George Will had an op-ed in the Washington Post on Sunday where he summarized a paper written by Richard Vedder and Bryan O'Keefe, in which they argued that the 1971 Supreme Court case Griggs vs. Duke Power effectively made the higher education market what it is today partly by proscribing general intelligence tests given by employers.
In the Griggs case in 1971, the Supreme Court interpreted the 1964 Civil Rights Act pretty "creatively," making it very difficult for employers to give any sort of test as a prerequisite for employment that wasn't a narrow application of the duties of the job. Congress codified the ruling the next year, and when a more conservative Supreme Court in 1989 narrowed the scope of Griggs, Congress and a reelection-seeking George H. W. Bush passed a 1991 law that undid that 1989 ruling.
Vedder and O'Keefe suggest that contrary to the popular belief that globalization, the new knowledge economy, other buzzwords were the primary cause of rising college enrollment and costs, the Griggs ruling was also a key factor. Their argument rests largely on the fact that the differential between high school- and college-educated workers started to grow and move outside of the 30-40% range around 1978, up until now when it's approaching 100% (see page 18 of their paper for those graphs). In the paper they explain why they chose 1978, seven years after Griggs and six after the subsequent legislative reaffirmation:
We have marked 1978 as a dividing point, on the assumption that the impact of Griggs started to be really felt around seven years after the decision. There likely is a lag of several years between the time a court decision is made and the time it significantly affects labor markets. And if the Griggs decision affected the demand for college, we should expect an additional lag of four or five years, the time between deciding to go to college and actually obtaining a degree and entering the labor market.
The creepiest part of this is that it suggests that Americans are spending four years of their lives out of the job market and spending up to $200,000 on a degree not because it's the most efficient way to signal good job performance, but rather because it's the second best option where the first best (more extensive testing on the part of employers) is proscribed by law. Though if you've been to college, you probably had an inkling that something was a bit off.
But there's one question I have about this proposition: why then do other advanced industrialized countries have similarly high college enrollment rates? Or do they? Though I suspect that even if these other countries lacked laws that encouraged employers to use college degrees as proxies for intelligence and capability, the almost 100% subsidized higher education in every other wealthy nation in the world has something to do with what seems like an over-allocation of higher education.