Isn't the observation that "graduates qualify for jobs that screen on degrees" a sufficient explanation for "why college graduates get higher-paying jobs"?
Data may or may not suggest that there is a residual gap once job application requirements are controlled for. But a priori, it seems sensible to assume that any such residual gap is a small part of the total difference.
It seems that complex sociological/psychological theorising is unnecessary or at least non parsimonious when compared to a simple explanation like "many high value job's list a degree as a requirement for application, and those requirements exist because there is a widely held belief that degrees are an indicator of applicant capability."
"Because it'll help me get a better job" is a rational answer to "why do you want a degree?" when many high paying job requirements use a degree as a filter regardless of whether having a degree provides any indication of capability.
Apologies if I'm missing the point, but I'm puzzled by what seems unnecessary complexity.
The separate question of "is requiring a degree a sensible filter for distinguishing high quality applicants to specific positions?" is interesting in its own right.
A very quick LLM literature review (unchecked, so don't update on my claim here) suggests different studies find small positive effects of having a degree on job performance r≈0.1 - 0.2. so it may not be a completely irrational belief to hold on average.
"Many high value jobs list a degree as a requirement for application, and those requirements exist because there is a widely held belief that degrees are an indicator of applicant capability"
If college lasted one year and cost 10k, then this seems reasonable.
The question is why people are willing to spend four years, and hundreds of thousands of dollars (not to mention the opportunity cost) to indicate capability. At *some* point this is far too expensive to be worth it.
Another way of putting it: if no other companies were willing to hire people without undergrad degrees, then in an economically rational system you should be able to hire a bunch of people far more talented than you otherwise would be able to (and for lower salaries than college grads command), by waiving this requirement. So why do barely any companies do that (outside Silicon Valley, at least)?
80+% of first year university students respond that "To be able to get a better job" is a very important reason in their deciding to go to college [1]. So we can reasonably comfortably say that for most people who recently started a college course they believed they were making an economically rational decision.
But you make a valid point that the cost in time and dollars is high, so are they rational or not? I agree that if the RoI of a degree is negative then the question of whether degrees fairly indicate capability is interesting. However, it seems that there are economists out there arguing that despite its steep price the RoI of a degree is very positive [2].
> The question is why people are willing to spend four years, and hundreds of thousands of dollars (not to mention the opportunity cost) to indicate capability.
Because they believe, and have reason to believe it's a rational economic action (obviously this doesn't mean it is always a rational choice).
Companies can continue to believe that a degree is a useful filter and applicants can therefore correctly continue to believe that their degree will get them interviews for better jobs. No additional structural expansion required.
If we're assuming spherical cows, efficient markets, and rational economic actors the more pertinent question to me is how far can college fees rise before the public believes they don't have positive RoI and stop buying.
Isn't the observation that "graduates qualify for jobs that screen on degrees" a sufficient explanation for "why college graduates get higher-paying jobs"?
Data may or may not suggest that there is a residual gap once job application requirements are controlled for. But a priori, it seems sensible to assume that any such residual gap is a small part of the total difference.
It seems that complex sociological/psychological theorising is unnecessary or at least non parsimonious when compared to a simple explanation like "many high value job's list a degree as a requirement for application, and those requirements exist because there is a widely held belief that degrees are an indicator of applicant capability."
"Because it'll help me get a better job" is a rational answer to "why do you want a degree?" when many high paying job requirements use a degree as a filter regardless of whether having a degree provides any indication of capability.
Apologies if I'm missing the point, but I'm puzzled by what seems unnecessary complexity.
The separate question of "is requiring a degree a sensible filter for distinguishing high quality applicants to specific positions?" is interesting in its own right.
A very quick LLM literature review (unchecked, so don't update on my claim here) suggests different studies find small positive effects of having a degree on job performance r≈0.1 - 0.2. so it may not be a completely irrational belief to hold on average.
"Many high value jobs list a degree as a requirement for application, and those requirements exist because there is a widely held belief that degrees are an indicator of applicant capability"
If college lasted one year and cost 10k, then this seems reasonable.
The question is why people are willing to spend four years, and hundreds of thousands of dollars (not to mention the opportunity cost) to indicate capability. At *some* point this is far too expensive to be worth it.
Another way of putting it: if no other companies were willing to hire people without undergrad degrees, then in an economically rational system you should be able to hire a bunch of people far more talented than you otherwise would be able to (and for lower salaries than college grads command), by waiving this requirement. So why do barely any companies do that (outside Silicon Valley, at least)?
80+% of first year university students respond that "To be able to get a better job" is a very important reason in their deciding to go to college [1]. So we can reasonably comfortably say that for most people who recently started a college course they believed they were making an economically rational decision.
But you make a valid point that the cost in time and dollars is high, so are they rational or not? I agree that if the RoI of a degree is negative then the question of whether degrees fairly indicate capability is interesting. However, it seems that there are economists out there arguing that despite its steep price the RoI of a degree is very positive [2].
> The question is why people are willing to spend four years, and hundreds of thousands of dollars (not to mention the opportunity cost) to indicate capability.
Because they believe, and have reason to believe it's a rational economic action (obviously this doesn't mean it is always a rational choice).
Companies can continue to believe that a degree is a useful filter and applicants can therefore correctly continue to believe that their degree will get them interviews for better jobs. No additional structural expansion required.
If we're assuming spherical cows, efficient markets, and rational economic actors the more pertinent question to me is how far can college fees rise before the public believes they don't have positive RoI and stop buying.
1. https://heri.ucla.edu/wp-content/uploads/2025/02/DATA-TABLES-TFS-2023_updated.pdf page 15
2. One recent example https://libertystreeteconomics.newyorkfed.org/2025/04/is-college-still-worth-it/