Credentialism and degree inflation

Based on Wikipedia: Credentialism and degree inflation

In the late 1800s, if you wanted to become a doctor in America, you needed little more than a bag of pills and some confidence. A few books and a friendly judge could make you a lawyer. If you could read, you could teach. The professions, as we understand them today, barely existed.

Now imagine trying to become a physical therapist. In the 1980s, a bachelor's degree would do. By the 1990s, employers expected a master's. Today, you'll need a doctorate. The job itself hasn't changed dramatically. Human bodies still work the same way. But the credential required to touch them has inflated wildly, like a currency printing money to pay its debts.

This is the story of how we became a credentialed society, and what we lost along the way.

The Great Transformation

For most of human history, you learned work by doing work. A blacksmith's son learned smithing. A farmer's daughter learned farming. Knowledge passed from person to person, hand to hand, generation to generation. The idea that you'd spend years studying theories about work before actually working would have seemed absurd.

Then came the knowledge economy.

The economist Peter Drucker coined this term to describe a fundamental shift in what modern economies produce. We moved from an agricultural economy, where most people grew food, to an industrial economy, where most people made things, to our current arrangement, where most people manipulate information. The transition wasn't gentle. Economists at the Federal Reserve Bank of St. Louis tracked job categories over three decades and found that "nonroutine cognitive" jobs—work requiring, in their words, "high intellectual skill"—increased by thirty million positions. It became the most common type of job in America.

This created a problem that hadn't existed before. How do you know if someone can think well?

When your workers dig ditches or assemble widgets, quality is visible. You can see the ditch. You can count the widgets. But knowledge work happens invisibly, inside people's heads. Management consultant Fred Nickols put it bluntly: the behaviors of manual workers are public, while the behaviors of knowledge workers are private. A supervisor can watch a ditch get dug. Nobody can watch a strategy being formulated.

Employers needed a proxy. Something that could stand in for ability, since ability itself couldn't be directly observed. They chose credentials.

The Gilded Age Origins

The roots of American credentialism reach back to the Gilded Age, that period of explosive industrial growth between roughly 1870 and 1900. It was an era of robber barons—men like Andrew Carnegie and John D. Rockefeller—building vast corporate empires while family farms collapsed and workers crowded into tenements.

The Long Depression of the 1870s devastated small landowners. Monopoly trusts swallowed up family farms. The mechanization of agriculture meant fewer hands were needed to work the land. Millions of Americans experienced what economists call proletarianization: they went from being independent farmers, tradespeople, or small business owners to being wage laborers working for someone else.

The railroads played a crucial role. The Transcontinental Railroad wasn't just a transportation system—it was a massive employer of displaced workers. Cities like New York and Chicago became magnets for industry and labor alike. Local businesses couldn't compete with giants like Standard Oil. The path to entrepreneurship narrowed while the path to employment widened.

Class consciousness sharpened. If you couldn't own a business, perhaps you could join a profession. And so working-class Americans began seeking respectability through professional credentials.

The problem was that professions barely existed as we know them. The historian Robert Wiebe captured the chaos:

"The concept of a middle class crumbled to a touch. Small businesses appeared and disappeared at a frightening rate. The so-called professions meant little as long as anyone with a bag of pills and a bottle of syrup could pass for a doctor, a few books and a corrupt judge made a man a lawyer, and an unemployed literate qualified as a teacher."

Clerks, salesmen, and secretaries drifted through jobs "that attached them to nothing in particular, beyond a salary, a set of clean clothes, and a hope that they would somehow rise in the world."

It was a free-for-all. And then the reformers arrived.

The Flexner Report and the Birth of Professional Standards

In 1910, the Carnegie Foundation published a document that would transform American medicine: the Flexner Report. Written by educator Abraham Flexner, it was a devastating assessment of medical education in the United States and Canada. Flexner visited all 155 medical schools in North America and found many of them to be, essentially, diploma mills. Students could graduate without ever touching a patient. Schools lacked laboratories, libraries, or any meaningful curriculum.

The report's aftermath was brutal. Within a decade, more than half of all American medical schools closed or merged. The remaining institutions adopted rigorous standards: laboratory requirements, clinical rotations, admissions prerequisites. Medicine became a real profession, with gatekeepers who could exclude the unqualified.

Similar reforms swept through law and other fields. Professional associations formed. Licensing requirements proliferated. The unqualified amateurs were weeded out.

This had economic benefits. Fewer doctors meant less competition, which meant higher salaries for those who remained. Professional closure—the term scholars use for this phenomenon—created artificial scarcity. It also, genuinely, improved quality. Patients stopped dying from treatments administered by charlatans.

But a precedent had been set. Credentials became the gatekeepers to economic opportunity.

The Corporatization of Management

Around the same time, something similar was happening in business.

In simpler times, a merchant kept schedules and accounts in his head. He knew his suppliers, his customers, his inventory. He was owner and manager in one person. But as corporations grew larger and more complex—spanning multiple divisions, multiple locations, multiple product lines—this personal knowledge became impossible.

The business historian Alfred Chandler, writing from Harvard Business School, called this transformation "The Visible Hand." Giant corporations killed off the hybrid owner-managers of the past and created demand for a new type of worker: the professional manager. These weren't people who had built businesses from nothing. They were salaried employees trained in the science of administration.

The university system responded. By 1910, Harvard and Dartmouth offered graduate programs in business. New York University, the University of Chicago, and the University of Pennsylvania launched undergraduate business degrees. Professional associations formed. Research journals emerged. Management became not just a job but a discipline, complete with credentials to prove you'd studied it.

By the 1960s, nearly half of all managerial positions formally required either an undergraduate or graduate degree.

The pattern was established. First, a field professionalizes. Then universities create programs to train people for that field. Then employers begin requiring those university credentials. Then the field becomes inaccessible to anyone who hasn't passed through the academic system.

The Inflation Spiral

Here's where the economics get interesting.

When only a small percentage of people hold a particular credential, that credential is valuable. It signals something unusual about the holder. At the beginning of the twentieth century, fewer than ten percent of Americans had graduated from high school. A high school diploma genuinely meant something. It was a ticket to middle-class respectability, even to managerial positions.

But what happens when everyone has a high school diploma?

Its signaling value collapses. If nearly everyone finishes high school, then finishing high school tells employers almost nothing about whether you're above average. The credential becomes a baseline requirement rather than a distinguishing achievement.

So ambitious individuals seek the next credential up. They pursue bachelor's degrees. For a while, this works. College graduates are distinguishable from the mass of high school graduates. Employers prefer them.

But then bachelor's degrees proliferate, and the same inflation occurs. The signal weakens. Employers, still trying to identify quality, push their requirements higher. Master's degrees. Doctorates. Professional certifications stacked on top of academic degrees.

This is credential inflation: the declining value of educational achievements as they become more widespread. It operates much like monetary inflation. When a government prints too much currency, each individual bill buys less. When a society produces too many bachelor's degrees, each individual degree accomplishes less in the job market.

The economist Bryan Caplan, in his book The Case Against Education, argues that this dynamic has become self-sustaining. More college graduates combined with weaker learning outcomes leads employers to ask for degrees even for jobs that don't need them—jobs that never previously required them.

The Gap Between Requirements and Reality

The evidence for credential inflation is striking.

A 2014 study examined job postings for executive secretaries and executive assistants. Sixty-five percent of these postings now require a bachelor's degree. But when researchers looked at who actually works in these roles, only nineteen percent hold degrees.

Think about what this means. The job hasn't fundamentally changed. People are performing it successfully without degrees. But employers are nonetheless demanding degrees from new applicants. The credential has become detached from the actual work.

Similar patterns appear across industries. Information technology help desk roles show particularly interesting data: researchers found little difference in advertised skill requirements between postings that demand college degrees and those that don't. The degree requirement isn't about different skills. It's about filtering applicants.

Matt Sigelman, who runs a labor market analytics firm, explains the employer's perspective with uncomfortable honesty:

"Many employers are using the bachelor's degree as a proxy for quality employees—a rough, rule-of-thumb screening mechanism to sort through the resume pile. Employers believe in the college experience, not just as an incubator for job-specific skills but particularly for the so-called soft skills, such as writing, analytical thinking and even maturity."

A degree doesn't prove you can do a specific job. It proves you're the kind of person who can get a degree—which implies organization, persistence, and compliance with institutional norms. Whether these qualities actually predict job performance is another question entirely.

The Costs of the System

Credential inflation imposes real costs, though they're distributed unevenly.

Most obviously, individuals must spend more time and money acquiring credentials that grant them access to the same opportunities their parents accessed with less. The Federal Reserve Bank of New York tracks underemployment among college graduates—meaning employment below the value of their degrees. About one third of all college graduates are underemployed, a ratio that has remained largely unchanged for thirty years.

In other words, a substantial fraction of people who invest years of their lives and tens of thousands of dollars (or more) in higher education end up in jobs that don't use their education. The degree was necessary to get the job. But the job itself didn't need the degree.

State-level credential requirements can create genuine shortages. When nursing regulators decided that registered nurses must hold bachelor's degrees, the policy contributed to a nursing shortage. There were plenty of people who could competently perform nursing work. But they couldn't meet the credential requirement. Patients suffered.

Then there's the question of what happens to people who don't acquire credentials. As requirements ratchet upward, those without degrees find fewer and fewer doors open to them. In the twenty-first century, a high school diploma often barely qualifies its holder for service work. The path from mail room to corner office—a genuine possibility in earlier generations—has largely closed.

The institutionalization of professional education has eliminated opportunities for young people to work their way up by learning on the job. Academic inflation means employers put their faith in certificates and diplomas—assessments made by others, years before the actual employment relationship begins—rather than demonstrated performance in the workplace itself.

The Opposite Case: Skills Over Signals

It's worth understanding what the alternative might look like.

In a skills-based hiring system, employers would assess candidates based on demonstrated abilities rather than credentials. Instead of asking "where did you go to school?" they would ask "can you do this specific task?" Modern technology makes this more feasible than ever. Coding assessments can reveal whether someone can actually write software. Writing samples can demonstrate communication ability. Work portfolios can display past accomplishments.

Some employers are moving in this direction. Major technology companies have begun dropping degree requirements for certain positions, particularly in software engineering where practical skills are relatively easy to assess. Apprenticeship programs offer alternatives to academic credentialing in trades and some professional fields.

But these remain exceptions. The credentialing system has tremendous institutional momentum. Universities depend on it for enrollment. Professional associations depend on it for gatekeeping authority. Employers find it easier to filter by credential than to develop sophisticated assessment methods. Everyone with existing credentials has an interest in maintaining their value.

The Strange Case of China

Credential inflation isn't uniquely American. Ancient China and Japan experienced versions of it. Seventeenth-century Spanish universities saw credential proliferation. Contemporary China has taken it to remarkable extremes.

Reports have emerged of employers requiring master's degrees for security guard positions. Security guards. The job involves standing at a door and checking identifications. Whatever skills it requires can be learned in days. Yet in an environment of credential inflation, employers raise requirements simply because they can—because there are enough credentialed applicants to fill even these basic roles.

The social consequences can be severe. When credential requirements exclude people from legitimate employment, those people don't simply disappear. They find other ways to survive. Critics in China have pointed to a correlation between credential inflation and participation in underground economies, as people shut out of the formal job market turn to informal alternatives.

What Drives the Spiral?

Credential inflation is controversial among economists, partly because its causes are complex and interconnected.

The most obvious driver is increased access to higher education. More people can attend college than ever before, thanks to expanded university capacity, federal student loans, and cultural expectations that college attendance is normal and necessary. When more people have degrees, degrees lose their distinguishing power.

But this creates a collective action problem. From any individual's perspective, getting a degree is rational. You're competing against other job applicants. If they have degrees and you don't, you're at a disadvantage. So you get a degree.

But when everyone makes this individually rational choice, the collective result is that degrees lose value—requiring everyone to seek higher degrees to maintain their position. It's an arms race where the weapons get more expensive and the participants gain no ground.

Employers contribute to the spiral through their own rational choices. Reviewing resumes is time-consuming. Assessing actual skills is difficult. Credentials provide a quick screening mechanism. Why wouldn't employers use them?

Cultural factors play a role too. American society increasingly treats college attendance as a marker of middle-class status, much as high school attendance was treated a century ago. Parents who didn't go to college want their children to go. Parents who did go to college assume their children will too. The pressure operates independently of job market realities.

And federal student loans—whatever their benefits in expanding access—allow many more individuals to acquire credentials than could otherwise afford them. This doesn't cause credential inflation by itself. But it removes a natural brake that might otherwise slow the spiral.

The Paradox of Educational Expansion

Here's what makes credential inflation particularly troubling as a policy problem: it appears to operate independently of market demand.

Normally, we'd expect labor markets to reach some kind of equilibrium. If employers demanded too many credentials, they wouldn't be able to fill positions, and they'd lower their requirements. If too few people had credentials, those credentials would become more valuable, and more people would acquire them.

But credential inflation seems to escape this equilibrating logic. Global initiatives to expand higher education—often motivated by genuine concerns about access and equality—may actually exacerbate the problem. The more people who get degrees, the less degrees are worth, the more pressure individuals feel to get more degrees. The spiral continues regardless of whether the economy needs more credentialed workers.

This creates a strange situation. We encourage young people to attend college because college graduates earn more than non-graduates. But the wage premium for college graduates has actually declined relative to high school graduates—one of the key indicators that credential inflation is occurring. The advice may have been correct in the past. Its accuracy in the present is increasingly uncertain.

Learning Without Credentials

It's easy to confuse credentialism with a belief in education's value. They're not the same thing.

Education—genuine learning that expands knowledge and capability—can be immensely valuable. But credentials are certificates attesting to education. The certificate is not the learning. A person can learn a great deal without any credential. A person can acquire a credential while learning very little.

Credentialism privileges the certificate over the substance. It values credentials because they're credentials, not because of what they represent. This is why degree requirements can detach from job requirements—why employers can demand bachelor's degrees for work that doesn't use bachelor's-level knowledge.

The opposite of credentialism isn't ignorance or anti-intellectualism. It's a focus on actual capability rather than institutional certification of capability. It's asking "can you do this?" rather than "do you have a piece of paper saying you might be able to do this?"

Where This Leaves Us

The credential economy is deeply entrenched. Universities, employers, professional associations, and individuals all have interests in maintaining it. Changing course would require coordinated action by parties who benefit from the status quo.

But understanding the system is valuable even if we can't easily change it.

If you're a student, recognize that credentials are signals, not guarantees. The degree gets you in the door. What you can actually do determines what happens after that. Skills matter. Networks matter. The credential is necessary but not sufficient.

If you're an employer, consider what you're actually trying to learn about candidates. Degree requirements are easy to impose but they may screen out capable people while admitting credentialed incompetents. Assessment is harder than filtering. But assessment produces better information.

If you're thinking about society broadly, recognize the tension between expanding educational access and credential inflation. Making higher education available to everyone is a worthy goal. But if the result is that everyone needs higher education to access opportunities that once required less, we may be running in place.

The Gilded Age merchants who became doctors with a bag of pills and some audacity were a problem. Standards and credentials addressed that problem. But every solution creates new problems. Today we face the opposite extreme: a society where the credential has become an end in itself, where years of formal education are required for work that doesn't use formal education, where the path to opportunity runs exclusively through institutions that charge admission.

We solved the problem of too few gatekeepers by creating too many. Finding the right balance—ensuring competence without demanding credentials for their own sake—remains an unsolved challenge. The inflation continues.