There are plenty of good reasons for a young person to choose to go to a university: intellectual growth, career opportunities, having fun. Around half of high school graduates in the rich world now do so, and the share is rising in poorer countries, too.

Governments are keen on higher education, seeing it as a means to boost social mobility and economic growth. Almost all subsidize tuition — in America, to the tune of $200 billion a year. But they tend to overestimate the benefits and ignore the costs of expanding university education. Often, public money just feeds the arms race for qualifications.

As more young people seek degrees, the returns both to them and to governments are lower. Employers demand degrees for jobs that never required them in the past and have not become more demanding since.

In a desperate attempt to stand out, students are studying even longer — and delaying work — to obtain master’s degrees. In South Korea, a country where about 70 percent of young workers have degrees, half of the unemployed are graduates.

Many students are wasting their own money and that of the taxpayers who subsidize them.

Spending on universities is usually justified by the “graduate premium” — the increase in earnings that graduates enjoy over nongraduates. These individual gains, the thinking goes, add up to an economic boost for society as a whole.

But the graduate premium is a flawed unit of reckoning. Part of the usefulness of a degree is that it gives a graduate jobseeker an advantage at the expense of nongraduates. It is also a signal to employers of general qualities, such as intelligence and diligence — that someone already has in order to get into a university.

Some professions require qualifications. But a degree is not always the best measure of the skills and knowledge needed for a job. With degrees so common, recruiters are using them as a crude way to screen applicants. Nongraduates are thus increasingly locked out of decent work.

In any case, the premium counts only the winners and not the losers. Across the rich world, a third of university entrants never graduate. It is the weakest students who are drawn in as higher education expands and who are most likely to drop out. They pay fees and sacrifice earnings to study, but see little boost in their future incomes.

When dropouts are included, the expected financial return to starting a degree for the weakest students dwindles to almost nothing. Many high school graduates are being misled about the probable value of university.

Governments need to offer the young a wider range of options after school. They should start by rethinking their own hiring practices. Most insist on degrees for public-sector jobs that used to be done by nongraduates, including nursing, primary-school teaching and many civil-service posts.

Instead of demanding degrees so widely, public employers should seek other ways for nongraduates to prove they have the right skills and to get more on-the-job training.

High school graduates should be given a wider variety of ways to gain vocational skills and to demonstrate their employability in the private sector. If secondary-school qualifications were made more rigorous, recruiters would be more likely to trust them as signals of ability, and would be less insistent on degrees.

“Micro-credentials” — short, work-focused courses approved by big employers in fast-growing fields, such as IT — show promise. Universities should grant credits to dropouts for the parts of courses they have completed. They could also open their exams to anyone who wants to take them, and award degrees to those who succeed.

Such measures would be more efficient at developing the skills that boost productivity and should save public money. To promote social mobility, governments would do better to direct funds to early education and to helping students who would benefit from university but cannot afford it. Young people, both rich and poor, are ill-served by the arms race in academic qualifications, in which each must study longer because that is what all the rest are doing.

It is time to disarm.

Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.