What pushes us to go to the best schools/universities? What is the consequence of the majority of a population acquiring higher education? If everyone will have a Bachelor's degree -or good grades- how will we be able to differentiate between the average and the above average prospective worker? Is all this schooling counterproductive since most students have greater difficulty to stand out from the rest?
Andrew Michael Spence, a graduate of Princeton University and Harvard University, is famous for his research about market signaling model. He developed his theory in 1973, and was later awarded Nobel Memorial Prize in Economic Sciences in 2001.
Spence’s findings are on education. He says that the function of education today is not in terms of productivity increases. Instead, it works as a signal to employers about the quality of the employee. In his job-market signaling model, (potential) employees send a signal about their ability level to the employer through education credentials. The informational value of the credential comes from the fact that the employer believes it is positively correlated with having greater ability and is difficult for low ability employees to obtain. Thus the credential enables the employer to reliably distinguish low ability workers from high ability workers.
An alternative theory is the one from Gary Becker: according to Becker, the individual will choose to invest his time and money in a way that will maximize his human capital.
People today obtain a higher education to maximize their productivity and also to signal employers about what kind of workers they can be. While they are investing time and resources into expanding their skillset and knowledge (Becker's theory), they, in turn, become more valuable in the eyes of the employer through their acquired credentials (Spence's theory). Nevertheless, while one should not invalidate the theory of Becker that stressed the importance of what the student acquires through education, it seems that the signal theory is more significant. Employers today are not as concerned with how a prospective employee's time was spent, or "maximized", during their schooling, but rather perceive the acquisition of a degree as an important indicator that "signals" a candidate is suitable for a given position.
Does the theory of Spence work with Distance Education (DE) or does the "traditional way" still bring better signaling? According to the Online Report Card -Among academic leaders, 71% say learning outcomes in distance (online) education are the same or better than face-to-face instruction, while more than one in four students take at least one distance education course in the US. Therefore according to comparative analyses of online and in-person education, Distance learning is as good signaling for employers.
We believe at Time to Know that our Distance Education on-line solution with specialization in personalized learning can maximizes each student's efficiency in learning and his or her personal connection with his teacher. From a Spence perspective our online platform "signals" to prospective employers that students who learnt with it have the necessary skills and determination to be a committed and productive employee. Further changing the views towards e-education is the fact that the lower cost, but equal or greater value, of E-learning solutions will continue to lead more and more students this route. Taking into account that leaders think equally of online certifications than traditional ones, Spencer's theory will become stronger by being applicable to more methods of learning and thus benefitting online students with prospective job offers.