Free Education in the Lemon Market
I had a recent conversation with an American of my generation. It was about education and inequality in the United States. She explained to me how a young person over there can't afford an education anymore and that without a university degree she can't get employment. I remarked that while this might be mostly true, education in of itself today is essentially free with the likes of Coursera and YouTube. Essentially college courses are available online for anyone to watch and when it comes to the likes of Coursera they also come with some sort of certificate of having attended the course and passed the exams.
We shifted to where this type of education might be most useful, and naturally given my background I suggested programming. Programmers for a long time have been self taught. In fact, it is estimated that nearly half of all developers are self taught (1). Therefore as far as I was concerned here was one of the most highly paid professions in the United States with no barrier to entry except for one’s own innate skills.
She retorted that while indeed one can get all sort of education for free, companies, even those who hire developers filter out those without a University bachelors when they want to hire someone. This is an automatic CV filter that a computer algorithm does which bars those self taught programmers with no bachelors from ever entering the workplace. She gave me an anecdotal example of a self taught programmer that she knew who got past the employment filters onto a great paying job because he had a university degree in liberal arts.
Well this argument seems hard to refute when one considers a seminal Economics paper done by George Akerlof knowns at “The Market for Lemons”. In this paper Akerlof argues that given a market with no information, the bad products end up dominating. From Wikipedia:
Suppose buyers can't distinguish between a high-quality car (a "peach") and a "lemon". Then they are only willing to pay a fixed price for a car that averages the value of a "peach" and "lemon" together (pavg). But sellers know whether they hold a peach or a lemon. Given the fixed price at which buyers will buy, sellers will sell only when they hold "lemons" (since plemon < pavg) and they will leave the market when they hold "peaches" (since ppeach > pavg). Eventually, as enough sellers of "peaches" leave the market, the average willingness-to-pay of buyers will decrease (since the average quality of cars on the market decreased), leading to even more sellers of high-quality cars to leave the market through a positive feedback loop.
This model of the car market turns out to work well for the labor market where the skilled workers will signal their skills to employers by collecting college degrees. Therefore when it comes to getting a job, the value of a degree from a prestigious university is a signal that you have been well selected from a pool of potential applicants and have passed the tests therefore you are well qualified for the job.
This is however true for your first job. But once you have had that first job all the next employers will care about is what did you do in your previous jobs. And so self taught programmer with no university degree needs to score a first job to be able to get the second job where his lack of official academics doesn't matter.
So the trick is getting this first job and this is where the mooc providers are focusing their efforts in creating project based credentials where mooc students can showcase their skills by completing company sponsored projects with real world applicability. The leader in this is udacity the computer science based education provider, but Coursera is not far behind. Therefore, the oneous today is on those MOOC providers to give some real work value to their project based education to give employers the right signals about the potential recruits.
References:
2- https://en.wikipedia.org/wiki/The_Market_for_Lemons
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