...I don't see how the author's idea of cutting university funding will improve this situation.
If you reduce subsidies for wasteful signalling, people will do less of it. Employers will then find signal based discrimination more difficult and expensive, and will reduce their dependence on it.
The assumption here is that education has a significant component which is "wasteful signalling". If this is true, and that's a pretty big if, what you say follows. If the assumption is not true, reducing funding would result in a poorly educated populace which could spell economic disaster.
My point is: (1) this is not an issue we can decide without looking at the data and (2) making a claim one way or another without carefully looking at the data is not justified.
Here is a blog post discussing data. After graduation, the sheepskin effect is about 50% of the value of a degree. (Over time, as a worker builds up a track record, this goes down.)
If you reduce subsidies for wasteful signalling, people will do less of it. Employers will then find signal based discrimination more difficult and expensive, and will reduce their dependence on it.