Question

Spence's original education signaling model has been criticized on the grounds that the presence or absence of a college degree is a relatively weak signal in today's job market. That is, although the wage gap between those with and without degrees remains large, there appears to be considerable "pooling” of different levels of talent, ability, determination, work ethic, etc., within the group of college graduates. Consider a variation in the model in which firms use grade-point average (GPA) as the signal No calculations are necessary for this problem.

Answer 1

Answer)

1. GPA in comparison to degree holding as the criteria adds another level of layering,it is like choosing best among the degree holders,now there is always a possibility that you are looking for someone competitive and and hard working,GPA could provide that signaling,simply put it helps you to narrow down and filter a lot of choices and thereby provide better signaling.
2. One weakness with using GPA as a signal is that it may leave people who are good in extra curricular activities or who are in a way all rounders.
3. This practice tends to decrease the signaling value,let us say a company comes for recruitment and is interested in people above certain GPA,now some people who also qualified for further rounds owing to grade inflation may not be able to do well in rounds specifically designed for people who actually scored above that GPA and company may think that there is something wrong with their indicator of GPA.
4. I think high ability students would feel aggrieved due to it owing to grade inflation in a way harming them off their chance as companies may think that GPA is not the right indicator while for low ability students it is nothing to lose,everything to gain situation as otherwise without grade inflation they would not have qualified anyway.
5. I think GPA is not at all vulnerable to this criticism,once you are inside the college,it is your hard work and ability to learn and apply which anyone can easily attain that leads to a certain GPA,comparing to some other indicators such as internship from a good company or previous education from premium but costly schooling,it is much better as it focuses on comparing students from same set of parameter where wealth is not a significant factor.

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