Costly Unintended Consequences

Decisions often have unintended consequences.

One such decision is the subject of a new paper, “Griggs v. Duke Power: Implications for College Credentialing” recently released by the Pope Center and the Center for College Affordability and Productivity. In the paper, authors Bryan O’Keefe and Richard Vedder make a strong case that a law (the 1964 Civil Rights Act) and a Supreme Court case interpreting it (Griggs v. Duke Power) have had extremely important unforeseen consequences – a huge increase in the demand for college degrees.

Not college education. College degrees.

The Civil Rights Act made it illegal for employers to practice employment discrimination. While Congress was debating the legislation, critics argued that its language might be read as outlawing employment testing if it seemed that the testing unfairly disadvantaged minority applicants. To address that concern, a section was added allowing employers to use “professionally developed ability tests” so long as they were not “designed, intended, or used to discriminate.”

With that new language, it appeared to be legitimate for a company to give all applicants the same aptitude test to sort the more skilled from the less skilled. That isn’t how things turned out, though. General aptitude testing was soon made legally perilous for employers and they replaced it with increasing reliance on educational credentials.

In 1971, a Supreme Court decision changed the meaning of the Civil Rights Act. <>Griggs v. Duke Power was about the legality of employment tests the company administered to job applicants. The tests were professionally developed and the company had no intention of discriminating against any applicant.

Nevertheless, the Court ruled against Duke Power, reading into the statute qualifications the legislators had not included. Specifically, the justices ruled that even an apparently neutral employment test would be illegal if it had a “disparate impact” (that is, if significantly more minority than white applicants failed) and the company could not prove that there was a “business necessity” for using the test.

That decision meant that businesses were courting trouble with the Equal Employment Opportunity Commission if they used aptitude tests to screen applicants generally. Tests for very particular skills were all right (and are still widely used), but testing as a way of evaluating applicants for overall trainability was legally perilous.

It’s important for businesses to evaluate applicants for their employability, but being taken to court by the EEOC is horrendous. So what could they do to screen prospects without running the risk of legal trouble?

O’Keefe and Vedder argue that since Griggs, employers have turned more and more to screening by educational credentials, requiring that job seekers have a college degree. They write, “Applicants for many jobs are now required to have a college degree. Seldom is that done because the work is so demanding that it couldn’t be done by a person who didn’t go to college, but instead it is a means of screening out presumably less trainable applicants.”

The logic is easy to grasp – it takes some persistence, discipline, and mental ability to get a college degree. For many jobs, those traits are a useful approximation of the skill level the employer is looking for. Besides that, it’s legally safe to screen people based on the possession of a college degree. (At least it seems to be; more on that later.)

Therefore it’s now common for companies to advertise jobs, stating that it is a requirement for applicants to have a college degree, but not care what the degree is in or how well the student did. As Charles Murray wrote in his recent book Real Education, “(T)he advantage conferred by the BA often has nothing to do with the content of the education. The employer does not value what the student learned, just that the student has a degree.” In other words, the degree requirement usually has nothing to do with knowledge. It’s just a legal way to cut down the applicant pool.

O’Keefe and Vedder support their thesis with evidence showing that the earnings differential between workers with college degrees and workers without them had been fairly stable prior to Griggs, but began increasing steadily after it. That is consistent with the idea that Griggs brought about an increase in demand for college credentials as a proxy for trainability and a safe substitute for general ability testing.

If their argument is right, and I believe it is, the United States is spending a vast amount of money on college just to help employers figure out which people are worth considering. After all, many young people are trainable, reliable, and disciplined enough for a great range of jobs by the time they have finished high school. But because the law has ruled out less costly ways for employers to ascertain enough about an applicant to decide if he or she deserves an interview, students, parents, and taxpayers have to foot the huge bill for college credentialing.

The authors’ thesis also helps explain another conundrum. For many years, the earnings differential between the college educated (or perhaps better to say “credentialed”) and those with only a high school diploma has been increasing steadily until very recently. However, college academic standards have been falling for decades and many graduates today are distressingly weak even in rudimentary language and math skills. If the learning that goes with the degree has been steadily decreasing, how can it be that the economic advantage has been increasing?

The answer is that as the college credential has become more and more prevalent as a screening device, fewer and fewer good jobs remain open to high school grads. It’s not that the economic returns on education are rising, but that openings into the world of business, professional and governmental employment keep dwindling for non-college people.

And that brings up a devilish question O’Keefe and Vedder raise: Is it clearly legal for employers to screen out people just because they don’t have college degrees? Griggs says that employers cannot use general aptitude testing to screen out people unless it can be shown that there is some “business necessity” for using it. The authors ask, “If challenged, could employers who have set the college degree as a requirement show that it has anything at all to do with the ’business necessity’ of the employer or are ‘job-related’?”

Apparently, that issue has not yet come up in litigation, but as the cost of obtaining a college degree keeps rising, it wouldn’t be surprising if it did.