We can thank the Supreme Court for credential inflation

Perhaps you have noticed that many jobs requiring only basic skills and a cooperative attitude are now walled off to Americans who don’t possess a college degree.

A recent study,  Moving the Goalposts: How Demand for a Bachelor’s Degree is Reshaping the Workforce contains evidence supporting that. For example, 56 percent of recent job postings for sales representatives and retail supervisors specify that having a college degree is a requirement.

This doesn’t mean that those jobs have such high intellectual demands that no one without a college degree can do them. It means that companies want to screen out everyone with lower educational credentials.

The mania for college credentials hampers upward mobility for individuals without a college degree. They are confined to the shrinking and mostly low-pay segment of the labor market where educational credentials still don’t matter. (As I argued here, that explains much of the earnings gap between workers with and without college degrees.)

Why don’t employers directly evaluate applicants’ capabilities rather than insisting that they put in the huge amount of time and money it takes to obtain a degree?

A 1971 Supreme Court decision, Griggs v. Duke Power, gives us an answer.

The case arose when Willie Griggs and fourteen other black employees of Duke Power Company sought promotions. Under a company policy adopted in 1965, workers weren’t considered for higher paying jobs with greater responsibility unless they had either earned a high school diploma or could pass two tests: the Wonderlic Personnel Test and the Bennett Mechanical Composition Test.

Griggs had not graduated from high school and didn’t earn passing scores on the tests. Instead of accepting the company’s offer to pay for workers who wanted to complete their high school education, he filed suit, alleging that the company’s policy violated the Civil Rights Act of 1964.

The Civil Rights Act made it unlawful for any employer to “limit, segregate, or classify employees or applicants in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee because of such individual’s race, color, religion, sex, or national origin.” Duke Power’s policy on education and testing, the plaintiffs argued, deprived them of job opportunities because of race.

Duke Power’s defense was that its policy was not intended to deprive any person or group of employment opportunities. It was intended to screen out workers who were probably less capable and reliable.

Furthermore, the company’s lawyers argued, the legislative history of the Civil Rights Act clearly showed that it was not intended to interfere with bona fide aptitude testing, widely used in business at that time. During Senate debate on the bill, opponents argued that it could be used to attack employment testing, which had in fact occurred in a case in Illinois involving Motorola. A state official had ruled the company’s testing illegal under state law because it was “unfair to disadvantaged groups.”

Bill sponsors, including Senator Hubert Humphrey, replied that nothing in the language of the statute could be construed that way, but to head off objections, they included a new section, 703(h). That makes it legal for an employer to use a “professionally designed ability test” if it is not “designed, intended or used to discriminate….”

You might think the Court would have ruled in Duke Power’s favor. Wrong—it ruled unanimously against it. The justices ignored the legislative history and gave deference to the federal agency charged with enforcing the law, the Equal Employment Opportunity Commission (EEOC).

The EEOC had promulgated guidelines on employment testing. Those guidelines advanced the idea that had been rejected in the debate over the Civil Rights Act, that tests would be illegal if they had a “disparate impact” on minority groups. Furthermore, the EEOC declared that if a test had a disparate impact (that is, minority workers were disproportionately affected), the employer would bear the burden of proving that it had a “business necessity” for using the test.

Chief Justice Burger’s opinion deferred to the EEOC’s reinterpretation of the law. Duke Power was in violation because its educational and testing requirements had a disparate impact on minority workers. The law, he wrote, required “the removal of artificial, arbitrary, and unnecessary barriers to employment where the barriers operate invidiously to discriminate on the basis of racial or other impermissible classification.”

Requiring either a high school diploma or ability to pass the two tests seemed to be artificial, arbitrary, and unnecessary, so out they went.

Businesses were put on notice that job testing was now fraught with legal danger. Tests were safe only if they could be proven necessary and perfectly screened for skills essential to a particular job.

But there was also a delayed consequence. With actual intelligence testing now an invitation to costly litigation, “many employers made the college degree a de facto intelligence test and focused only on hiring applicants who possessed it.”

That is the conclusion of Bryan O’Keefe and Richard Vedder in their paper Griggs v. Duke Power: Implications for College Credentialing. With general testing to screen applicants now a legal minefield, companies began screening by college credentials. 

O’Keefe and Vedder show that several years after the Griggs decision there was a marked increase in earnings of college grads relative to workers without degrees. The Court’s embrace of the EEOC’s egalitarian ideology wasn’t the only factor in the rising demand for college credentials, but undoubtedly it was an important one that led to our costly credentials “arms race.”

Professor David Labaree nailed that point in his book How to Succeed in School Without Really Learning: The Credentials Race in American Education, writing,

The difficulty posed by the glut of graduates is not that the population becomes overeducated (such a state is difficult to imagine) but that it becomes overcredentialed, as people pursue diplomas less for the knowledge they are thereby acquiring than for the access that the diplomas themselves provide. The result is a spiral of credential inflation, for as each level of education in turn floods with a crowd of ambitious consumers, individuals have to keep seeking ever-higher levels of credentials to keep a step ahead of the pack. In such a system, nobody wins.

Nobody wins, except the people and institutions that provide college credentials. Their business has mushroomed.

We probably would have a college “bubble” just from the effects of easy federal college aid and the push by politicians for educational attainment, but by making employee testing legally dangerous, the Griggs decision helped inflate it.

The Supreme Court and EEOC bear much of the blame for the way we have oversold higher education. Could they, however, help to undo that costly mistake?

O’Keefe and Vedder raise that question: “If challenged, could employers who have set the college degree as a requirement show that it has anything at all to do with ‘business necessity’ or are ‘job related’? That is very doubtful.”

Suppose that someone who’d been turned away from a sales job for lack of college degree took the company to court, claiming that its educational requirement had a disparate impact, screening out people who could succeed in the job. That would appear to be a strong case.

I have never heard of such a case, attacking an employer’s college degree requirement on disparate impact grounds. But nothing would more rapidly deflate the college bubble than if the Court were to hear such a case and rule consistently with Griggs.