Twenty years ago, 15 per cent of young people in the UK were leaving university with a degree. By 2007, a massive expansion in higher education meant that a third of the same age group were graduates, and the Government’s ambition is that 43 per cent of England’s adult population will eventually go to university.
At the same time, it aims to maintain the pre-eminence of British universities as world leaders in research (behind America) and to avoid funding cuts while also tightening the public purse strings.
If this seems like an impossible feat to pull off, then you would not have been surprised by yesterday’s CBI report, which predicted that tuition fees at England’s universities could as much as double after a forthcoming government review of university funding. The CBI recommended that students pay higher interest rates on their loans and have maintenance grants cut back.
The Russell Group of top 20 research universities welcomed the findings and the university sector as a whole has refused to condemn them. Students, whose debts are already projected to soar to an average of £23,200 for next year’s intake, are predictably railing against it, while presumably wondering in increasing numbers whether university is really worth the money any more.
It’s that question which Ian Walker, a professor of economics at the Lancaster University Management School, has spent years investigating. In recent times, the most convincing argument for college was that graduates would earn on average around £160,000 more in their lifetime than a person who could have gone to university, yet chose not to. But on closer examination, Walker has found that not all the degrees of our two million students are equal.to data from the Labour Force Survey, the returns of a university education vary dramatically, depending upon gender and degree course.
At the top end of the scale, Walker has calculated that a British male graduate of economics could earn up to 43 per cent more than a non-graduate with two or more A levels every year of his working life. In medicine, business management or law, the graduate earnings premium for men is again almost 40 per cent. When the average non-graduate who could have gone to university earns about £25,000 a year, over 40-plus years, the returns for an economist can add up to £430,000 over a lifetime.
For female graduates, the returns are potentially greater still — in economics as high as 63 per cent — because nongraduate jobs for women are often menial and pay very little.
The good news is that if your offspring are studying law or maths at Oxford or University College London, they are probably set for life — but if, say, they are opting for a degree in archaeology at Wolverhampton, the rewards could be minimal. Although a female arts graduate will still earn an average of 25 per cent more than her nongraduate peer, the economic returns for the average British male arts graduate are negligible; in 2007, PricewaterhouseCoopers put the earnings premium as low as £35,000. For linguists, a degree represents barely a ten per cent hike in income.
Rory Barrow is one of an emerging group of young people to have turned his back on university. The 21-year-old was halfway through his second year at Newcastle studying accountancy and maths when he looked at the bottom line of his own finances, and realised that he was £11,000 in debt and could not see where he was going with his degree.
Against much well-intentioned advice, Barrow applied for the four-year HEADstart scheme, run by PwC, which pays on average £17,000 pa to trainees. His application was successful (PwC demands 280 UCAS points and most trainees are aged 18 to 35), and he is scheduled to qualify in two years with a chartered accountancy qualification, after which he hopes to be on the same salary as a PwC graduate.
Barrow would advise all other school-leavers to look at the traineeship option if they are not certain about going to university and thinks that schools should do more to promote apprenticeships: “You can still be academic and not do well at uni,” he says. “I got good A levels, but uni wasn’t for me and now I’m really enjoying working.”
The work is hard, and there are two exams every six months, but Barrow claims to have no regrets. “I’m working much better now because I’d begun to become disengaged from the course,” he says. “I’m also paying off my debts, which aren’t nearly as high as they would be if I’d finished my degree.”
John O’Leary, editor of The Times Good University Guide, advises school-leavers to think twice before ripping up their university acceptance letters. He insists that not only will graduates be ahead in the queue when the jobs do come round, but that there are benefits to student life that cannot be measured, in terms of friendships and broadening horizons.
O’Leary also points out that the student loan, which currently does not have to be repaid until a graduate earns over £15,000 a year and which is written off after 25 years, is still the best on offer.
However, he acknowledges that some universities’ degrees do command far higher salaries than others and that the question of going to university becomes harder if you face taking up a place at a less reputable institution.
“Overall if you’re looking at the high earners, you’re looking at the top of the league table, which is mostly the Russell Group universities, such as Oxford, Cambridge and Bristol, and the 1994 group, which includes Sussex and St Andrews. There are huge exceptions such as oil and gas management at Robert Gordon university, Aberdeen, but if you’re doing art history at a lesser-known institution you might think twice.”
Although the wage premium between colleges and courses is clear, Walker says that the reason for the astronomical differences in remuneration is not immediately obvious.
“We don’t know, for example, if the medical student earns more than the arts student because he adds more to his human capital while at university or whether he is brighter, because we can’t control for ability,” he says. “What the data could suggest is that the engineer is not necessarily brighter than the arts student but that he learns different things at university, that make him more employable.”
One possibility is that arts graduates do not learn the same basic skills needed by business as Science, Technology, Engineering and Mathematics (STEM) graduates, which makes them less attractive employees. “My daughter did English at university and was very determined,” says Walker, “but one of the problems she faced was having to do a lot of numerically-based tests for the graduate training programmes. There are some very elementary skills that students need to get to put themselves on to a fruitful career track, but the problem is that what we teach at university adds more to some kids’ market value than others’.”
Part of the premium for STEM graduates must also be based on supply and demand, but if it were not hard enough to get a job in an economic downturn with a degree in English or history, the news that employers also operate their own discreet internal league table to determine your job prospects must be still more dispiriting.
Whatever the average rate of return for a degree, there is of course no guarantee of a job at the end of it. Research by the Institute of Education has found that up to a third of graduates can end up in permanent non-graduate jobs after they graduate from university.
And that situation looks, if anything, to be worsening — this year companies have cut their graduate vacancies by a quarter, according to the Association of Graduate Recruiters, and BT has cut its graduate scheme altogether.
It was these concerns that put Tom Mursell, 20, off taking up his place at Bournemouth to study law. Having left sixth form college two years ago, he found himself stacking shelves in a supermarket alongside several disenchanted graduates, who were despairing about ever being able to use their degrees.
“I didn’t feel ready to go back to full-time education, so I took a gap year and began looking into alternative training schemes,” he says. “I found that particularly in retail and accounting there was a lot of employerfunded study with companies that took you on straight from A levels.”
During his gap year, Tom founded a website devoted to introducing school-leavers to apprenticeships, training schemes and employer-funded study, such as those at Tesco, Sainsbury’s and PwC. This month he expects that notgoingtouni.co.uk will get 30,000 visitors — the site has become so successful that he is able to draw a small salary from it. In November he will start a degree with the Open University, where a typical degree costs £4,500 to complete.
A higher wage is not the only reason for doing a degree. Many graduates would insist that without university, they would never have made the friends they have, nor have developed such broad interests. Ed Davey from Clapham, South London, would probably beg to differ with them. After achieving disappointing A levels at ADT college, Wandsworth, he saw little point in higher education and turned his efforts to qualifying as a dinghy instructor, and has since found work at Sunsail’s Vounaki resort in Greece.
“I had friends with worse grades but who are still going to uni to do business, IT or sport and I just didn’t think their degrees would be worth the paper they were written on,” Davey tells me, while preparing the sails on a Laser 2000 boat on the edge of Paleros Bay. Although he has not ruled out university for good, the 20-year-old currently hopes to build on his sailing skills for the future.
“The majority of people I speak to don’t believe that university is the be-all and end-all,” he says. “I’d have probably done something very average such as business and the idea of being £23,000 in debt with a mediocre degree means that I’d have taken a step backwards before I’d even started.”
So was Davey right to do what he did? If you face debts of tens of thousands of pounds and a salary premium of as little as £35,000, is university really worth it? All the academics I spoke to were in agreement: if you are going to be a marginal student at a marginal university, probably not. And if you go to university simply to party, the rate of return to partying will be zero.
“An average graduate who hasn’t worked hard will now find that he is £20,000 in debt and hasn’t got an asset because he’s gambled it away on partying,” says Walker. “But if he does work, he could earn 30 per cent more than he would have otherwise for the rest of his life.”
More than 130,00 applicants have apparently received no offer of a university place this year. Could it be that some of those who were turned away in clearing had a lucky escape? Prof Walker certainly thinks that for marginal, reluctant, or lazy students, university is a waste of money. “I’ve been teaching 30 years, and I’m always disappointed,” he says. “In week one they all seem the same and in year three, I can see that some are just lazy bums.”
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