The solution is not better degrees, but no degrees. Young people entering the job market should have a known, trusted measure of their qualifications they can carry into job interviews. That measure should express what they know, not where they learned it or how long it took them. They need a certification, not a degree.
The model is the CPA exam that qualifies certified public accountants. The same test is used nationwide. It is thorough -- four sections, timed, totaling 14 hours. A passing score indicates authentic competence (the pass rate is below 50%). Actual scores are reported in addition to pass/fail, so that employers can assess where the applicant falls in the distribution of accounting competence. You may have learned accounting at an anonymous online university, but your CPA score gives you a way to show employers you're a stronger applicant than someone from an Ivy League school.
The merits of a CPA-like certification exam apply to any college major for which the BA is now used as a job qualification. To name just some of them: criminal justice, social work, public administration and the many separate majors under the headings of business, computer science and education. Such majors accounted for almost two-thirds of the bachelor's degrees conferred in 2005. For that matter, certification tests can be used for purely academic disciplines. Why not present graduate schools with certifications in microbiology or economics -- and who cares if the applicants passed the exam after studying in the local public library?
The incentives are right. Certification tests would provide all employers with valuable, trustworthy information about job applicants. They would benefit young people who cannot or do not want to attend a traditional four-year college. They would be welcomed by the growing post-secondary online educational industry, which cannot offer the halo effect of a BA from a traditional college, but can realistically promise their students good training for a certification test -- as good as they are likely to get at a traditional college, for a lot less money and in a lot less time.
Certification tests would disadvantage just one set of people: Students who have gotten into well-known traditional schools, but who are coasting through their years in college and would score poorly on a certification test. Disadvantaging them is an outcome devoutly to be wished.
I'm not much of a believer in the idea of people who "know the material" but "don't test well." Yes, I consider it both obvious and true that test performance does not correlate perfectly with job performance--some people's test scores will overpredict their actual competence and others, who get nervous or whose competence is better-suited to actual long-range projects, will have their performance underpredicted by test scores. However, I don't think that matters much: so what if I get a 75 when I'm actually a 90 in practice? The key thing is that I'm competent and I can prove it. If I'm just barely competent and also a poor test-taker, and I therefore fail to make the cut, I study harder and work until I can muster a passing grade, which will pay off when I get on the job and now turn out to be more than just barely competent. Of course all this assumes that you have tests which actually measure competence in some meaningful way. That's a potential failure point in a test-driven system, but is the current regime wherein ability is inferred from one's ability to stagger through a four-year English program any better?
Don't get me wrong here--I'm not sad I went to college, and I even benefitted from a couple years of graduate classes, but if I'm not able to demonstrate that competence in some quantifiable way it's hard to see why a potential employer should care.
P.S. I should add that you have to validate the test, for example by giving it to workers of various ability levels within the industry and seeing if the best of them also score better on the test. If the test doesn't predict actual performance it's worthless.
"The presentation or 'gift' of the Holy Ghost simply confers upon a man the right to receive at any time, when he is worthy of it and desires it, the power and light of truth of the Holy Ghost, although he may often be left to his own spirit and judgment." --Joseph F. Smith (manual, p. 69)
Be pretty if you are,
Be witty if you can,
But be cheerful if it kills you.