Mindy Marks and I describe a specific signaling argument in detail in our AEI Outlook, “Leisure College, USA.” But it’s simply not the case that, as Bryan Caplan suggests, “the natural inference” to be drawn from a rising college wage premium in the presence of declining study time is that college is just “wasteful signaling.” Economists have long known that the college wage premium has been rising. A dominant explanation for this is skill-biased technical change, that changes in technology may have amplified the productivity of the educated more than the productivity of the less educated. Some other explanations have to do with minimum-wage laws. It’s hotly debated. But any of these explanations could be right even though study time is declining. Declining study times mean that the return to college has risen more than previously thought. This could simply mean, for example, that the effect of skill-biased technical change is larger than previously thought, so that even more modest increases in human capital now generate significant wage gains.
In fact, it’s actually rather difficult to extract from a “wasteful signaling” argument any clear explanation for the rising return to college. Tough questions arise. If it is now much easier to acquire this signal, then why is it rewarded more? If anyone can acquire a degree so much more easily now, then the signal shouldn’t really signal as much. So why the big wage bonus? Clearly, there is no “natural inference” favoring signaling.
It’s a complex issue. Most of us believe that productivity-enhancing skills can be learned in college (I certainly wouldn’t want to go to a doctor who hadn’t gone to college.) We also believe there may be a signaling component to education, as well. In our piece, we simply note that if learning is a part of the university mission, or if studying leads to any meaningful increase in human capital, then these declining study times should be disturbing. Readers who believe college to be a waste of time, producing no useful knowledge, probably don’t need to be disturbed by students spending less time on it.
Philip Babcock is an assistant professor at the University of California-Santa Barbara.