Signaling vs. Skill Building


  • Describe human capital and its impact on production
  • Identify the possible roles college plays in human capital development
  • Recognize examples of signaling in marketplaces

Relevant Clip(s):


Recently there have been discussions on the role of college in developing skills of recent graduates. Some argue that college is essential for high school graduates to compete in today’s modern workforce, but a group (1, 2, 3) of economists have loudly been arguing that college isn’t developing skills, but rather separating out potential workers who would be just as successful without college, but need the degree to be “signaled” in the marketplace.

Discussion Questions:

A majority (57%) of Americans believe the higher education system in the United States fails to provide the value that families pay, but at the same time, 86% of college graduates believe that college has been a good investment for them. In many labor economics courses, and the labor section of principles textbooks, economists argue that human capital is an investment that provides payoffs in the future in exchange for upfront costs, similar to stocks and bonds.

What’s interesting is the role that college actually provides, and, not surprisingly, responses differ by whether survey respondents graduated college. Nearly half of the public (47%) believe the main purpose of college is to teach work-related skills, while nearly 40% responded that college was meant to help students grow personally and intellectually. College graduates tended to put more importance on intellectual growth, while respondents who didn’t finish college put more emphasis on career preparation.

To start the discussion, watch “Golden Apple” where Vice Principal Cameron Tucker is asked to hold an assembly for the school on options after college. Cam initially believes that there are many options for high school graduates, and that not everyone should go to college. Later, he finds out that the school principal wins an award if 60% of the graduating class goes to college, so he tries to turn the assembly into a very pro-college message. Once he realizes he has may have the chance to become Principal if the school doesn’t meet the threshold, he changes the narrative to downplaying college.

The other clips are scenes from different episodes in the show where the Dunphy children talk about the things they’re learning in school, many of which seem irrelevant to their future careers. Ask your students what skills they believe employers want college grads to be able to do and whether many of their classes are actually doing that. They may have stories about silly things they have done in classes that don’t seem to provide much value at all.

If classes aren’t actually teaching skills, then perhaps they are serving as a signaling mechanism to future employers. They are certifying that graduates can complete drawn out tasks and won’t quit at the first sign of frustration. If that’s the case, is college actually an investment? A good segue out of Modern Family is the Marginal Revolution Economics Duel on whether education builds skills or serves as a signal.