Degrees versus Skills: Are Universities Preparing Graduates for Real Work, or Just Credentials?
DOI: https://doi.org/10.5281/zenodo.21705200
Dr. Indu Sharma, Dr. Deepika Balai, Anjana Parik, Ms. Abhilasha Singh
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Keywords:
higher education; human capital; signalling; credentialism; graduate employability; skills mismatch; skills-based hiring; curriculum design
Abstract:
It is now a staple in public discourse that universities do not create jobs but rather credentials, and that this is typically argued against as if it were a single empirical question, with a single answer. The question is poorly formulated, this paper contends. A degree serves at least four functions: it creates a capability, it provides an indicator of existing capability, it conveys behavioural predispositions, it allocates access to a position on a queue. They benefit different people, have different decay properties, have different welfare implications, and, due to their empirical entanglement, evidence produced to support one is often interpreted as evidence against the other. We devise the Credential Function Decomposition (CFD) framework to decompose them, and we define credential drift as the difference between the allocative weight that employers give to a degree and the capability content of that degree. There are four observable mechanisms that can drive drift, of which opportunistic upskilling in slack labour markets is best documented and most challenging to align with the pure human-capital account. We then argue that the solutions of universities' training in job-ready skills is misdirected, since the skills with the shortest half-lives are the ones that are the least in the universities' comparative advantage and the ones where employers have historically paid the training price. Comparative evidence from vocational education systems, in which the early employment advantage is smaller and can even turn into a disadvantage at the older age, supports this reading. We also cite the need for an independent, valid assessment as the "stick" that makes a change from credential-based screening difficult, if not impossible, and describe it as a public good problem that has been seemingly unsolvable by the private sector. Seven propositions are drawn from this, as well as a reflection on the skills-based hiring movement, which to date has far outnumbered actual hiring behaviours. This paper does not gather data for the estimation of the parameters; hence no invented statistics are reported here, only an estimation template with placeholders to be filled with a transparent simulation harness.