Is College Still Worth the Time and Expense?

Though U.S. residents increasingly question whether a college education is worth the time and expense,  it likely remains true that for any number of “white collar” or “office” jobs, a college degree does matter as a signaling device and sorting procedure for employers. 

In other words, a college degree acts as a signal to employers that a person possesses "unobservable" qualities like perseverance, conscientiousness, and the ability to delay gratification. That is why, in many cases, the actual degree subject matter does not matter. 

It is the personal habits employers believe a college graduate possesses that matter. 

Study	Key Findings	How it Connects to "Signaling"
Spence (1973), "Job Market Signaling"	Seminal work in economics that introduced the signaling theory as a concept to explain labor market outcomes. It posits that education is a signal of a worker's innate ability to employers.	The model shows that in a world of imperfect information, high-ability workers invest in education to signal their productivity to employers and distinguish themselves from low-ability workers. The degree itself is the signal, not the knowledge it contains.
Tyler, Murnane, and Willett (2000)	Explored the "sheepskin effect," which is the wage premium associated with completing a degree, compared to just having a similar number of years of schooling.	Found that there is a significant jump in earnings for those who complete their degree (the "sheepskin") versus those who drop out with similar total years of schooling. This suggests that the signal of completion is more valuable than the simple accumulation of credits or knowledge.
Bingley, et al. (2015)	Using a panel of Danish twins, researchers found that the wage return to education decreases when controlling for unobserved factors like "ability," suggesting these factors are highly correlated with schooling.	By comparing identical twins with different educational attainments, the study attempts to isolate the effect of education from genetic and shared environmental factors (which are strong proxies for unobservable skills). The finding that the return to schooling is smaller when accounting for these factors supports the idea that the degree is partly a signal for pre-existing ability.
Arteaga (2018)	Found that a reform at a Colombian university that reduced the "human capital" content of a degree (i.e., less specific knowledge) had a significant negative impact on the graduates' earnings, especially for those from lower-reputation institutions.	This study shows a blend of both human capital and signaling theories. It suggests that while the degree serves as a general signal of quality, the specific skills gained (human capital) are also important. The "signaling" effect is especially crucial for graduates of less prestigious schools, who rely more on their degree to gain access to higher-paying firms and better job matches.

That noted, lots of well-paying jobs do not require such signaling mechanisms.