Degrees of relevance : does education socialize or signal?

A classic but unresolved debate regarding the American stratification system is the precise nature of the underlying causal processes by which education is associated with socioeconomic attainment. One traditional view of education is the technical-functional or human capital approach which posits that education augments productive capacities by imparting valuable analytic and cognitive abilities, technical competences, and significant social or communication skills. A contrasting view is the signaling approach, which downplays the intrinsic significance of schooling, and instead emphasizes the role of educational credentials in certifying, legitimating, and rationing employment in higher-paying jobs. As the labor market becomes increasingly polarized with the decline of unions and the downsizing of the traditional manufacturing sector, educational attainment is becoming increasingly significant for socioeconomic attainment, and this classic debate is thus becoming even more relevant to understanding inequality in contemporary America. To shed new light on this issue, this analysis investigates the 2003 National Survey of College Graduates, which includes data on workers’ assessments of the extent to which their educational background is utilized in their jobs and work activities. The results of this analysis indicate that individuals whose degrees are highly relevant to their current occupation have significantly higher salaries than individuals whose degrees are less relevant, controlling for the level of degree. These findings provide evidence for human capital arguments by showing that education which augments productive capacities has greater rates of return than education that simply provides one with higher levels of credentials.