The Rebundling of Higher Education: Platforms, Credentials, and Market Signaling

Most high school graduates still plan to attend college that upcoming autumn, though some of the luster has worn off due to economic struggles.  Although a four-year college degree was once considered a virtual guarantee of middle class success, that is no longer the case.  Only some degrees are still considered highly lucrative, such as those related to science and engineering.  Employers’ preferences for four-year degrees are also eroding, at least formally, with more companies using skills tests rather than simply reviewing applicants’ credentials.

Economics of the Four-Year-Degree

College attendance in the West dramatically increased with the post-World War II Baby Boomer generation.  For decades, a four-year degree from a university was seen as a guarantee of being ushered into the ranks of management, especially in white collar office jobs.  High schools heavily pushed students toward enrolling in college right after graduation, with college readiness becoming a cornerstone of the high school curriculum.  Then, in 2008, the Great Recession hit and dramatically impacted higher education funding.  Prior to this recession, governments generously funded much of students’ college tuition…but now students were on the hook for a lot more of the bill.

Simultaneous with the decrease in government subsidies was the significant increase in tuition costs themselves, hitting students with a double whammy.  Most universities were competing for students, and thus spending heavily on amenities like new dorms, fancy gymnasiums, and posh student unions with food courts.  As a result, students were hit with regular hikes in tuition rates.  At the same time, the value of four-year degrees were declining due to an increase in supply.  As more and more students graduated from college, the labor market became oversaturated with degrees relative to the number of full-time, managerial-track jobs available.  Therefore, over the past fifteen years, college costs have soared while degrees earn less income.

New Competitor: MOOCs

Over the same time period, much of college instruction has gone online, with students logging in to learning management systems (LMS) like Canvas and Blackboard more frequently than attending in-person lectures.  Many colleges and universities have even moved to making entire programs available entirely online.  Now, many college-level courses and programs are available to the public free of charge, known as MOOCs (Massive Open Online Courses).  MOOCs allow any Internet user to log in and learn the same content as paying students elsewhere.  

While MOOCs were an extremely popular idea circa 2012, the predicted revolution of MOOCs toppling traditional college education didn’t happen.  As many educators discovered during and after the Covid pandemic, most students do not do well in an entirely online learning environment…at least if they don’t have an investment on the line.  Thus, MOOCs were initially very popular but faded quickly as rates of completion were low.  Learn at your own pace courses often resulted in students procrastinating and then feeling too overwhelmed to catch up, leading to high dropout rates.  

New Competitor: Microcredentials

A more targeted concept than generalized MOOCs are microcredentials, which are skill-based courses that give completers a credential.  Many microcredentials can be MOOCs, but some MOOCs are more academic-based, such as a history or humanities course, than skill-based.  Microcredentials have become popular in recent years due to some employer dissatisfaction with graduates of traditional four-year degrees.  Employers want to see specific, targeted skills in their new hires. 

Microcredentials are popular because they can be a complement to, rather than a substitute for, traditional college education.  In fact, many universities are adding microcredential programs to their curricula, attracting customers who want the skill credential and the trusted, prestigious name of the university to back it.  Therefore, while MOOCs were originally proposed as a way to replace expensive universities, microcredentials have largely been adopted by these same universities as a supplement to students’ degree plans.

Supply vs. Demand: Credential Inflation

A problem for both four-year degrees and microcredentials is credential inflation, which naturally occurs as more and more students complete these programs and saturate the labor market.  This requires new students to complete more education to remain competitive.  Some credential inflation may also be due to institutions making it too easy to complete them, resulting in happy, satisfied students - who give favorable reviews online - but exasperated employers.  There is a principal-agent problem between employers and universities: employers want graduates who have been through rigorous coursework, while universities want to keep students from feeling overwhelmed and dropping out.

What may occur to stabilize the amount of credential inflation are partnerships between colleges and major employers, with employers vouching for the rigor of specific degree and microcredential programs.  Colleges and universities can then hold more firm on academic rigor, pointing to the fact that this rigor allows their graduates to be widely accepted by those major employers (i.e., Fortune 500 companies).  This will keep demand high for those programs, ensuring steady revenue for those schools.  The major employers will benefit by having high-quality talent pipelines, making support for those schools worthwhile.  

Equity of Modular Learning Platforms: Accepted or Rejected?

Online learning management systems, which use modular learning platforms to break courses into distinct modules or units that can be completed one at a time, are often praised as a way to increase equity in higher education.  Their modular nature means students have more flexibility on timing, allowing them to complete one module or unit at a time rather than having to tackle the entire course.  Being online allows students to complete courses from anywhere and on their own time, which increases equity.  

While equity has undoubtedly been increased in terms of access to education, this has not been matched in terms of outcome.  Despite public praise for skill-based hiring and not holding strictly to credentials, employers often still want applicants to have the four-year degree.  Therefore, although many people agree that recent degree requirements for jobs that used to not require them are inequitable, companies appear hesitant to follow through on pledges to remove these requirements.  It remains to be seen whether non-degreed applicants with microcredentials and real-world skills can truly compete for full-time white collar jobs with college grads, as employers are likely to praise the equity of no formal degree requirement while informally sticking to the status quo.

Or, employers may follow through and hire non-degreed applicants for full-time jobs…but pay them less.  A true test of the value and equity of MOOCs and microcredentials is whether these graduates can achieve pay parity with college grads in the work force.  This is extremely unlikely, at least in the near term.