They should because it can tell kids if they need more work or not. If there were no grades in school than we would have issues with attitude and homework. I think kids should get grades and keep them that way! Any kid that does not get grades can go crazy or does not know how he/she does in school.
When you turn in work in at school, don't you want to know how well you did on it? This isn't even a question of much else, but if I worked really hard on a project and I turned it in, I don't want to know that I did the project for nothing, I want to know if it was worth something. If I didn't have any real reason to complete the project aside from a basic understanding of the subject, chances are I'm not going to try as hard on the subject as people who are doing it for the grade, unless it's something I'm passionate about.
It's true that some kids have it easier at school; sometimes because they are more intelligent or talented in one subject, which allows them to be lazy, sometimes they worked hard and developed a good learning system for themselves.
As grades enable feedback on a clear scale from "you have no clue" to "you got it" they are forcing kids into this performance to challenge them to grow and to reflect. It does not matter, whether a task has been done well, because you trained or understood it naturally - it anyway reflects how well you understood.
Grades are not a competition for itself, because there is no limit how many people actually CAN get a perfect score. The competition starts when you are trying to get a job with these grades. But if you imagine a business world without grades; companies would just go into a competition-like selection process anyway for the job.
Although that sounds not that bad at the beginning, because it would enable a more "specific" selection and strengthen underdogs. The two main problems of this are however to feedback a kid individually if you cannot test them and that the first encounter with the pressure of performance would then be late in life when they'll have troubles to manage this new concept.
It's not realistic to think that a teacher can develop a close understanding of ALL his students to reflect whether they understood the subject or not, because that would require even better pedagogic skills, then teaching requires already . We neither have the teachers nor the ideal human beings to give them so much power over young people. Feedback without "cold calculated" numbers gives all the decisions about performance to an average person that is not always neutral.
So in conclusion: Neutral grades are pressure, but they are the only way to provide a feedback that is logical, objective and fair and not bound to emotions of those giving the feedback.
Tragedies happen in a young life and I admit that the "security net" should be more flexible, but NO grades is the wrong general answer to a lot of people's individual problems.
A while back I was failing most of my classes and to be honest, I didn't care. I knew what they were teaching I just didn't care. Now that I am gone I can learn about 2.5x as much as I did in a single year of public schooling, why? Because grades held me back. I would usually turn things in late if I turned them in at all because I am good at teaching myself methods of doing problems. I actually passed mot of my tests with solid A's but it didn't matter because I didn't do the work in between. Whenever I did feel like doing my work I would actually get points deducted if I didn't show my work, even if I did it right. These are the problems with grading and the reason I will never finish high school, rather get a GED and go to college 2 years early.
Grades are to school as pay checks are to hourly jobs. Everyone who works 40 hours is getting paid, but not all contributed equally to the workload. Some work harder, others work less but find it naturally easier, and some just don't care but are well liked by management.
There are a plethora of studies showing that students perform better when they are told they aren't being graded.
Studies (http://news.Stanford.Edu/news/2005/february23/cheat-022305.Html) conducted by the "Organization for Economic Cooperation and Development" show that the higher the level of competition for high GPA's and good grades to make yourself look good on college applications not only hinders learning, but it actually makes you more likely to cheat for the good grade than to earn it. They also looked at Finnish schools, some of the best on the planet, and found that in very low competition settings, children actually learn more because of the reduced stress of not competing for grades or gradelike achievments. If you don't think stress about grades is all that bad, read this study about how the adolescent brain actually experiences stressful situations as much more stressful than an adult would because of their different brain chemistry. A fifteen year old who cares experiences a failed grade the way an adult might experience the death of a loved one. That big a difference has to be taken into account.
To the second point, grading children actually reduces what they learn and how much they learn because it gives teachers too much pressure. When a teacher is bound by numbers and data meeting stringent guidelines, like making sure 80% of their students pass within a certain grade, they are more likely to teach them the testable material than the important stuff. That makes students good at only one thing: memorization. Memorizing siginficant amounts of data is something a computer should do, not a person. What makes us special is HOW we use our knowledge, not how MUCH knowledge we contain. When students are expected to memorize so they get good grades on the tests, they miss out on much more important logical and reasoning skills that will actually help them in real life. Memorizing division equations doesn't mean a thing if you don't know that dividing is the correct action when writing a budget.
And most importantly, much like the hourly wage job analogy, the kids who work the hardest, or shall we say, fight the hardest to "win" good grades by whatever means necessary, are not the only ones who will get good grades. Sometimes morons slide by with A's because the teacher likes them, and otherwise really intelligent kids who just didn't enough attention, or didn't want to do the mind-numbing, monotonous, repetative homework assignments will fail when they are far beyond their peers. Grades don't mean a thing. Learning and understanding are what matter. You can test for learning and understanding without the added pressure of grading and the results are not only better, they matter more.
No amount of grade are going to be any useful in our life ahead who ever looks back at school and says thank god I got good grades because without that I would not be where I am today. No one because it's not true and its not fair because I am the one kid in my class that knows the material and the subject matter aces all the tests but when It all gets averaged in my grade is an F or D because I dont do homework and the grades get averaged in as I don't know anything and therefor I stay behind even though I know the material.