The Great University Con

by David Craig

  3. Which location?

  Another major factor in graduate employment is the region where the graduate lives. In 2012, the Local Government Association’s research into graduate destinations found: “...huge variation in graduate employment levels across the country with some areas seeing around one in three (36 per cent) graduates in full–time employment while two in three graduates (60 per cent) are in work in other parts of the country. This reflects variable job opportunities in different towns and cities”182

  In 2015, ONS figures showed that graduate unemployment rates in Outer London were, perhaps surprisingly, nearly double that of regions such as the South West and the East of England, possibly reflecting the relative oversupply of graduates (and universities) in the capital.183 There are also significant variations in the levels of pay, quality and diversity of work on offer in different regions. None of this variation is reflected in the cost of degrees from different universities. Supporters of expansion have consistently argued that graduates still fare better than non–graduates in regions of high unemployment. Whilst these graduates might enjoy improved rates of employment, it is often in unskilled or administrative work. An improved prospect of a job in a call centre seems scant reward for the graduate debt that it often occasions.

  4. The year of graduation

  As recent graduates have discovered, in a recession the pool of graduate jobs can dry up for nearly all applicants. In 2008, at the beginning of the economic crisis, blue–chip employers reduced their employment criteria down to just five universities. Malcolm Grant, provost of University College London and chair of the Russell Group noted that: “Firms are already narrowing their search to a small number of universities: Oxford, Cambridge, the LSE, UCL and Imperial, and I think that’s a shame.”184

  This meant that graduates with Firsts from other Russell Group universities found their CVs and application forms simply resulted in polite letters thanking them for their applications rather than inviting them for interviews. This situation hadn’t changed greatly by 2012 when the Minister for Universities, David Willetts, criticised graduate employers for focusing their recruitment activities within six UK universities.185

  Unfortunately, this initial period post graduation can be more critical for new graduates than they realise at the time. If they can’t get the right job, or in some cases the right unpaid work experience, their CV becomes less attractive to top employers, degrading over time. Six months after graduation, graduates without employment find themselves competing in interviews with younger and more confident final–year undergraduates. Due to expansion, universities produce increasing numbers of graduates, regardless of how their previous graduates are faring in the job market.

  In 2010, the think tank Demos noted that young people who were unemployed during recessions often suffered lasting damage through reduced lifetime earnings and a greater chance of subsequent unemployment. Their report also noted that graduate status did little to prevent or mitigate this effect:

  “Professor Lisa Kahn, a labour economist at Yale University, has demonstrated that graduating from university into a ‘bad economy’ has a significant negative and persistent effect on wages with earning over a lifetime substantially lower for individuals graduating into a poor job market.”186

  A final point is that some degree subjects are more vulnerable than others to the effects of the economy. Research into the variability of returns for different degrees between 1993 and 1999 found that graduates in law and architecture were particularly vulnerable to changes in wider economy during this period. Architecture graduates could suffer variable returns of up to 40%+ depending on what year they started their degree, for lawyers this figure was up to 50%+.187

  Graduates and the UK Labour Market

  The specific difficulties facing those graduating into a recession are a sign of a much wider problem facing all graduates. Namely, that the supply of graduates post expansion bears little relation to the labour market’s demand for graduates. Until the economic crash in 2008, the problems facing UK graduates in the job market were generally ignored by the mainstream media. Such issues were effectively masked by a long period of relative prosperity and high levels of employment. Following the economic downturn, however, the problem of graduate oversupply started to reach the national news.

  By 2013, the Association of Graduate Employers (AGE) was warning of 85 graduates competing for each available graduate job.188 In the most competitive fields these ratios were much worse, with 154 graduates applying for each position in the retail industry and 142 graduates applying for each investment banking post.189 In 2010 Carl Gilleard, the AGE’s chairman, advised graduates unable to find work that: “Any employment is better than no employment [even] if it’s about flipping burgers or stacking shelves rather than being sat at home feeling sorry for yourself and vegetating.”190

  For many UK graduates, flipping burgers and stacking shelves is exactly what they end up doing and not just in the short term. Figures released in 2015 by the government department responsible for universities showed that 43% of recent graduates (aged 21–30) were either in low–skilled jobs, which by definition carry no graduate premium, or unemployed.191 It’s not what they were promised by teachers, politicians, careers advisers and glossy university marketing prospectuses.

  It is hard to escape the conclusion that expansion has progressively swamped the UK labour market with a quantity of graduate qualifications far outstripping demand. In fact, it has been clear for well over a decade that universities are pumping out far more graduates than the UK economy either wants or needs.

  In 2004, the Teacher Training Agency found that over 25% of graduates under thirty five in various jobs were bored and felt that they had started on the wrong career. Over 50% of graduates interviewed for the research admitted that they fell into jobs rather than planning them and that these jobs had not met their pre–university expectations. These graduates were relatively lucky though, bored maybe, but at least they were in work.

  Five years later, figures from the Higher Education Statistics Agency (HESA) highlighted a significant number of graduates who weren’t so lucky. Looking at graduates from 2005, HESA found that nearly 25% of these were not in full–time work by 2009. A fifth of those working (part–time and full–time) were not in graduate level jobs and 11.7% had been unemployed at least once since graduation.192 Those graduating in 2005 did so when the economy was growing and jobs were readily available. They also graduated when there were 25% fewer graduates. The three years in which 40% could not find full–time graduate–level work were good years to be looking for employment. If these boom years were leaving 130,000 graduates a year in this position four years after graduation, then what should future graduates realistically expect from the labour market when they enter?

  Moreover, many of the professions which traditionally have been high–volume employers of graduates, such as law, medicine and actuarial science, are projected to suffer the effects of deskilling through the ongoing digitalisation of many areas of process and expertise. This could have a significant impact on the scale and scope of graduate roles both within these professions and the labour market as a whole.

  As a final point, it is also worth noting the recent trend for graduate salaries to either fall or stagnate. During the last seven years for which data is available, the average graduate starting salary has fallen significantly from £24,293 in 2007 to £22,057 in 2014.193 These figures include sharp falls for some of the highest–earning professions such as medicine, dentistry and law. All of this signposts a growing gap between expectations and reality; between what students are told to expect from a degree and what, if anything, most of them actually get. What expansion has really meant for all graduates is a deteriorating labour market with less likelihood of a graduate job, falling starting salaries, less chance of finding any job at all and, for all but a fortunate few, the evaporation of New Labour’s much vaunted s
o–called ‘graduate premium’.

  Where is the ‘graduate premium’?

  “Any politician that dangles the carrot of a graduate premium on future earnings to justify increases in student fees, interest rates on loans, or adjusting student loan repayment thresholds, should be challenged for gross mis–selling” Angus Hanton, Co–Founder, Intergenerational Foundation194

  The ‘graduate premium’ is a relatively recent term which purports to describe the additional average earnings that a graduate “might” expect to earn during their working life compared with a non–graduate. Throughout New Labour’s Widening Participation era of university expansion, it was claimed ad nauseam by politicians that a graduate would earn, on average, £400,000 more during their working lifetime than a non–graduate. It was no coincidence that this term first entered the public consciousness during the introduction of top–up fees by New Labour. These additional earnings, this ‘graduate premium’, were introduced as the spoonful of sugar that would supposedly make the medicine of top–up fees more palatable for domestic consumption.

  The graduate premium was essentially a marketing gimmick. The government wanted to keep on expanding Higher Education, sending more and more students to university from a broader range of backgrounds to hit its 50% of school leavers going to university target. It also wanted to transfer some of the cost of study onto the student through the introduction of tuition fees, but at the same time not to discourage would–be applicants. The idea of the graduate premium allowed politicians to make the case that, whilst a degree would now cost more money, it was a worthwhile investment because it would enable a young person to earn more money in the future. This sense of quid pro quo is what lies behind the concept of the graduate premium. The idea ignores the intangible value of Higher Education, of learning for its own sake, and fosters a sense of expectation amongst applicants. Through its constant repetition, the graduate premium has become dangerously close to an implicit guarantee that all students will see a financial return on their loans.

  It is now painfully obvious that many graduates will see little, if any, of these additional earnings. Their degree will often result in a net economic cost – a graduate liability. To protect the policy of expansion, government and universities have been extraordinarily quiet about the fact that many degrees should carry financial health warnings, as cigarette packages carry physical health warnings:

  “People planning to do arts degrees really need to be told that they have to have some sense of direction as to what they are going to do after they graduate. That there aren’t going to be these great prospects for them.” English and philosophy graduate

  The most recent estimate of the graduate premium was produced in a 2011 report commissioned by the Coalition government. It proposed a premium of £108,000 – a ‘mere’ 73% reduction from the original £400,000 premium outlined by Blair’s and Brown’s New Labour. This new estimate would suggest that, on average, a graduate can expect to earn roughly £2,455 a year more than a non–graduate during their working life. Unfortunately, the problems with the graduate premium do not end with this dramatic reduction. It is worth highlighting that the 2011 estimate was produced prior to the massive fee increases in 2012. These added in the region of £18,000 worth of additional debt onto the average graduate and that’s before compound interest takes hold.

  Even more significantly, there are two basic problems with the graduate premium. Firstly, the underlying concept is not fit for the purpose for which it was intended. Secondly, each estimate of the graduate premium suffers from fundamental flaws in their method of calculation.

  The first problem is that the concept of the graduate premium groups together universities and degrees with wildly different returns, providing an average that is meaningless for individual graduates. For example, based on the government’s 2011 figures, degrees in medicine and dentistry return £403,000 (to male graduates) and £339,511 (to female graduates). On the other hand, mass communications and documentation subjects (media studies, if you wanted to know) return £5,437 (to male graduates) and £33,483 to female graduates. This is certainly not a new point; it was made quite forcefully in a 2004 paper by the academics Andrew Robinson and Simon Tormey:

  “The government is taking what is only an average figure, and turning it into a universal benefit. Nursing is now a graduate profession, yet nurses are paid abysmally low wages. Financial benefits do not ‘generally’ follow at all; they follow only for some students, only in some cases.”195

  We can see this problem quite clearly in Figure 1 (taken from the 2011 report on the graduate premium). This shows the huge variations in returns (graduate premiums) for graduates according to their degree subjects and gender.

  In Figure 1, the premiums for male graduates in medicine are the only ones matching the original New Labour £400,000 estimate for the graduate premium. There are also a large number of subjects where the premiums for male and female graduates fall significantly below the current government–estimated average of £108,000: biological sciences (including psychology), creative arts and design, mass communications, non–European languages, history and philosophy.

  Subject

  Male

  Premium

  Female Premium

  Medicine and dentistry

  £403,353

  £339,511

  Biological sciences

  £77,197

  £54,379

  Veterinary sciences

  £164,859

  £127,503

  Physical/environmental sciences

  £108,020

  £76,206

  Mathematical and computer sciences

  £151,507

  £121,751

  Engineering

  £157,124

  £99,116

  Architecture

  £169,545

  £81,128

  Law

  £214,626

  £108,246

  Business and administrative studies

  £130,165

  £100,424

  Mass communications

  £5,437

  £33,483

  Non-European languages and lit.

  £67,226

  £23,103

  Historical and philosophical studies

  £1,395

  £42,291

  Creative arts and design

  (-£15,302)

  £27,192

  Education

  £89,634

  £142,051

  Figure 1 - Expected graduate returns by degree subjects

  (2011 estimate)196

  At the extreme end of this, what exactly is the point in being a male creative arts graduate, when a degree in this subject will leave you worse off on average than if you never attended university? On the plus side, the report’s estimates do appear to confirm what has long been suspected – that funding tens of thousands of undergraduates to study mass communications is not quite the critical investment in the nation’s youth that media studies lecturers would have us believe.

  The estimates also identify major disc
repancies in the returns to male and female graduates in both different subjects and average premiums. Official estimates for the average male premium are £120,512 and for the average female premium £82,371. This imbalance is even more pronounced in subjects such as architecture and law where there is a rough ratio of 2:1 between the average male and female premiums. In addition, the 2011 report also notes that degree classifications significantly influence graduate premiums. For men graduating with a First, the average premium is £144,000; for men with a 2:2 the premium is £80,000. Interestingly, female graduates with a 2:1 degree actually achieve a higher premium (£87,486) than female graduates with first class degrees (£79,206).

  These patterns around degree subjects, gender and degree award are not just evident in the 2011 report, they have been identified and described in all of the literature on the graduate premium. Anybody who has read any of the literature around the graduate premium must be aware of this and the problems inherent in the concept of an average graduate premium. The bottom line is that the idea of the graduate premium is not just nonsense; it is mendacious nonsense, leading applicants to commit to debt for returns that were never feasible. Graduate returns vary hugely depending on an individual student’s sex, university, degree classification and subject. Even were we to accept the estimate of £108,000 (which we should not), there are graduates from many universities for whom this average premium is simply a statistical sleight of hand. Unfortunately, the devil in this particular detail is rarely (if ever) spelt out to potential university applicants.

  The second problem facing the graduate premium is a number of flaws in its calculation. The 2003 estimate of £400,000 was based on a sample of the Labour Force survey. This data was un–weighted and based on the reported earnings of people in full–time employment. It later became clear this type of premium was something that only male graduates in the highest earning careers might reasonably expect (for example, male doctors). When asked how they had arrived at this figure, the government department responsible for the estimate (the DfES) declined to provide any further detail.