Social Econ Blog

So, what’s the evidence for signaling theory? Four facts, tucked away in this pdf and in an article by Richard Blundell and colleagues in the February 2000 Economic Journal, should make one ponder:

1. Mature students earn less than newer graduates, despite having the same human capital. This might be because mature students convey a signal that they weren’t smart enough to go to university straight from school, or are not committed to the world of work, or are just bolshy (you don't often meet a Conservative mature student, do you?) . Whatever the reason, this seems more consistent with signaling theory than human capital theory.

2. Students who take gap years earn much more than students who don’t; the gap is almost as great as the return to a degree itself. Taking a gap year doesn’t necessarily build skills, but it reveals character traits (being middle-class) valued by employers.

3. Returns to vocational education are often low, relative to non-vocational courses. Oxford classics graduates earn good money, even though the ability to converse with a dead Roman is not required for many jobs.

4. University drop-outs earn less than people with just A levels. Human capital theory says this shouldn’t happen – because they have a little more education. Signaling theory says it should. Drop-outs signal a lack of determination, which is a bad sign for employers.

Of course, this evidence is not conclusive; there is evidence for human capital theory too.

// posted by BW @ 10:29 AM