The Great University Illusion

The value of having a degree is shrinking as more and more people are graduating and the playing field is levelling. But this doesn’t mean it’s not worth having one. While you won’t stand out with a degree, you will certainly be ruled out of almost all “degree-level” jobs for not reaching that standard. So they are still useful for a small percentage of professions and – most importantly – signalling.

This means coming to terms with the fact that degrees are not good to have for the reasons we might like to believe. Studying for a degree doesn’t make one smarter and isn’t the only reason why people who have them go on to earn more. There is also almost no correlation between what you study at university and what career path you take and almost everyone who has a degree doesn’t use what they learned in their degree in the jobs they go on to do.

In 2017, Professor Bryan Caplan is set to outline his own fascinating findings about the common myths surrounding university in The Case Against Education. He has already written and spoken extensively on the topic and touches on what the content of his book will be in 2015 in this podcast aired by Cato.

University graduates, he finds, earn 83% more than high school graduates. Now, would that not be quite an enormous investment, even considering that to go to university one would be giving up four years’ wages plus handing over four years’ worth of loans and/or tuition fees? And could we not, then, just take four years out to study every time we wanted to increase our earnings?

The answer is no. Besides there being diminishing returns accruing to an individual for increasing their education, the problem is that not all of this 83% extra earnings observed in graduates is down to having a degree. The reason for this is that people who apply for and are accepted into university already have big labour market advantages – meaning that they are already unusually employable. They will typically have higher IQs and possess harder-to-measure qualities like better work ethic.

So about 55% of the extra earnings graduates enjoy can be said to be caused by having a degree. Though Caplan points out that this is only an average and people’s experiences vary widely. If we look at the differing abilities of university students, it tends to be that students with higher scores opt for the toughest degrees and low-scoring students choose to study lower-paying subjects at university.

Again, it’s an illusion. There’s a perpetuated myth that the better your degree, the better you will do later on in life. But it’s almost all correlation – simply choosing a more rigorous degree doesn’t cause one to have a high-paid job.

It gets even more interesting when Caplan talks about the “sheepskin effect” whereby it is possible to prove that what you learn in your degree is not the reason you go on to be more successful than your high school-graduate counterparts. It’s called the “sheepskin effect” because diplomas used to be written on the skin of sheep.

If we naively thought that the aforementioned 83% extra payoff experienced by university graduates was down to what is being learned while at university, then we might think that looking at the quarters individually, each of the four years would provide equal payoffs.

Instead ,the big payoff comes at the end of the degree and it’s almost not worth embarking on one at all unless you get that certificate at the end. It doesn’t matter if you became remarkably more learned in those two years you spent at university. 70% of the gains come from completing it. And we can already tell in general how long it will take people to finish their degree, and indeed the probability that they will finish it, before they even start university.

Economists tend to talk like university ingrains in individuals a whole load of job skills that give them greater “human capital”. But if this were totally true, one would have to believe that the 83% gain makes you 83% more productive. Of course, that’s not true.

Listening to university students imparting what they can recollect of inebriated, post-society-social frolics and dead-pig-head shenanigans, preceded by napping, Netflix and a sprinkling of study might not paint a clear enough picture. And unsettling tales of “bull-shitting” essays, not bothering to show up to lectures and the little “contact time” with tutors might not make it obvious that students aren’t busy gaining attributes that will make them more employable. So Caplan also looks into this phenomenon.

Students, unsurprisingly if “ye have little faith”, when surveyed, tend to prefer teachers who give them As, as opposed to teachers who teach them more useful skills, and are pleased to be let off when professors cancel tutorials. Not to mention the fact that before graduates go into interviews they’re not exactly scrambling to remember what they learned in their degrees.

Even highly lucrative degrees like Economics are not remotely vocational. So all of this makes no sense for the human capital model yet points towards the usefulness of the signalling model for explaining these supposed gains after a four year carry-on on campus.

At least, for many people, university is still a world in which to relish the access to renowned academics and lavish libraries, have their views and ideas challenged and changed, take advantage of networking opportunities, learn skills leading societies, make friends for life and simply study something they really enjoy.

It’s so important to realise the gains to be made by a lot of people in a lot of circumstances from jumping into doing, and immediately setting off on the path to where we want to be. We must shake this collective idea that it’s absolutely imperative we tick boxes like getting a degree.

The Case Against Education should go a long way towards penetrating society’s misconceptions about university.


  1. I’ve heard this argument before, but it seems like it’s easy to find counter-examples. If you get a math or engineering or music degree, it’s hard to argue that there isn’t a big change in human capital. I don’t care how brilliant and hard-working you are, if you don’t have an appropriate engineering education, I don’t want you to build a bridge. The sheepskin certifies that education, so there’s some signalling, but it’s largely informative of the education rather than (or in addition to) person attributes.

    I don’t think I’m completely missing the point. Maybe different degrees have different signal-to-real capital ratios?


Please enter your comment!
Please enter your name here