The most prominent theory for why college graduates earn more on average than individuals who didn’t finish college is “Human Capital Theory.” The idea is that a college education is a skill-building process, and the labor market rewards more productive workers (more education –> more human capital –> higher wages).
Another well-known theory for why college graduates earn more is that a college degree effectively sends a signal to the labor market of one’s higher productivity. The idea is that a college education isn’t so much a skill-building process as it is a skill-indicator. It filters out the less skilled workers. Employers learn who’s more productive and therefore deserve higher pay, and more productive people have a way to communicate their higher value to potential employers. In this model, it’s still a helpful social structure (and individually rational for workers and employers). However, in the case of higher education, the social problem with a pure signaling explanation is its resource-intensiveness.
A ton of evidence indicates that education is a skill-building process and not merely a signal. While a 100% signal interpretation isn’t plausible, there’s evidence suggesting that a credential has value beyond human capital development. If you can imagine a figure comparing years of education on the x axis and wages on the y axis, studies have found “jumps” in the years where a credential is awarded (known as the “sheepskin effect” in higher ed). If firms figure out how to identify talent without relying on traditional postsecondary credentials as a signal, expect them to think creatively about cost savings. All else equal, it would be cheaper to hire people with two years of postsecondary education than four.
Skill development and certification are central postsecondary functions, and technology could affect both. Greater modularity and an emphasis on competency versus seat time could help students spend more time developing human capital and less time “satisfying requirements.” Better assessment technology could help employers identify the skills that offer the most value. The symbiotic relationship here could be transformative, especially considering the weaknesses of current postsecondary practices (Google found GPAs weren’t a useful metric). Higher education could be a social institution more committed to labor market skill-building and skill-assessment. Books like Academically Adrift and Google’s giving up on GPAs both suggest that higher education has room to improve in both areas. There are legitimate concerns about a laser-like focus on employability, but a thoughtful move in that direction seems to be what students, parents, and employers want. Economic theory suggests that firms will train–or pay to train–their workers in firm-specific skills but not general-employment skills. So long as this theory is consistent with reality, general education will continue to belong to the academy.