Financial Return on University Degree Declining in the U.K.

Do any readers from the U.K. or elsewhere have any idea what explains this:

According to the [British] Government's Department of Education and Skills, today's graduates can expect to earn a modest £120,000 more across their entire lifetime, than those with two A-levels who go straight into employment. A similar piece of research, conducted just 10 years ago, suggested this premium used to be in excess of £400,000.

Once you've taken the expense of university into account - which, according to NatWest, will average around £28,600 for each student for a three-year degree course in England - the decision to go to university is no longer a no-brainer. Furthermore, if you add on the extra £2,000 a year in tuition fees that most students will have to pay from next autumn (in addition to the £1,000 a year they already pay), the cost of a degree rockets to almost £35,000.

Comments are open.

Comments

[Tad Brennan]

My first temptation was to say--it's because the pay for academics in the UK is so criminally low.

Which it is, but the percentage of people employed in academia is so miniscule, in relation to country-wide statistics like this, that it really could not be driving things.

Perhaps this actually reflects a *healthy* thing about the UK, i.e. that there are more decent jobs open to people without a university degree? It does sometimes seem artificial in the US that you need a BA to be, e.g., a real estate agent, an administrative assistant, etc.. The requirement of a BA is sometimes disconnected from any substantive requirements of the job, and becomes more of a class-membership guild-card. (I.e., it reflects no particular knowledge, just the fact that you could afford to remain out of the full-time labor-force for four years). So perhaps this is a symptom of the UK being, in this regard, *less* classist?

[Simon Prosser]

As the article notes, a far higher proportion of the UK population get degrees now than in the past, even compared to ten or fifteen years ago. The number of well paid jobs has not increased by anything like the same proportion. And whereas in the past (up to about 15 years ago) students had fees and in many cases full maintenance paid by the government they now have to take out loans to pay for most of it themselves. It would be interesting to know whether there's the same change across all universities and subjects. It would also be interesting to compare the figures with other countries.

[mab]

Maybe the discrepancy has something to do with the overall economy from 10 years ago, when the first study was done... Perhaps 10 years ago everything looked more rosy (since with the internet and other factors, the economy was beginning to roar), and so for those with a higher education background the expected income was projected to be higher...

[Len Cleavelin]

"Perhaps this actually reflects a *healthy* thing about the UK, i.e. that there are more decent jobs open to people without a university degree? It does sometimes seem artificial in the US that you need a BA to be, e.g., a real estate agent, an administrative assistant, etc.."

If you haven't hit the nail right on the head, you've come awfully close to the answer, I think. One of the recent trends that has disturbed me greatly is how, in the United States, a bachelor's degree is a de facto minimum requirement for a lot of entry level jobs for which it was never required before. I wish I had a dime for every "administrative assistant" I know (by way of background: I work at in academia, on a health science campus) who has a *masters degree* (typically in the humanities), and feels lucky that s/he (usually a she) was able to get that job. Having a masters myself (in information systems, as well as a law degree I no longer use, but that's by choice), I find it sad that someone invested the time and money into getting a masters degree only to secure employment in a position that could be performed just as well by a high school graduate.

The *really* depressing thing is to then think about the jobs that the mere high school graduates are left with....

[Thom Brooks]

Perhaps the truth is a combination of these things, e.g. the fact that a BA is not necessary to secure a well paying position and that ten years ago (with the internet boom, etc) projected earnings were inflated grossly, shown now by Enron, etc. In fact, my ex-wife makes more than £160,000 and never finished her B.A. (Whereas I make a very small fraction of this as a lecturer despite having a B.A., two M.A.'s, and a Ph.D.) All that said, I do agree that pay for UK academics has really dropped over the last twenty years, I am not so sure we're all in such bad shape. My guess would be that when you take into account higher insurance rates in the US, higher costs of education in the US, etc etc that pay here is at least comparable, if not close enough, to US pay for academics, at least for those not yet superstars.

[Joe S.]

I think that Tad & Len are pretty close to the truth. The Brits graduate a smaller percentage of the population than almost any other industrialized country. As a consequence, you don't need a degree to go into business. Thanks to Thatcher & Blair, the returns to a business career have gone up tremendously.
And an important thing they missed--the comparison is between university grads and people who have two "A" levels. That's kind of like several AP credits. I would say that, even in America, if we took somebody who had gotten a few good AP scores, falsified a college degree for them, and put them at work for business, they would probably do just fine.

[B. Kriplur]

If the situation was different, and people went to trade schools for things like administrative assistant work and business it would definitely make more sense. I am a recent graduate in the United States so I have just experienced all of this first hand. Going to college can increase your post graduate expectations; your working with interesting and challenging things in college only to graduate and be a telemarketer. It is a rough transition.

There were moments when I would get angry at the students at my school because it seemed like most of them had no interest in learning anything or doing anything intellectual at all. College now seems to be nothing more than an extended childhood or a rite of passage, but to think about it another way, we have a system in which the people want to go to school for business end up funding the humanities. Sometimes I wonder how much longer this can go on, especially with the rise in tuition.

[Chris Bertram]

Why is it surprising that people who take a BA in, say, "Media Studies" and don't start earning until their mid-20s have lifetime earnings not much above people who, say, train as plumbers or electricians?

[Andrew Goldfinch]

To echo the earlier comments made by Simon Prosser, this is simply another case of good old demand and supply. The number of graduate jobs in the UK has simply not kept up with the huge increase in the number of graduates being churned out each year. Increasingly the British undergraduate degree is becoming the new A-level, that is to say the basic qualification needed for office work even if the skills acquired during the degree are simply not needed.

In addition, though unemployment is low this is mainly due to the huge number of low paid £5-an-hour retail and office jobs that have become (scandalously in my opinion) the new backbone of the UK economy. Since there are few graduate jobs out there many graduates have no choice but take up these jobs in the hope that they’ll eventually find that golden graduate job starting on £24,000 pa rising to £50,000 pa within five to ten years.

I have a friend who graduated in 2002 from Leicester University with a high 2.1 degree in archaeology. Since graduating he has been working in Pizza Hut for £6 an hour. He’s only on £8,000 pa and is resigned to the idea that he’ll never earn more than £20,000 pa during his lifetime.

I also know of a Polish woman who has a PhD in philosophy (from a university in Poland) who is working as a £14,000 pa secretary in London.

And now Blair wants up to 50% of the population to have degrees! Yet another example of political idealism having no point of contact with reality.

The sad truth is that degrees in the UK, except from elite institutions, are on the verge of becoming worthless.

[Yevgeny Vilensky]

I think that Prof. Brennan and Andrew Goldfinch have hinted at something quite interesting. One of the reasons that in the US, a BA has become a necessity for even administrative assistant jobs, I think, is because everyone is now pushed to go to college whether they would benefit from the education or not. How many times do you hear college counselors, policy makers, educators, etc. making broad claims about society's goals of everyone attending college. Thirty, forty, fifty years ago, one could be quite bright and not have gone to college and get a decent-paying job afterwards. Nowadays, that is rare and a BA is a mark of mere minimal competence and not even that. The result of the drive to push everyone to go to college is that college has been largely dumbed down. Even if you went to a third-tier college forty years ago, that at least meant something. Now, it doesn't mean much because the third-tier schools have become glorified high schools.

[Joe S.]

I agree with Goldfinch and Vilensky in part. If you issue more degrees to more people, they will have less value on the job market, and are likely to lower the average quality of the degree recipients. (There are exceptions to the second rule: the Carter-Reagan military buildup caused a tremendous increase in the number of engineering degrees, but also raised the median math SAT of engineering students.)

Where I disagree with them is their presumption that this is a bad thing. Watered-down degrees frequently are better training than no degrees at all. It is the old problem of democracy.

[Andrew Goldfinch]

With regards to the comments made by Joe S., if degrees lasted for only one year and were relatively cheap then a high percentage of the population attending university would be most welcome. The analytical skills acquired during a rigorous degree can be life-transforming. Democracy would certainly become enriched and the chances of another Bush becoming President reduced.

However, degrees last for three years in England and four years in USA and Scotland. We all know of the colossal fees that US universities command and where America leads England follows. With the advent of new ‘top-up’ fees the average British student will now be charged £3,000 per year from next year.

Now let us imagine that a third of UK graduates end up with jobs that command only the average salary of £18,000 pa. Their degrees have enhanced their general skills for life but have failed to give them a job with a high salary. Can improving general skills justify the loss of three working years and debt that, according to the UK government, will take 15 years to pay back? ( http://education.guardian.co.uk/higher/news/story/0,,1542355,00.html )

No. Many people undertake undergraduate degrees with the aim of enjoying a well-paid job at the end of it. Most students labour for three years under the impression that upon graduating they will be rewarded for their hard work and debt. Some certainly will be. But a significant proportion will not.

The best way to generate a skilled workforce for ‘normal’ jobs is to ensure good schooling and also by encouraging a culture of lifelong learning through independent reading and thinking, not by hanging debts over average workers that could cripple them for years. Career advisors should be honest and realistic when advising students on the benefits of university education, especially when advising poor students who plan on going to low ranking universities.

[Pete Jordan]

Joe S. said "Watered-down degrees frequently are better training than no degrees at all"; I'm not convinced. First degrees in, say, Chemistry are still of value (but Chemistry departments in the UK are closing through lack of suitable applicants and consequent lack of funding); too many degree courses are now content-free diploma mills. All that matters are bums on seats and meeting government targets, there's precious little *education* going on.

But perhaps I'm old fashioned in defining education as the process of learning to learn: learning to think, to question.

[Thom Brooks]

I would certainly disagree with Pete Jordan's claim that UK universities do not have much in the way of "education" happening within their walls. This is presumably a reaction against so-called "Mickey Mouse degrees" in non-traditional subjects? Surely, the vast majority of degree awarding subjects at all universities are in these traditional subjects and so I don't see what the worry is beyond an ideological belief unresponsive to facts on the ground. Certainly, even two years study involving written assessment has a value, whatever the subject (if one thinks that being able to express ideas clearly is a most important tansferable skill).

It is also worth noting the great differences between US, England, and Scotland mentioned above by Andrew Goldfinch. Indeed, the US and Scotland have four year degrees. However, in Scotland you'll usually end up with a M.A. instead of just a B.A.

A further difference and, I think, a real selling point. In the US (where I did a B.A. and M.A. myself), when you go to study philosophy about 30-6 odd credits out of 128 or so in total need to be in your subject. Perhaps 50% or more of your credits must be in any number of non-major areas. Thus, I took physics, chemistry, several english classes, spanish, maths, art history, etc etc all outside of my major. In Scotland and England (and Wales), when you study philosophy, you study philosophy: three years of only and nothing but philosophy classes. (Yes, there are options of doing two subjects---say, politics & philosophy---or 'combined studies' of three subjects over three years.) By the end of three years, a student has in all likelihood taken far more philosophy classes than someone in the US doing a B.A. This does not mean one side is any better than the other---goodness, I'm not suggesting that at all!---but degrees are far more in depth. This could cause a big problem for the futures of some students. If many students will embark on a career quite different than their degree course, perhaps the American-styled liberal arts degree is better suited for giving students some flexibility. Any subject depth needed could be learned on the job. In that sense, you might get more bang for your buck elsewhere. On the other hand, for relatively cheap fees (by US standards), you could really jump into a subject if you wanted to. Looking back, I wish very much I had done my B.A. over here rather than in my native US.

[JSTaylor]

I don't think that Thom's claim, above, that if you study philosophy at the undergrad. level in England and Scotland you study philosophy and philosophy only. This is true (typically) in England. It is not true in Scotland. The traditional Scottish system of higher education requires four years for the first degree. Students take three subjects in their first year, which can be unrelated to each other. They then drop one in their second year, and move on to study an additional year of the other two. At the same time they also pick up a new subject in their second year and study that at the first year level. In their third and fourth years they study either one or two subjects exclusively.

I agree with Thom that the degrees in the UK are far more in depth, and mention this merely for the sake of accuracy.