"This quickly generates a "race to the bottom" where everyone has to pay absolute costs for relative advantages."

I really like this framing. You've expressed something I've felt intuitively but never really been able to articulate (either to myself or others).

As a side note: this framing is why I oppose subsidizing college in the US. Having a college degree is mostly a relative advantage, especially outside of STEM. We only need so many firefighters, so if we preferentially hire applicants with college degrees and subsidize college, it's kinda pointless.

Better is making sure that economic opportunities remain available for those without degrees, when possible. Make it illegal to discriminate against those without college degrees unless it's a bona-fide occupational qualification.

Why can't we do both? Poor kids who would get a great benefit from college deserve as much help as poor kids who wouldn't benefit from college but would benefit from vocational training. If the object is to effectively help everyone, only doing half is a bad thing.

Because there's a limited number of "slots" for the sorts of white-collar professional careers that a college degree gives you preferential treatment for. Putting another student through law school does not make law firms hire more lawyers. It means that the average quality of hired lawyers goes up while one more person with a law degree fails to get employed in the field.

The analogy would be more clear with sports - putting more effort into youth basketball training won't make more NBA players, it will just make NBA players better.

This is the "lump of labor" fallacy. The NBA has a finite number of teams and only adds to them slowly. Having more good white-collar professionals often means that companies can expand and make more money.

Even if there were a finite number of "slots", not funding smart poor kids to go to college is a dumb idea. Having smarter/better candidates for the "slots" is better.

Of course, different professions have different amounts of "get a bigger piece of the pie" versus "make the pie bigger". The trades are more obviously positive-sum: if people get better at making houses, more houses end up getting built for people to enjoy. Things like patent trolling are negative-sum: when a patent-trolling office expands, they do so at the cost of putting others out of work at a greater rate.

However, this isn't the point that the "free college for everyone" crowd is aware of, let alone considering. It's straight equivocation between "college degree holder earns on average $X more" and "an extra college degree is worth $X more to society as a whole".