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The OECD estimates were based on the lifetime earnings premium for graduates during the 1970s-1990s, which were already out of date by 2005.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.

We are all (average) Graduates now

Or Why the law of averages means you end up paying more

A banker, a doctor and a headmaster are in a room discussing their average earnings. The headmaster was pleased to see it was higher than he thought. The banker was rather miffed that it was lower than his professional aspirations had led him to believe. When the banker walked out of the room in a huff, something odd happened. The average fell. If Bill Gates, Li Ka Shing or Laxmi Mittal were to inadvertently walk in, the “average” would soar.
This variation on an old joke illustrates neatly the pitfalls of talking about average graduate earnings. Yet the OECD in Paris has this week been trumpeting the “graduate premium” in its flagship Education At a Glance report, a fat book of statistics from rich countries that comes out once a year.
The graduate premium is the average salary an average graduate earns over an average working life in an average country in the OECD (richer countries so that statistics from Africa don’t mess up the averages) compared to the average non-graduate. The OECD computes this as £113,000 for men. For women it averages out at £81,000.
Some of that goes in taxes so its not like having £81,000 to spend on Jimmy Choos. But spending power apart, it is worrisome the way governments use this to predict average earnings of future graduates.
Using future averages based on a past that is rapidly disappearing (known in the jargon as extrapolating), the government justified its last vast increase in university fees. You’ll pay, they insisted “because its worth it”.
Asian parents want their offspring to be doctors and bankers for good reason, but the overall graduate premium is a lie that is growing like Pinnochio’s nose. Many graduates find themselves in “non-graduate jobs” because there are simply too many graduates. Graduates in non-graduate employment were around 15% of UK graduates a few years ago. Now it is almost 25% and rising. It may not all be due to recession.
The government has already had to downsize its “graduate premium” figure in recent years. Simple maths tells me the graduate premium will drop as fees rise so they won’t be able to use this argument forever.
Recent stats suggest that men with humanities degrees may not even be better off than (average) non-graduates. That is no reason not to study history or literature. But it is a good reason to fight fee rises that are based on bankers still being in the room.
What I want to know is that if my daughter currently embarking on a 7-year degree in Architecture does not earn £81,000 more than a gardener over a life time, will we get our fee money back?