Magazine | November 25, 2019, Issue

Break Up the B.A. Cartel

Library of Trinity College, Dublin (De Agostini/W. Buss/Getty Images)
Washington has massively distorted the labor market, to the benefit of the higher-education industry

Joe Biden, Bernie Sanders, Elizabeth Warren, and the rest of the Democratic field have a solution for anxiety about the cost of college: They’re offering student-debt forgiveness and “free college.” They quibble about the details — Sanders wants to have taxpayers eat all $1.6 trillion in outstanding student loans while Biden pledges simply to make existing loan-forgiveness programs more generous. But they agree on the broad strokes. They want to supersize the hundreds of billions of dollars in subsidies that state governments and Washington provide to higher education.

The problems with all this are manifold. Loan forgiveness mostly would involve taxpayers’ picking up the tab for students who have racked up large loans by going to law school, business school, or pricey private colleges. It would reward those who borrowed the most, while stiffing students who scrimped and saved by opting for cheaper schools or working nights. And, given that college graduates enjoy a big boost to lifetime earnings, the schemes would favor the class of Americans with the best financial prospects.

The second half of the subsidy agenda entails providing “free college” at public institutions. As Sanders has cheerfully volunteered, Washington would take a supervisory role in how public colleges operate, with federal bureaucrats issuing edicts on college offerings, staffing, salaries, and much else.

Confronted with all this, conservatives have mostly played defense — pointing out the perverse incentives, the payoffs to the privileged, and the hefty subsidies for a dysfunctional status quo. While this makes clear what conservatives are against, less clear is what we’re for.

After all, there are real problems to be addressed. While higher education can be a powerful engine of opportunity, too many Americans experience it principally as a toll. Employers increasingly require applicants to present a college degree, even when those anthropology degrees aren’t relevant to the job, and even as employers express skepticism that colleges are preparing graduates for work. Colleges, in turn, jauntily treat their privileged position as an opportunity to raise costs and add administrative staff.

Conservatives should move to bust this dysfunctional college–industrial complex. We can do this not by denouncing colleges but by going after the legally suspect protection racket that permits rent-seeking. That racket? The use of the college degree as a default hiring device. This represents one of the most significant hurdles to opportunity and social mobility in American life.

Even as reformers have taken up arms against indefensible licensure regimes, the use of the college degree as a hiring device (one that is, as we shall see, adopted by private employers but heavily encouraged by government policy) has gone bizarrely unchallenged. That’s despite its profound costs and dubious legality. Today, thousands of employers routinely use college degrees as a convenient way to screen and hire job applicants, even when post-secondary credentials bear no obvious connection to job duties or performance. Indeed, researchers at the Harvard Business School reported in 2017 that nearly two-thirds of the employers they had surveyed admitted to having rejected applicants simply because they lacked a college degree — even though they were otherwise qualified for the job. 

Burning Glass Technologies reported in 2014 that employers increasingly require new hires to have bachelor’s degrees for positions where current workers don’t have one and for which the requisite skills haven’t changed. This was true even though the researchers also found that college graduates filling middle-skill positions cost more to employ, have higher turnover rates, tend to be less engaged, and are no more productive than high-school graduates doing the same job.

Why would employers behave so irrationally? 

In large part, it’s an unintended consequence of federal antidiscrimination law. Title VII of the Civil Rights Act of 1964 prohibited employers from discriminating against workers or job applicants on the basis of race, color, religion, sex, or national origin. It did, however, allow the use of “professionally developed” ability or employment tests insofar as they were not “designed, intended or used” to discriminate.

In Griggs v. Duke Power Company (1971), the Supreme Court unanimously interpreted this language to mean that when a selection process disproportionately affects minority groups (i.e., has a “disparate impact”), employers must show that any requirements are directly job-related and an accurate predictor of job performance.

This “disparate impact” standard, which Congress codified into law in 1991, applies to any test or selection procedure used for employment decisions, including educational requirements. But while it’s been scrupulously applied to non-educational types of employment tests, it hasn’t been applied to college degrees. And that is despite massive disparities in the rate at which “protected classes” earn college degrees — which mean that screening that is reliant on degrees is going to have a disparate impact on these groups of potential applicants when they seek work, no matter their skills.

For employers, college-degree requirements represent an easy, risk-free way to screen applicants while sidestepping legal culpability. And colleges, of course, reap the outsized benefits of acting as the gatekeepers to employment. It’s an arrangement that allows campus bureaucrats to pull in six-figure salaries, require most aspiring professionals to run a progressive gauntlet, and shrug off the fact that half of college students fail to graduate, all while feasting on federal student loans and aid. Democratic proposals are designed to keep this gravy train running with ever larger injections of public funds.

The big losers are the two-thirds of workers and would-be workers who do not have a four-year degree. Requiring a college degree summarily disqualifies non-credentialed workers with relevant qualifications and experience from the applicant pool. It bars young people from pursuing entry-level jobs that can open up new opportunities. And it holds families and would-be workers hostage, forcing them to devote time and money to collecting degrees whether or not those degrees impart valuable skills or knowledge.

In short, Washington has massively distorted the labor market. It has made college degrees the convenient, legally safe proxy for employability while making employers nervous about using alternative mechanisms. This has stymied the market for reliable, legally approved alternative credentials and employment assessments.

What might be done about all this? Here’s where we should start: A degree should hold value in the labor market because of the skills and knowledge it represents, and not because colleges have hit upon a scheme that enables employers to circumvent the law of the land.

Making that a reality would require putting degrees on a level playing field with other credentials and professionally devised employment tests. For instance, companies such as Coca-Cola and FedEx use eSkill to test for roles ranging from human resources to sales, while companies such as Amazon, Twitter, and CapitalOne utilize HackerRank to assess candidates in over 35 programming languages. There are many such tools, and their potential would be enormous if more employers had reason to request more comprehensive, systematic, and rigorous assessments.

Employers should be prepared to justify the use of college degrees in the same way they would any other employment test, and the courts and the executive branch should apply the same standards to college degrees that they would to any other test. This argues for legislation and enforcement that give employers much more leeway to use rigorous, job-relevant degree alternatives. Of course, when degrees are an appropriate prerequisite for a position, they should be treated accordingly. If employers determine that degrees in nursing, electrical engineering, or anything else accord with hiring standards for particular jobs — and can make that case — then using degrees as hiring tests is wholly appropriate. But it is much less so to declare “B.A. required” for a general administrative or clerical position.

The president can take an important step by ordering the Office of Personnel Management (OPM), whose rules apply to the federal government’s 2 million employees (2.8 million with the Postal Service), to change its guidance that agencies may routinely require a B.A. for entry-level positions. While there are instances in which OPM currently permits the substitution of “specialized experience,” the complexity of satisfactorily demonstrating such experience and the relative ease of screening based on degrees means that there is a heavy thumb on the scale.

New OPM guidance should stipulate that a degree may be required only when it is “job-related” and provides a “reasonable measure of job performance.” That same guidance should extend to the classification and qualification standards governing the hiring of 4 million federal contractors. Such executive action would be consistent with the precedent set by the Obama administration, for instance, when it moved to reduce federal employment barriers by prohibiting inquiry about an applicant’s criminal history until after a conditional offer was made (a practice known as “banning the box”). Governors should pursue a similar tack in their state agencies, which collectively employ 5 million people. 

Between Washington and the states, such a change could affect upwards of 11 million jobs (this excludes the 14 million positions in local government). In making it, state and federal leaders could catalyze the marketplace for alternative credentials and hiring tools, start to establish standards and norms in that marketplace, and give employers confidence that the alternatives are neither risky nor impractical.

Meanwhile, champions of individual rights should file lawsuits challenging college requirements in the courts with the same verve they’ve brought to challenging other kinds of credentialing requirements. In recent years, public-interest firms such as the Institute for Justice have successfully challenged an array of once-uncontroversial licensure requirements.

Finally, it needs to be addressed that federal student aid currently discriminates against alternative models of credentialing, such as apprenticeships, non-degree programs, and training partnerships. In the long term, changing the system will require Congress to modify the relevant legislation, adopting common standards for eligibility. In the meantime, eligibility is determined by sponsoring institutions and accreditors. On that count, governors, state boards of higher education, and boards of trustees can direct traditional public institutions to sponsor, or expand their eligibility umbrella to include, nontraditional providers, thus making those programs (and their students) eligible for federal aid.

Overthrowing the college degree as a one-size-fits-all fast pass to employment will inevitably weaken the college cartel. Individual colleges will have to work harder to make the case that they’re worth the time and money. The grip that colleges have on the nation’s cultural imagination may loosen as well.

College can be a very good thing. That’s not at issue. Rather, the point is that an inconsistent judicial standard, excessive regard for employer convenience, and colleges’ self-interest ought not to oblige Americans to buy a very expensive credential when good alternatives exist. While Democrats want to protect this racket and even up its payoffs, conservatives should be pledging to bust it.

Frederick M. Hess is the director of education-policy studies at the American Enterprise Institute.

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