I think that you're dead right -- completion of a four year degree is taken as evidence of employability mostly because of the difficulty of paying for it. If you've got a degree, you're either comfortably upper middle class (in that your parents can write big checks) or you've demonstrated willingness to suffer financially a great deal. Either one of those makes employers think you're stable and responsible.
It would make as much sense to refuse to hire people unless they owned real estate -- the screening function is the committment demonstrated by coming up with the money, not anything that gets learned in college.
My Bachelor's (of Science) degree is in Computer and Information Systems and I can't tell you for sure whether people who have hired me have thought it represented (a) or (b); but can tell you that if they were taking it as (b) it they were making a mistake in so doing. I gots mad skillz but my bachelor's degree program is not where I got them. But I think it is fairly accurate as an (a). When I (infrequently) interview people that is how I regard a bachelor's degree.
I am currently in school for a master's degree which I am hoping will work out as more of a (b), though I will certainly not object if people take it as (a).
Even law school? Pretty much (a). There's probably a year's worth of stuff that's taught in law school that's necessary to practice -- the rest of it is of intellectual interest, but not skill related. (And I'm a litigator. Transactional lawyers get even less out of law school.)
I don't think LB's class-based analysis is exactly right. Admission means different things to employers at different levels. Being admitted to Yale undergrad is an IQ sort, with a high bias towards being presentable, ambitious, and accomplished. I know that's the way I look at it as an employer.
For the graduate schools, it may be different. A Wharton MBA is a sort for a basic level of smarts and knowledge, prior business success of some kind, and a high level of ambition. On a Harvard JD I'd defer to LB, but I suspect this is used by employers largely as an IQ sort. I doubt anyone makes the inference: JD --> ability to pay --> stable and responsible.
My blogmate Ben H made the excellent suggestion that Ivy league admissions offices should be spun-off independently. Then a person could get the blue ribbon seal of approval -- "Harvard quality" -- and just go wherever you felt was the best $/experience fit.
presentable, ambitious, and accomplished.
Isn't the capacity to demonstrate that you are accomplished at the age of 17 a class sorting mechanism? You play in the youth orchestra because your parents bought you lessons and an instrument, you were on a travelling soccer team because your parents had the resources to drive you all over the state... these are things, like paying for college, that a non-affluent kid can do if they are very unusual, but an affluent kid can do much more easily. That portion of college admissions that is not purely academic identifies the upper-middle class kids and a very few super-talented kids outside that group.
And of course, most people with four-year degrees don't go to selective schools; they go to schools where the basic screening process is whether you can pay. (They may get excellent educations -- it's just that most schools aren't selective.)
Inside Higher Ed had something on this, but about getting an engineering degree vs. a specialized certificate.
The problem with the sorting arguments is the question, why couldn't companies do this more cheaply than hiring out of certain schools? Especially if you're talking about an "IQ sort" there's not much reason that companies couldn't do this themselves.
The econ argument along these lines is that certain things act as a signal if it's more costly for less attractive candidates to do them. Thus, a degree might act as sorting for people who are obedient and willing to significantly defer gratification because it would be too costly for other sorts of people to endure four years of expensive college that doesn't very directly relate to their goals (if those goals are not understanding and self-improvement in a liberal arts sense). This is typically credited to Michael Spence who modeled education as a signalling game.
Yglesias has been debating himself on the value of expanding college enrollment. He makes the point that elites also manipulate the educational system to try to reserve slots at the top for their own children. Thus jobs in business and finance, which used to be dominated by guys with a high school diploma, have become the reserve of top MBA's.
I buy college as a sort by class if class is understood as "habits of mind" (by accomplished I meant less 'plays the flute' than 'has suceeded at something') I don't think it really works if class means "net worth." The inference going to college --> has money --> reliable isn't the one I think employers are making. I think they are making the college --> certain intellectual and cultural baseline --> fine employee.
Insofar as white collar employers value degrees from non-selective colleges, I think it's because almost no 21-year-old with middle-class habits of mind (punctual, ambitious, will take direction, fits in culturally to a white collar work environment) doesn't go to college.
I suspect many employers would be pleased to hire a kid who could have gone to U Mass but decided to bag it to do something else. That profile is just vanishingly rare and hard to identify.
As to why employers aren't doing IQ tests, my understanding is that it isn't the easiest thing for employers to do. And since employers don't directly bear the burden of prospecitve employees college years, there's little reason for them to duplicate the sorting process accomplished by universities.
Employers used to do IQ tests, but it got them accused of discrimination, so they stopped.
The BA is neither (a) nor (b), but a signal that you can be assigned to do something you haven't done before and make a success of it. That's why it's required for entry level jobs where candidates typically have no track record and required for promotion beyond entry level when candidates for entry level typically have a track record.
I'll show you the life of the mind!!!