bastiat in his original French, of course.

Certainly, there are social benefits to education. An educated population is, in general, a very good thing. Even if they don’t use skills that they developed through higher education, it’s probable that these janitors and flight attendants are leading more fulfilled lives as a consequence of their education. Perhaps the time that they spend outside of work, in leisure, is more fulfilling than it would have otherwise been.

On the other hand, there are also negative consequences to having a high number of degree holders. If one person becomes more educated, then he or she has a good chance of making more money. However, when a majority of the population becomes more educated, they compete for the jobs requiring that knowledge. This is the phenomenon that we see in the article — that’s why 29.80 percent of flight attendants have a bachelor’s degree or more. An additional negative consequence is degree inflation. As a greater number of people seek education, it will become increasingly difficult to distinguish between the quality of individuals (i.e., it will mute the signal), and employers will demand even more education, contributing to degree inflation.

Government subsidization of education is one of the biggest reasons why these 17 million degree-holders are in positions that do not require a degree. Despite the aforementioned positive consequences of an educated society, subsidizing education should not be the objective of government. When the government makes something less expensive, individuals will consume more of it than they would otherwise — more than the socially optimal level. The housing market is an analogous example: The government subsidized homeownership, so many individuals over-consumed housing, including those who were poorly suited for homeownership. (The United States experienced a housing bubble; is an education bubble in our future?) Although a particular project may have some social benefits, when that project is subsidized with taxpayer monies, it should be weighed against the costs.

Please don’t mistake my statements as being anti-education; on the contrary, I am a supporter. This post is an argument against current funding mechanisms. The policy of subsidizing education is quite regressive. Public universities, including my own alma mater, are largely funded by tax revenues taken from the general population, not by consumers of education. It would be more efficient if everybody paid for the true cost of their consumption through private means (i.e., private loans, savings, scholarships), just like they do for other goods and services. The government could then devote the tax money that they would save on higher education to other programs instead — on primary and secondary education, perhaps — or return it to taxpayers, to spend in the private sector.

I encourage our readers to watch the video “So You Want To Get a Ph.D. in the Humanities,” which former Show-Me Institute intern Martha King recently posted on her Facebook wall. It’s simultaneously hilarious and depressing.