Those Who Benefit Should Pay

Or Why Every Employer Should Pay a Graduate Levy

Whatever figure emerges from the bruising political battle ahead to set the level of fees at universities in England, whether it is £5,000, £7,000 or, God forbid £10,000 a year, it is clear that the overriding guiding principle now is that the individual, as the main beneficiary of degree-level education, should be the one who pays for it.


There is no longer even lip service paid to education for its own sake. Even the 1990s argument of an educated population contributing to higher GNP, and a more competitive economy, particularly as Europe and America watched the rise and rise of the Asian economies, seems dated.

But there are several problems with the user-pays principle. The first is that as more and more young people have degrees – and in countries like the US, Sweden and Finland the figure is approaching 70%, the measurable benefit to the individual, the so-called lifetime earnings premium, has been going down.

T he previous British Government under Tony Blair based its arguments for a fee hike in 2005 on the amount a graduate can earn over a lifetime compared to a non-graduate as calculated by the OECD. The OECD estimates were based on the lifetime earnings premium for graduates during the 1970s-1990s, which were already out of date by 2005. The OECD has not been keen to publicise the rapidity with which that premium is declining in post-industrial economies, but at least, in its latest Education at a Glance 2010 snapshot of education indicators, it now admits that it has decreased in Britain, Sweden and New Zealand.

The lifetime earnings premium, while relatively high in the US and UK is much, is much lower in countries like Sweden, Denmark, New Zealand and Norway - countries. Could that be because they are more egalitarian societies, where the salary of the lowest paid and the highest paid are not so wide apart, than because their degrees are worth so much less? It is also possible that lifetime earnings figures are skewed by large numbers of highly paid people in financial centres such as London and New York. The point is that the difference in graduate and non-graduate earnings over a lifetime are based on more than the possession of a degree itself. The OECD acknowledges that when it says than the premium for women is a whole lot lower than for men. Yet no one is arguing there should be fee-discounts for women students.

As the premium declines, there may well be a time when it is almost negligible, compared to the cost of a degree itself. This has already happened in England for male humanities graduates. Yet you can bet your bottom dollar, university fees will continue to go up and up even as the earnings premium goes down. Even if the government has to justify hikes by relating fees to earnings premiums, universities do not. They want to get as much as they can, any way they can. They want the power to levy their own fees, and they want it now.

There is another problem with the user pays principle. As more jobs which previously did not require degree level qualifications – nursing in particular comes to mind – now require an increasingly expensive degree; and as the cost of education and training is transferred from companies and employers to the institutions, the user-payment burden is skewed strongly and unfairly towards the individual forced to take out bigger and bigger loans against future earnings.

Employers are saving an awful lot of money on training and in-house education. They may argue that they pay in the form of higher salaries for graduates, but it is clear it has become harder to move up the career ladder without paying for a qualification upgrade yourself. The rise and rise of the MA and now the second masters or mid-career MA testifies to that.

Graduates know about the dearth in training only too well, because those companies who do provide fantastic entry-level training programmes are the most sought after of all with 100s of applicants per place and rising. Employers have been able to get away with this for some time because of the ease with which they can hire from overseas, fully trained, and probably more experience for a lower salary than domestic graduates.

Everyone pays taxes that go towards universities, even if their own children do not attend. Those who do attend pay a great deal, financed by loans. That sounds about right when you consider that all of society benefits from universities. But who gets off scott-free? It is the employers of course. The biggest beneficiaries, including banks, multinationals and oil companies, who not only save shed-loads on educating managerial talent, but also shiploads on research and development carried out by universities.

While increasingly transferring their responsibilities for education and training onto the state and the individual and for more and more jobs – even the receptionist has a degree these days - employers have not been ask to stump up their fair share of the cost of higher education. Every single company – and yes, even charities and government departments – should be asked to pay a levy for every graduate they hire. And that levy should be divvied up to universities who in turn would use it to subsidise fee levels.

Then, and then only, will it be fair to say those who benefit most from higher education, pay the most.