Record numbers of school-leavers awarded places at university – but is that a good thing?

David Kingman ponders the news that this year has seen a record number of young people being given places at universityIf_Blog_Mortar-Board-Coins-300x199-300x199 If_Blog_Mortar-Board-Coins-300x199

A record number of school-leavers will be going on to university next year, according to figures that were released alongside the announcement of this year’s A-level results. UCAS, the University and Colleges Admission Service, says that 424,000 young people will begin undergraduate courses at universities in the autumn, which is 3% higher than last year’s total.

This record figure has been achieved despite a small demographic decline in the number of 18 year-olds in the UK compared to last year; this appears to have been more than offset by the government’s decision to remove the cap on the number of places which universities are allowed to offer.

Steady returns

IF believes that the expansion of the higher education sector over recent years – which has been accompanied by the trebling of tuition fees since 2010 – has occurred without sufficient debate about whether attending university is the best route for so many young people to follow. In a recent research paper for IF, Steve Kemp-King reviewed the published evidence for the “graduate premium” (the financial return which graduates receive in the labour market over a career, compared with non-graduates), finding that earnings for those with a degree vary wildly in accordance with a range of contextual factors, such as the graduate’s choice of course and institution, their gender and even their familial background.

Since this paper was published, the Institute for Fiscal Studies (IFS) has made another contribution to this debate by publishing research which shows that the dramatic increase in the share of young people who were graduates over recent years appears not to have had a detrimental effect on their earnings premium over non-graduates. Despite the proportion of 25–29 year-olds who are university graduates having risen from just 13% in 1993 to 41% by 2015, the ratio of their average earnings to the average earnings of workers who left school with only GCSEs in this age group appears to have held fairly constant in the 1.2-1.7 range. The report’s author, Wenchao Jin, argues that this has been due to changes in the UK economy that occurred over the same period, which she warned may be coming to an end:

“Our research suggests the increasing supply of graduates induced firms to decentralise more decision-making and create more graduate jobs. As most firms have now made such a change, we believe future increases in graduate numbers could reduce the graduate wage premium in the future.”

Getting their money’s worth?

If the value of doing a degree (measured in purely financial terms) has remained so remarkably steady over time, then does that mean all the young people who will be enrolling on their new courses next year will automatically get their money’s worth?

The evidence strongly suggests that their returns will vary widely. To return to IF’s paper, one of the most robust sources which that review of the literature drew on was a different piece of analysis undertaken by the IFS. Earlier this year, they produced a report entitled How English domiciled graduate earnings vary with gender, institution attended, subject and socio-economic background, which used administrative data from the tax and student loan authorities to produce one of the most detailed studies yet undertaken exploring how recent cohorts of graduates have fared during their first 10 years in the labour market after leaving university.

This study confirmed the pattern of extremely widespread variation in graduates’ financial returns. To an extent, this paper appears to contradict the findings from the more recent IFS analysis of the graduate premium, as its authors said “we find subjects like Medicine, Economics, Law, Maths and Business deliver substantial premiums over typical graduates, while disappointingly, Creative Arts delivers earnings which are roughly typical of non-graduates.” In other words, although the average premium which graduates enjoy over GCSE-holders appears to have been fairly constant over time, once you look at the financial returns to studying individual subjects it rapidly becomes apparent that these are so varied as to make describing a single average graduate premium almost redundant. This piece of analysis suggested that there are both subjects and institutions which tend to produce graduates who enjoy virtually no graduate premium at all – suggesting that the time and money they have invested in studying, not to mention the public investment in subsidising their student loans, may be misplaced.

Of course, this discussion only considers the financial returns to studying at university – there are plenty of other reasons why people want to become graduates which haven’t been considered here. It should also be pointed out that IF doesn’t want to put any young person off attending university purely on the basis of this kind of analysis, as the returns to studying are almost impossible to accurately predict at the individual level, pretty much regardless of what or where someone studies (after all, everyone can probably name at least one former creative arts student who went on to become a multimillionaire artist or rock star).

However, IF would like there to be more of a debate at the policy level about whether the relentless expansion of higher education is necessarily the unfettered good news story which it is usually presented as, either for students or for taxpayers.