Thursday 29 June 2023

Signalling theory suggests that we may need two categories of university degree

In The Conversation last week, Ananish Chaudhuri (University of Auckland) argued the case for having two categories of university degree:

And while cognitive abilities such as reading, writing and maths matter, so too do social skills such as empathy, resilience and an ability to work in diverse groups and with diverse views...

Universities play a crucial role in developing these skills. But the emerging two groups of students – on campus and off – are not getting the same education. The increasing emphasis on online instruction and exams is devaluing degrees...

This suggests we may need to distinguish between online and on-campus students in each of our courses. The course content will be the same, but the assessment methods will be different.

Online students can take tests, quizzes and exams remotely. Some of this may also be available to on-campus students. But on-campus students will be expected to come to lectures regularly, ask questions, write, speak and engage in interactive tasks, including group work.

Would students sign up for on-campus courses but simply not attend? This could be prevented by making sure each student completes tasks that earn participation marks that count toward on-campus credits. If they fail to do so, they will automatically become online students.

Is this unfair to online students? Not necessarily. Many with jobs may prefer it. In any event, they will have to consider whether the benefits of coming to campus are worth it in terms of job prospects or earning potential.

It is worth reviewing the purposes of education from the perspective of the student. On the one hand, education provides useful cognitive and non-cognitive skills that have value in the workforce. In theory, skills development need not necessarily be different between in-person students and online students. However, some 'transferable skills' like teamwork and interpersonal skills are more difficult to develop in an online environment (as Chaudhuri notes).

On the other hand, education provides a signal to employers about the quality of the job applicant. Signalling is necessary because there is an adverse selection problem in the labour market. Job applicants know whether they are high quality or not, but employers do not know. The 'quality' of a job applicant is private information. High-quality (intelligent, hard-working, etc.) job applicants want to reveal to employers that they are hard-working. To do this, they need a signal - a way of credibly revealing their quality to prospective employers.

In order for a signal to be effective, it must be costly (otherwise everyone, even those who are lower quality job applicants, would provide the signal), and it must be costly in a way that makes it unattractive for the lower quality job applicants to attempt (such as being more costly for them to engage in).

Qualifications (degrees, diplomas, etc.) provide an effective signal (they are costly, and more costly for lower quality applicants who may have to attempt papers multiple times in order to pass, or work much harder in order to pass). So by engaging in university-level study, students are providing a signal of their quality to future employers. The qualification signals to the employer that the student is high quality, since a low-quality applicant wouldn't have put in the hard work required to get the qualification. Qualifications confer what we call a sheepskin effect - they have value to the graduate over and above the explicit learning and the skills that the student has developed during their study.

Now we can see where there is a key difference between in-person and online education. In-person education is more costly than online education, even if the tuition fees are the same, because it requires effort for a student to get themselves onto campus and into class each day. Higher-quality students (who will be higher-quality job applicants) are more likely to be conscientious and make this effort than lower-quality students. So, having an in-person education should provide an additional signal of quality to employers, over and above the signal provided by the degree itself.

However, if there is no way for the in-person students to distinguish themselves from the online students, then the value of the signal provided by in-person education is lost. Chaudhuri argues that the solution is to create a two-tiered qualification system. One (in-person) qualification would convey a signal of high quality to employers, and the other (online) qualification would convey a signal of lower quality to employers.

I'd argue that this already happens to some extent. It's the reason why Massive Open Online Courses (MOOCs) haven't displaced traditional education, despite being free or low cost. Employers can tell the signalling value of a degree when compared with studying online using a MOOC. The problem that Chaudhuri notes is that students' university transcripts probably don't clearly identify students who have done their study in-person from those who have done their study online.

Of course, savvy employers don't only rely on job applicants providing signals. Employers engage in screening, in order to reveal the private information for themselves. They do job interviews and subject job applicants to various pre-employment tests, which helps the employer to tell the high-quality and low-quality job applicants apart. It would not surprise me at all to learn that, as part of the standard job interview script, employers now ask how much of their degree a job applicant completed online. However, job applicants can lie in job interviews, so screening is unlikely to be as effective as signalling in solving the adverse selection problem. Perhaps, two categories of university degree is the best solution after all.

Regardless, the takeaway for students is, as I noted in this 2017 post, that they should be acutely aware of the signals that they are sending to future employers. Education is a signal, but the type of education matters as well.

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