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Government and HE: The Price of Everything and the Value of Nothing

  • 7 June 2021
  • By Peter Mandler

This blog is by Peter Mandler, who is Professor of Modern Cultural History at Gonville and Caius College, Cambridge, and the author of The Crisis of the Meritocracy:  Britain’s Transition to Mass Education since the Second World War (Oxford University Press).

James Forsyth’s piece in the Times on Friday (‘Tories want to end the university boom years‘) does a good job of summing up government’s present intentions for higher education;  it should remind us too of how blinkered and under-examined are government’s (and much of public discourse’s) assumptions about what HE is for and how it works.  Those assumptions derive mostly from currently fashionable economists’ axioms (principally, every investment is a cash return) and on enduringly fashionable politicians’ axioms that what they do is all-important.

To start with, of course, HE is almost entirely about individual pecuniary returns. Even David Willetts, a moderate in such matters, talks about the ‘four quadrants’ – individual and social pecuniary returns, individual and social non-pecuniary returns – and then devotes himself almost entirely to the first only. (I will be doing the same in this post.) HE that does not deliver these individual pecuniary returns is ‘low-value’ or ‘dead-end’. This calculation is an entirely artificial one, depending as it does on the same government’s own fee policies. UK students currently probably pay more for tuition than any other students on the planet – yes, even U.S. students. The ‘value’ of their course is calculated by how much they pay back on what they borrow for the purpose. That in turn depends not only on the level of fee set (essentially, by government) but also the rates of repayment set (exclusively by government).  

It also depends on their rate of pay. That is set by the labour market.  The current assumption is that the labour market accurately assesses the value-added by HE and rewards it accordingly. Never mind that the labour market is full of pay conventions – there are severe shortages in care and agricultural workers but their rates of pay don’t rise to suit – and that employers demonstrably hire workers, not on a rational calculation of the specific skills they’ve acquired in HE, but on many background characteristics as well. Even crude attempts to control for background characteristics show that. Never mind that most job skills are acquired on the job. HE (and other education) raises your general skill levels, makes you a more disciplined, flexible and indeed trainable worker. There isn’t very often a clear match between HE skills and the specific job.  Only a quarter of STEM graduates go into jobs that require STEM skills;  in that sense they are much like all other graduates.  Empirical studies of employers’ hiring practices show that they aren’t investing in particular skills – they’re going to teach those on the job – but in particular people. Yet we go on assuming that HE is best assessed by stacking up the artificial ‘costs’ to government of non-repayment of loans against the unproven ‘benefits’ of a specific HE course for a specific job.

By that calculation, government is having to spend more on unpaid loans, and the axioms then suggest that too many people are going to university. Augar came to the unlikely conclusion that it is better to have more people at skill levels 4 and 5 than at skill level 6. It is of course true that a lot of people who used to be at 4-5 have now progressed to 6:  you’d think might be a good thing for many reasons, but no. We’re told there are alleged skill shortages at levels 4-5. Fine – let’s progress more people currently stuck at levels 2-3 to 4-5. But why would you want to knock people currently at higher levels down a peg? The argument as expressed by Forsyth is that some people with ‘higher technical qualifications’ (4-5) might be earning more than some graduates. But even if you assume labour markets work this way, and that’s the only reason for education, it seems likely the higher return would vanish once the shortage were filled, especially by people who were forced into rather than chose these qualifications. Why not hire graduates for those jobs? That’s often what employers are tempted to do;  sociologists call this the ‘single job queue’. The graduate might have more skills than the person at levels 4-5, more ideal worker characteristics, better trainability, higher productivity. But the current logic says no, they are hiring an over-qualified worker, or under-paying a graduate. Don’t spend a penny more on education than you have to, to meet the labour market ‘need’. 

Why don’t we press the logic further and send more 15-year olds into shops and offices like we used to?  That might even help us find those missing care and agricultural workers.  Alternatively, we might remember all the reasons that we raised the school-leaving age from 11 to 18 over the past century: not just to provide suitably skilled work, but to make people (as studies show more education does) healthier, happier, more tolerant, better citizens. To give people choice – you’d think a free-market party and government would care about this – about their futures rather than suit them up for their employer. As an investment in human capital, it’s probably the best thing for the economy too. But to assess that properly we’d have to take all ‘four quadrants’ a hell of a lot more seriously than anyone is currently doing.

HEPI’s review of Peter Mandler’s latest book is here and HEPI’s assessment of likely future demand for higher education is here.

1 comment

  1. Albert Wright says:

    In my opinion the 4 quadrants would be best served by investing tax payers’ money in better education for all between the ages of 5 and 18, not those from 19 to 24 and not at level 6 or above.

    Let’s make those near the bottom of the economically successful pile happier and then I will agree more with the statement “HE (and other education) raises your general skill levels, makes you a more disciplined, flexible and indeed trainable worker.”

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