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Why is so common to suggest university students to specialize in order to get a better paid job?

This goes completely against the principle of diversification of investments, in order to decrease risk by spreading it over a portfolio.

Instead, students are driven towards specialization, investing their most valuable asset, time, in a single high risk endeavor. Specialization might be good for society as a whole, but can have disastrous consequences for the individual.

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    $\begingroup$ You should specify who is doing the "suggesting". I, for example, do not "suggest" that "everyone specialize their education". (And probably most informed persons I know would not either.) $\endgroup$ – Kenny LJ Jun 19 '18 at 2:40
  • $\begingroup$ This not a new problem: Here's Poincare in his book, Science & Hypothesis "Oppressed as we are by the neccessity of being specialists, if we are to know anything thoroughly in these days of accumulated details, we may profitably study the historical evolution of knowledge over a field wider than our own. $\endgroup$ – Mozibur Ullah Jun 20 '18 at 1:43
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    $\begingroup$ @KennyLJ Job advertisements indicate expectations of specialized knowledge. I would not be surprised if university professors anticipate and communicate to their students those expectations. $\endgroup$ – Iñaki Viggers Jun 20 '18 at 12:54
  • $\begingroup$ Recall that specialization follows 12 years of general education, across maths, natural sciences and social sciences. Toddlers are not being pulled out of the crib and put onto single-path lifelong apprenticeships (or similar). Regarding specialization being risky for individuals even if good for the economy as a whole: This is among reasons that a strong social safety net can not only be consistent with the moral philosophy of all great religions, but also conducive to individuals being in a position to rationally take risks associated with higher-average-productivity specialization. $\endgroup$ – nathanwww Jun 20 '18 at 14:37
  • $\begingroup$ You diversify your portfolio to reduce risk but you surrender larger earnings as a consequence. Same goes for education. By specializing, you increase the chances of a higher income. However, if you specialize in the wrong field...that's the risk. If you have a diverse education then you may be more employable (ie. reduced risk) but the chances are you will also have a lower income. From a practical point of view, most people don't just want any old diverse job, they want a job doing something they enjoy. That is why students specialize, not because people suggest it. $\endgroup$ – Dunk Jun 21 '18 at 21:56
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Note: I did not vote down on this question, and it is not clear why anyone would do so.

Why is so common to suggest university students to specialize in order to get a better paid job?

Because the industry evolves and encounters increasingly harder, diverse challenges. Specialized knowledge is essential for coping with those challenges. At the same time, it is impossible for everybody to achieve expertise in all the diverse disciplines or branches of knowledge. In the labor market, that implies that the supply of workforce is more constrained as we move along the "specialization axis".

It is noteworthy, though, that specializing in order to get a higher compensation is not always profitable. For specialization to be profitable, there also needs to exist enough demand for a skills set. A specialist in semantics of Etruscan dialects spoken in the Po Valley will have a much harder time to find a job in his field (let alone to earn a satisfactory salary) than a specialist in 4th generation nuclear reactors.

students are driven towards specialization, investing their most valuable asset, time, in a single high risk endeavor.

Not really. A certain extent of diversification is inherent to the individual's university background. In the case of the nuclear reactor specialist, his background includes calculus, probability, numerical analysis, thermodynamics, heat transfer, electricity, etc. That background makes it easier for him to adapt to drastic changes such as switching careers.

By contrast, a company is much more static and, thus, much unlikelier to cope with drastic changes successfully. Here are some factors that impair a company's adaptability:

  • Managers, first and foremost, aim at retaining their power;
  • it is harder for various stakeholders to agree on what the new direction needs to be;
  • synchronizing an update of skills set of all its members is expensive and possibly out of reach;
  • some members of the organization might leave during the transition;
  • new processes might entail new redundancies, frictions, and additional overhead.

A shareholder has little-to-no control on how the company will fare, or whether it will adopt a unified, effective approach at all. Things are different with the individual, provided that he is determined, not erratic, and has a rational/realistic vision of what he wants.

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Here's one reason I think behind the push towards specialization. My explanation is not tailored around the goal of getting a better job, but instead towards success in a more general sense.

You note that specialization in education "...goes completely against the principle of diversification of investments, in order to decrease risk by spreading it over a portfolio [sic]". You are correct in this statement: specialization is risky. However, that is precisely the point.

There is a very nice recent working paper, http://www.hanzhezhang.net/research/1402PreMatchingGambles.pdf in which the author shows that, "...people take risky investments they would have not taken if not for their subsequent participation in competitive matching markets". Perhaps the most compelling result is the first proposition,

Proposition 1: If the surplus function $s(x_{m}, x_w)$ is linear in $x_m$, every man’s unique weakly dominant strategy is the extreme lottery.

That means that the riskiest bet is weakly optimal. Hence, in our world, where matching is competitive (and where a linear surplus is a reasonable assumption), specialization is rational.

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Somebody should post an answer based on Spence's famous model of Job Market Signaling. Spence's observation was the following: suppose more able people find education easier (i.e., less costly) than do less able people. Then we can sustain an equilibrium in which education is interpreted as a signal of ability by employers--even if the education itself does not contribute to employees' productivity. The reason this is possible is that high ability individuals will be willing to incur the (low) costs of getting a good education, whereas the effort will be too great for low ability individuals.

If successfully completing education is more difficult as it becomes more advanced and more specialised then specialisation would make the signal more valuable.

This is obviously not the whole story, but this theory has the attractive feature that it can explain why people often choose fairly specialised courses of education that are not closely related to the career that they ultimately embark upon.

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According to the present scenario, it's good to have diversified knowledge as we know the world is quite dynamic but on the contrary to cope up with the current market competition of demand & supply of human resource we must gain specialisation in minimum one field so that we can prove oneself as a tough competition over other.

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Adam Smith's "Wealth of Nations" suggests that division of labor results in higher productivity.

Specialization in a particular field is simply an example of division of labor. Employers, broadly, have little interest in hiring generalists, their work force is highly divided. They need a worker for a particular, specific task.

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