Is the Sky Falling? Grade Inflation and the Signaling Power of Grades.

Grades are the fundamental currency of our educational system; they signal academic achievement and non-cognitive skills to parents, employers, postsecondary gatekeepers, and students themselves. Grade inflation compromises the signaling value of grades, undermining their capacity to achieve the functions for which they are intended. We challenge the 'increases in grade point average' definition of grade inflation and argue that grade inflation must be understood in terms of the signaling power of grades. Analyzing data from four nationally representative samples, we find that in the decades following 1972: (a) grades have risen at high schools and dropped at four-year colleges, in general, and selective four-year institutions, in particular; and (b) the signaling power of grades has attenuated little, if at all.