Do you think the system would crash if we did away with grade levels? What about grades on assignments? What might happen? What effect would that have on teachers? Parents? Schools? Tests? The Federal Government? Let's briefly examine the possible effect(s), as I see it.
Imagine a scenario where children come into a school and are authentically assessed for their strengths and weaknesses and then have a learning program created especially for them that will use their strengths to make progress on their weaknesses. Teachers in the classroom would have to be knowledgeable about a broad span of information, always be willing to learn more and work even more collaboratively with their students to provide meaningful, challenging curriculum for all students in the class. When a student falters, they don't "repeat third grade" because it isnt about grades - they would continue to move on with their cohort, requiring the next teacher (or you could even move on with the original class) to provide the challenging, engaging curriculum to result in progress - even with the struggling student who would have been left back in the traditional classroom. However, the student's affect wouldn't be negatively influenced and a sense of family would continue to be strengthened.
...and that is the next level of my proposition - to do away with assigning grades. I have been in brainstorming sessions at the university level about assigning grades. I know some of the concerns and questions that arise when discussing "grades." Think of the assessment cycle: pre-assessment, formative assessment and post-or summative-assessment. The reason for pre assessment is to inform the stakeholders (teachers, parents, learner). It gives the stakeholders an idea of the level of proficiency in relation to the lesson or unit objective. Formative assessment gives stakeholders insight into the learner's progress during instruction. Finally, summative assessment indicates the level of progress the learner made relative to the objective(s) of the lesson. So the question becomes, if assigning grades are necessary, WHEN are they necessary? Or are there different levels of "necessary"?
Assigning a grade for a pre-assessment isnt necessary because no one is comparing it to anything in particular - unless you compare students to one another or performances by former students - don't do that. You should be using that information to inform your practice. If you don't use it for pre assessment, then it is only slightly more effective to use as a post - since you are comparing performances, not letter grades because the letter grades represent levels of proficiency. So I say to that, show or tell the students how they progressed - or better yet, let the learner tell you what they learned and how much they progressed by informing them of the objective so they can tell you how close they got to the objective. It takes more time and organization but by doing this, and emphasizing a personal approach, it will make all that time preparing for federally encouraged testing to be obsolete.
It is possible for all grades. If you tell a kindergartener that the objective is they learn to write their name using the capital letters of the alphabet then you can show them their performance on the task and ask if they have met the objective. You can avoid saying that is a 5, or an A, or "acceptable" and the two of you can agree that it has all the characteristics of the objective and the learner has reached the goal.
I will say, and this conclusion came from the meetings at the university level, as a summative assessment when you are no longer going to instruct this skill, a grade or score may be effective because it informs the stakeholders of their final level of proficiency. (Evergreen College in Washington state still uses narrative reports on their grade transcripts for graduates, nice approach) My only opinion on that is, when learners leave a university class - it may be the last time the teacher will see the learner, so a final summation is necessary. At the elementary level, it isn't that way until the end of fifth grade. So the practice of assigning descriptions of the learner's performance might also breed more collaboration between teachers and grade levels.
Just a final note on grades and grade levels. I have 40+ year old friends and colleagues who remember the feeling of being held back in first grade. Simply removing the "grade level" would eliminate this memory. Learners would learn skills, concepts, etc. and after mastering them, would move on to the next level of skills and so on. Teachers would have to know their stuff across several levels of proficiency and allow the learner to take over more of their learning; both end results would be a positive step toward making education more effective.