Are Rising Graduation Rates Good News? Two Theories, Four Answers
By Bryan Caplan
Like most people, Tyler Cowen thinks that rising high school graduation rates are good news:
The nation’s high school graduation rate has risen — to 78 percent in 2010,
the Education Department says in its most recent estimate. That’s
obviously still not where it should be, but it’s the highest figure
since 1974. (For a long time, the rate was under 70 percent. After
decades of stagnation, the graduation rate started to turn up in 2000,
and the growth has been robust for more than a decade.)
On average, these additional high school graduates — not to mention
college degree recipients — will find better jobs and enjoy better
health, long-lasting benefits that will be reaped for many decades.
You might expect me to invoke the signaling model of education to rebuke him. But in fact, neither the human capital nor the signaling model offers clear guidance here. Both theories imply ambiguous evaluations.
In the pure human capital model, rising graduation rates are good if they reflect increased learning. But they are not good if they reflect lower standards. For all its faults, the human capital model is no rationale for social promotion – handing out diplomas based on age rather than performance.
In the pure signaling model, similarly, rising graduation rates are good if they reflect a rise in underlying worker productivity. But they are not good if they stem from increased “investment” in education, higher subsidies, stricter compulsory attendance laws, or even skill-biased technological change. (Skill-based technological change increases the return to ability, which in turn increases the incentive to signal your ability via education. If the education does not actually increase your skill, this supply response is socially wasteful).
To know whether rising graduation rates are good news, then, you don’t just need to know the relative importance of human capital and signaling. You need to know why graduation rates went up in the first place.