We have all heard the gripe; most of us have uttered it too. The author of this article certainly has. Why this obsession today with kids having to go to university. It seems you need a degree for anything. Some graduates are leaving university and taking on apprenticeships. It is absurd, of course it is. Yet, maybe it is not as absurd as we have been led to believe. New research suggests that graduates are good for us.
There has been a change in common sense. There was a time when having a good education was prima facia a good idea. But now, the queues outside the Job Centre made up of graduates, or the number of graduates working for minimum wage suggests that degrees are not what they used to be. We tell our kids to go to university. They run up massive debts. And they enter the job market with skills that are no more relevant than a handful of CSEs (That’s assuming you are old enough to remember what a CSE is). Is it an example of madness Britain, a country that has fallen in love with debt, or alternatively is it that the government (and to be fair, the last government was just as guilty – maybe even more so) has found a new wheeze to keep the unemployment data down; to keep young people off the jobs market for as long as possible by getting them to go to university?
It is just that the second of those arguments does rather fly in the face of economic theory. If it really is the case that degrees are meaningless these days, then UK plc, and indeed its government courting popularity, would encourage more potential graduates to get jobs instead because this would stimulate demand, which in turn would create more demand and the need for more jobs.
Now the National Institute of Economic and Social Research has produced a report on behalf of the Department for Business Innovation and Skills which suggests graduates are good for UK plc.
Looking across much of the developed world, the report found a strong correlation between rising productivity and the increase in number of graduates.
Between 1994 and 2005 UK labour productivity per hour rose by 34 per cent. Over the same period the share of the work force with a university degree rose from 12 to 18.9 per cent. The report suggests that at least one third of this growth can be attributed to the growing number of workers with degrees. However, even in 2005 the share of the workforce holding a university degree in the UK was below that of Finland, the US, Japan and Canada. The report said: “If the Higher Education sector in the UK were to expand towards the size of the US, this could be expected to raise the level of productivity in the UK by 15-30 per cent in the long-run.”
The report also found that graduates, on average, are paid 70-180 per cent more than workers without formal educational qualifications. It said: “Within the UK, the wage premium for graduates is higher than average, at about 160 per cent relative to workers without formal educational qualifications. Wage differentials should be closely correlated with productivity differentials, since firms face a hard budget constraint and relative wages are determined to a large extent by employer demand.”
If you want to read the report in full, see: Graduates and economic growth across countries
Here are three observations.
Some university degrees are better than others. It may be true to say that some graduates benefit enormously from their qualification. But that does not mean all do.
The report referred to here was looking at data up to 2005. A lot has happened since then. But it is important that we take a long-term view. Right now, graduate unemployment is too high. But that does not mean it will always be that way. Let’s not make a judgement about the worth of education from the very narrow perspective of a country recovering from its longest ever economic downturn.
Technology is making the future even harder to predict than normal. Who knows what skills will be in demand in a decade’s time? Maybe in an environment of such rapid change, a good education is a good basis upon which individuals can build.
© Investment & Business News 2013