Archive for February 2nd, 2012

February 2, 2012

An important step in breaking higher education’s credentialing monopoly?

by Grace

On the road to the dismantling of  higher education’s expensive monopoly on credentialing comes an announcement of new online testing options for students.  

First, a review of economics.

If the price of something rises a lot, people look for substitutes. Resources (dollars) are scarce, and individuals want to make the best use of them. They “maximize their utility” by shifting away from high-priced good or service A to lower-priced good B.

Students and employers are stuck in our current system, where colleges hold credentialing monopoly.

With regards to colleges, consumers typically have believed that there are no good substitutes–the only way a person can certify to potential employers that she/he is pretty bright, well educated, good at communicating, disciplined, etc., is by presenting a bachelor’s degree diploma. College graduates typically have these positive attributes more than others, so degrees serve as an important signaling device to employers, lowering the costs of learning about the traits of the applicant. Because of the lack of good substitutes, colleges face little outside competition and can raise prices more, given their quasi-monopoly status.

As college costs rise, however, people are asking: Aren’t there cheaper ways of certifying competence and skills to employers?

New competency tests as college alternatives:

The search for alternative ways is leading to other entities offering credentials for much less than the $30,000-$60,000 per year that colleges charge.  New agreements between Burck Smith’s StraighterLine, the Education Testing Service (ETS), and the Council on Aid to Education (CAE) to offer online competency tests have just been announced.

Students can tell employers, “I did very well on the CLA and iSkills test, strong predictors of future positive work performance,” and, implicitly “you can hire me for less than you pay college graduates who score less well on these tests.”

Will it be more “fair”?
The suggestion is that employers will be a driving force in the move to alternative credentialing as a way to keep salary costs in line.  This could be true, pointing to a possible increasing class divide between high and low earners, with only graduates of elite residential colleges in the running for top salaries.  On the other hand, employers would be able to spurn the graduates of the many expensive-but-mediocre colleges in favor of alternatively credentialed employees who would be able to compete for jobs on a true merit basis.

More:  How quickly will the Higher-Ed Revolution happen?

It’s happening, almost overnight: what could be the collapse of the near-monopoly that traditional brick-and-mortar colleges and universities currently enjoy as respected credentialing institutions whose degrees and grades mean something to employers.

Related:  Higher education is a prisoner’s dilemma

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