Worthless paper: we don’t need no degree!

If one rummages through economic theories, one finds three powerful ideas that show why education is important for society. Firstly, education ‘converts’ humans into human capital. This makes us productive and creative. Secondly, education has positive spillover effects, benefiting even those who are not educated. For instance, a more educated society is more likely to have lower crime rates than a less educated one.

The third idea, attributed to Michael Spence, the 2001 winner of Nobel Memorial Prize in Economics, is that of signalling. We study because we want to send a signal of our ability to our prospective employers. There is an information gap in the job market. At the interview table, I know about my abilities more than my employer. How is she sure she is hiring the right candidate? Among other things, by looking at educational credentials. The university you go to signals the type and level of quality you bring to the table. A more prestigious university fetches you higher likelihood of jobs as well as higher salaries. People want degrees so they can signal their quality.

But here is the catch. A degree signals the quality of the college, not the candidate. It’s an associative relation. Because I go to college A, and A’s degree is valuable, so I become valuable. So if a degree signals poor quality of college, why go there in the first place? For a vast majority of Indian students, it doesn’t matter. There is a lust for degrees. Not education, but degrees.

Look at the numbers, roughly. Since 2001, the number of universities have gone up from 250 to 800, and colleges from 13,000 to 40,000. The gross enrolment ratio, which shows how many students go to college from every 100 that complete their schooling, was 8.1% in 2000-01, and now stands at 25%. The number of students entering colleges annually in India is the same as the population of Afghanistan! This is a mindboggling figure. Indians want degrees. There is a newfound aspiration. It is disastrous what happens to the dreams of most Indians who want education, but end up getting mere degrees.

40,000 colleges! Most of these colleges have failed their promise on providing signal of good quality. But because they have been regulatorily established, they will still give a degree, certified by the government. And that acts like a ‘completion certificate.’ A tick-mark on the CV, a process fulfilled, an outcome generated. In a way, it pushes you for the next step.

In the next step, employers will perhaps find it hard to assess quality through signal of degree from one of the 90% of colleges. They will perhaps look at other attributes — the scores in various subjects, the articulation skills of the employee, their interests, their aptitude (there are now companies that do standardised tests for college graduates, on which the employers rely more than the degree itself!), and the like.

Recommendations become hugely important therefore in India. And many jobs are filled through state-organised entrance examinations, which eliminate those who, despite having graduated from colleges, need to prove their worth. Cases of bribes for jobs (for instance in recruitment of teachers) become commonplace. The value of degree is stripped off, without an iota of consideration towards years the student has spent in a college. Millions of college graduates, with degrees in hand, look at uncertain future. Their colleges had UGC certification, all possible approvals and accreditation. But their degrees are worthless.

One wonders why don’t new educational spaces emerge, which signal quality and where a degree carries weight? That’s because even if I have all the right ingredients, I still cannot grant a degree unless I affiliate myself with a university. The same rigid and mediocre university which I was trying to set myself out from. And building a new university means negotiating in a horrendously
meandering bureaucracy few can survive.

Making a start

But markets are stubborn, and they will find a way. If I can’t give degrees, why don’t I simply send signals to convey quality, packaged in something else? If a degree ought to be signalling the quality of faculty, curriculum, research, why can’t I start a space with all this, and not grant a degree. Why not establish a physical space with great teachers and interested students with an agile and market-responsive curriculum? Why will the employer ask for a degree, if it can easily assess the quality, by looking at the credentials of people involved with such initiatives? Indeed, this is happening.

The Indian School of Business, Hyderabad, arguably one of the best in the world, does not offer a degree. Nor does the Indian School of Management and Entrepreneurship (Mumbai), Vedica Scholars Programme (Delhi), Indian School of Public Policy (Delhi), Indian School of Development Management (Noida) offer any. None of them are degree granting institutions, or suffer from any governmental approvals.

Each of them, despite being expensive, attract some of the brightest and committed cohorts of students who spend months together with the prospect of growth, learning and a job, but no degree! Market flocks towards them because they know they will get skilled graduates. Graduates come because they know market will come. All you need is good teachers between them as the glue of credibility.

The world of higher education is set out for major disruption in the coming decade. This may just be one of them. And one of the early casualty could be the traditional degree.

(The writer is associate professor of economics at OP Jindal Global University and sits on the governing council of Indian School of Public Policy)