by David Craig
In 2005, the Royal Society for Chemistry and the Institute of Physics commissioned the accountancy firm PricewaterhouseCoopers (PwC) to investigate the graduate premium. In their report PwC identified a “gross graduate premium” of £160,000. A subsequent study by PwC in 2007 for Universities UK (the membership body for vice chancellors) conveniently arrived at the same figure. Universities UK argued that their estimate provided a strong case for the continuing value of a degree in the face of future tuition fees increases. This sponsorship is a key problem for the graduate premium. Research into the graduate premium has always been commissioned by organisations with a vested interest in attracting the maximum number of students to university. If we take fast–food providers’ research into the health benefits of their products with several pinches of salt, why do we accord any more validity towards the conclusions of research published by university trade bodies promoting the financial health benefits of attending university?
Moreover, the reports on the graduate premium published in 2005 and 2007 (which had estimated the graduate premium at £160,000) used data from long–term studies of graduate returns based on graduates from the 1990s or earlier. This data was taken from periods with fewer graduates, much stronger prospects for graduate employment and fewer degrees with low employment prospects and pay. Projecting this data forward into a future where there were twice as many graduates fighting for a similar number of graduate jobs is at best specious. Similarly, the 2011 government report, which provides the estimate of £108,000, uses labour force survey data from 1996 to 2009 – again a period with significantly fewer graduates and, as a result, when there was more employer demand for graduates. This data is also drawn from a period of relative economic prosperity and growth, which ignores the devastating effect that the economic crisis will have had on graduate earnings and employment from 2008 onwards. The calculations also overlook the fact that earnings in a whole range of so–called graduate careers are also open to non–graduates via other routes, including law, banking, retail management and so on. The difference in earnings between graduates and non–graduates is therefore hugely and dishonestly over–estimated.
There are several other problems with the way the graduate premium is calculated which would have any statistician tearing their hair out. But in summary we can say that any politician or university cheerleader, who continues to make use of ‘the graduate premium’ to advertise the benefits of Higher Education, should be sued for mis–selling.
Student Debt
What about the other side of this transaction, the quids for this dubious pro quo – namely student debts? Well, they now mount up very quickly. In 1994, Barclays estimated that students graduated with an average debt of £3,190. In 2010, the student website Push’s debt survey suggested that students graduated with an average debt of £19,562, Push claim that students graduating from 2015 onwards will have an average debt of £59,100.197 (Figure 2)
Figure 2 - The increase in average graduate debt 1994-2015
At the time of writing, a graduate earning under £25,000 a year won’t have to pay back their student loan debt at all. But this debt will keep accruing compound interest at the rate of inflation (RPI which is usually higher than CPI) plus 3% (again, at the time of writing). Whilst debt is more widespread and socially accepted than 30 years ago, it still has implications that run far beyond the financial. Massive generational debt at this level will have serious psychological and social impacts for these graduates.
On an individual level, such debt constrains and even removes individual choice. Those rich enough to avoid most or all of this graduate debt can still take the time to “find themselves” or wait for the right job after university. Those without this luxury have a choice between “nose to the grindstone” to tackle this debt before the compound interest rides it over the horizon, or mortgaging their future to enjoy the present. It won’t take many graduates choosing the latter option before student loan non–repayment becomes a serious issue for the taxpayer.
CHAPTER EIGHT: THE FINE ART OF MISMANAGEMENT
The Great Expansion has been massively funded by students, their families and the taxpayer and that expenditure has often been justified by politicians and universities as investment in the future of the country. But when we look at things like which universities or groups of universities have grown the most, which degree areas and subjects have increased in number and the financial results of the universities which have expanded most, we discover that this supposed ‘investment in the future’ has been mismanaged on an almost epic scale. And this mismanagement is going to be horrendously expensive for students, their families and taxpayers and extremely destructive for our Higher Education system and even for our country’s economic future.
1. Which universities have expanded most?
The first point to make about expansion is that most of it has occurred in the universities and degrees that provide the worst returns for graduates and taxpayers alike. In other words, it has occurred predominantly in new universities, rather than elite universities. For example, the UK’s two strongest universities, Oxford and Cambridge, have hardly increased their domestic undergraduate student body at all during expansion. The Russell Group* of elite research universities increased its intake of domestic undergraduates by around 7% between 1995 and 2010. Over the same period, Oxbridge increased its intake of domestic undergraduates by only around 0.95%.198 For the rest of the university sector, the average rate of expansion during this period was closer to 70%.
Since 2001, 31 new universities have been created, normally by changing the title of an existing college of Higher Education to ‘University’. Chichester, Worcester and Cumbria all now proudly host their own ‘universities’. From the perspective of the students who enrolled at university during expansion, it is worth remembering that these new universities were and are significantly under–resourced compared with their more established counterparts, something which is reflected in much worse ratios of staff to students and in higher student drop–out rates.
Another issue worth noting about expansion is the changing proportions of domestic and international students studying at the UK’s elite universities. These universities may have barely increased their undergraduate intake of UK students during expansion, yet the number of international students enrolled at these universities has doubled in the last decade, correspondingly reducing the opportunities for domestic students. As the Telegraph commented in 2015:
“Official figures show the number of international undergraduates has jumped from around 39,000 in 2005/2006 to over 75,000 in 2013/2014. Out of the 24 Russell Group universities, Exeter saw (a) jump from 685 foreign students a decade ago to over 3,200 – a 378 % increase. At Sheffield University, the number of students from China has gone from 580 in 2005 to over 4,000, a 590% increase.” 199
From the perspective of these universities, recruiting a greater percentage of non–EU students who can be charged fees at the international market rate (often triple that of domestic students) makes a great deal of financial sense. Viewed from the perspective of a national investment in Higher Education, this type of recruitment strategy is nonsensical.
2. Which degree subjects have increased most?
A further aspect of expansion to consider is in which subject areas it has occurred. Before we do this, it is worth reiterating that all of the available evidence suggests that degrees in science, technology, engineering and mathematics (STEM) subjects, on average, offer the best returns to graduates (and taxpayers) and that arts or humanities degrees, on average, offer the worst. It is also evident from all of the available research that STEM skills are in greatest shortage in both national and international labour markets. These statements were true at the start of expansion and they remain true today. Therefore, it seems reasonable to expect that expansion, as a national investment in the UK labour market, should have concentrated on providing a greater absolute and relati
ve proportion of STEM graduates. So has this happened?
The short answer is “no”. Instead, universities have focused on providing degrees which are cheap to run, quick to expand and which they think will attract students – essentially arts and humanities degrees. Taken at the level of individual institutions, this means an unbalanced cohort, top–heavy in arts and social science students. Considered at the national level, it is even more problematic. In 2004, a Higher Education Policy Institute (HEPI) report suggested that: “Current arrangements have resulted in institutions taking decisions based on their own self–interest which collectively may often result in suboptimal outcomes for the country as a whole.”200
Unfortunately for Britain, British students and British taxpayers, expansion has mainly occurred in degree subjects for which there is little or no demand from employers. Figure 1 shows a list of full–time undergraduates across a number of the major areas of university study for the academic years 1994/95 and 2012/13.
Number of students
Subject
1994
2013
Difference
Medicine & dentistry
26,544
45,280
70%
Subjects allied to medicine
60,239
133,770
120%
Biological sciences
49,939
141,000
180%
Agriculture & related subjects
11,159
8,850
-21%
Physical sciences
51,282
64,530
26%
Mathematical sciences
15,528
30,040
93%
Engineering & technology
96,118
93,945
-2%
Architecture, building & planning
29,489
26,230
-11%
Social studies
77,488
128,710
66%
Mass communications & documentation
10,120
53,965
430%
Historical and philosophical studies
32,847
53,105
62%
Creative arts and design
62,835
134,250
114%
Figure 1 - UK Full-time undergraduate study by subject area201
We can see the following main trends:
A major increase in students studying subjects allied to medicine. This has largely been driven by nursing becoming a degree subject
A huge increase in biological sciences students, driven by rises in the numbers of psychology and sports science students
A large increase in undergraduates studying mathematical sciences. This is probably driven by a number of the less prestigious universities offering degrees in ‘mathematical studies’ which tend to be easier than pure maths degrees
A drop in engineering and technology students
A large increase in social sciences students
A massive increase in mass communications and documentation (media studies) students. (The same 2011 research estimates suggest a £5,437 lifetime premium for male graduates in these subjects – just over a hundred pounds a year)
A huge (114%) increase in creative arts and design students. (The government’s own 2011 research into the graduate premium estimated that male graduates in these subjects were projected a net liability of £15,302 after graduation)
Nursing aside, expansion has mostly occurred in creative arts and design, mass communications, social sciences and biological sciences subjects. The number of students studying STEM subjects has mostly declined in absolute or relative terms. Even in STEM areas such as the physical sciences, where there has been growth, it has been about half of the average growth across the sector as a whole.
There are numerous other statistics available which reveal that expansion has not occurred in the STEM subjects which we have been told are so vital for our national economic competitiveness, but primarily in new subjects (media studies, photography, sports science, forensic sciences), for which there are few recognised career paths, limited graduate–level jobs and minimal or even negative graduate premiums. Expansion has also dramatically increased the supply of graduates in law, psychology and journalism – professions where there is no evidence of increased demand for these subjects in the labour market.
In 2011, a search for “sports science” undergraduate degrees on the UCAS website identified 24 different courses at 13 different universities. A query for undergraduate courses in “sports studies” now produces 468 courses at a total of 69 universities. Despite the hoped–for boost in participation in sport promised from the £9.5+ billion 2012 London Olympics, it seems questionable whether we British have really become so athletic and sporty that the UK labour market actually needs the huge number of sports studies graduates that the universities are so enthusiastically producing.
3. What is the availability of key subjects?
There is one further issue which should be mentioned about the nature of expansion: that it has resulted in an overall reduction in the geographical availability of key subjects such as STEM degrees. Despite the massive growth in the Higher Education sector, the availability of these key subjects is actually reducing, at both the individual institutional and regional levels.
In 2006, the Institute of Physics noted that 30% of UK university physics departments had been closed or merged since 2001.202 In the same year, a Universities and Colleges Union report showed that a total of 10% of maths and sciences courses had been scrapped across the Higher Education system between 1996 and 2006.203 This reduction and concentration of STEM courses compounds many of the issues involved in equality of access. State–school pupils are statistically less likely to apply to or obtain places at elite universities. Disadvantaged students are much more likely to study and live at home, such that, if their local universities don’t offer courses in these key subjects, which employers and the economy need, then realistically they can’t or won’t choose to study them.
Expansion or just getting fat?
Most expansion has occurred in the newer universities in cheap, easy–to–run subjects for which there is little demand in the labour market and, as a result, these are more likely to provide graduate liabilities rather than premiums. Moreover, the students who are studying these degrees at these universities are generally from state schools and have low levels of academic achievement. Many are from poorer and disadvantaged backgrounds and, in the name of expansion, they have been promised a mirage for which they are having to borrow up to £60,000 with compound interest to follow. It is hard to see how expansion of this type has benefited the majority of these students or their families. It is even more difficult to sustain the argument that exp
ansion has provided the UK labour market with the skills that it needs. Finally, it is virtually impossible to identify what exactly taxpayers have received in return for footing a significant part of this bill.
There is one group of people and organisations that must have benefited from expansion, however, universities and their employees. At the very least, expansion must surely have been good for them?
University cash-flow problems
Despite a massive increase in resources during expansion, the reality for many universities has been a hand–to–mouth existence, with the very real prospect of financial meltdown. In 2008, Tony Dickson, a former deputy vice chancellor at Northumbria University, describes many universities’ financial problems thus:
“Most universities operate with a year–on–year revenue surplus considerably below the 3 per cent of turnover that HEFCE recommends as a minimum. As a result, the sector is undercapitalised and under–invested. Another way of saying this is to point to the fact that the UK government spends less on Higher Education as a proportion of GDP than most other OECD nations.” 204
Throughout expansion, dozens of universities have flirted with insolvency – some yearly and some monthly. The reasons for this instability are complex. However, the scale of these problems shows that they are systemic in nature. In 2001, the Association of University Teachers (AUT) produced research showing that nearly half of UK universities and colleges were running annual deficits:
