By Johnny Rich –
Minimal-debt, appropriately-funded universities, and affordable recruitment fees are only a few of the growing number of benefits to hiring graduates.
Hmm, I don’t think so. But a system without such glaring flaws would indeed be impossible with the current funding models for HE. That’s because they’re set up in opposition to one another. For students to have low debts, universities must go without funds or the taxpayer has to foot the bill. This creates a problem in the system, because employers don’t have any control over what students choose as their occupations or where they go to school. This means there are no incentives for them to encourage university attendance among young people
But that doesn’t mean higher education is off the hook. The key is to look at what benefits it brings.
A little history
Once upon a time, people didn’t need degrees. What training they needed was mostly delivered on the job. The cost of skilling the UK workforce was effectively met by its businesses. And they didn’t mind because they were ensuring their employees could do their jobs.
The UK expanded its higher education system so that the country could better serve this knowledge-based economy.According to the joint report we commissioned with Lord Leitch, by 2020, 50% of jobs will be filled by people who have already paid tens of thousands for the privilege. These are reports that need to be taken seriously.
As the world changes, some careers become less in demand and there are now more opportunities for graduates to merge other skills with their degree. In the UK alone there are over 8,000 students studying forensic science and only 9,500 jobs in this sector.
Many CSIs may not know this but many universities offer other more valuable degrees which will lead to better jobs- thus, it’s wise for a CSU student to know what their interests are and pursue that instead of simply relying on the false promises of globalization.
The expansion of higher education in the 1980s meant that the cost was now being taken-up by students, which was deserved, so perhaps it is no surprise that new courses were oriented towards what they wanted This is because their entire educational experience has been focused on getting them the qualifications they need to get the best possible job. Despite this, the information and understanding of how to find work that they’ve had is pretty limited or outright misguided.
Meanwhile, it’s been costing taxpayers more too. After all, our economy and society needs graduates; doctors, social workers, and teachers. But while the taxpayers pay a large part of the bills they don’t have much say in whether or not we need to produce so many graduates each year.
Make the funding follow the value
Higher education has three beneficiaries: students who want rewarding careers, the country that has social and economic needs, and employers who need a highly skilled workforce. So let these benefits decide the ballad of higher education.After all, why not let those same forces determine which universities are best at delivering benefits?
In other words, if universities can’t generate any value, why should they be funded? Labour markets have a good way of measuring the value of their workers- it’s called ‘pay’
I have a graduate tax idea for the future which is different from what we currently have. Instead of adding the cost of their education to their national insurance contribution, the costs should be added to the employers so that they are getting a return on investment.Reversing the university student cap would give some universities a way to create greater funding, which they could then use as they see fit.
Why it would work
Graduates who are highly employable and add lots of value to their employer should expect a high salary in return. In fact, their university will be rewarded because they will have contributed heavily to this.
If however a university’s graduates aren’t proving to be a good source of revenue, the university will have to question what it’s doing. Should it stop offering media studies, even though the student demand is there? Should it try to teach it better? Or, more likely, it would work harder to ensure the students recognise the employability skills they are picking up through their studies. Recruiters, who often complain that graduates may be well educated but aren’t prepared for the workplace, may find universities are quick to change their priorities when their funding is at stake.
Lord Browne points out how employers contribute to interest rates on student debts by raising the costs of hiring graduates. Workers are paid not according to their need, but according to their value.
Wider participation and student contributions
One of the key advantages of this system is that it removes the main barrier to entry into university: debt. Now, anyone from any background can attend university.Or more accurately, the fear of debt. It does not matter how ‘progressive’ the current funding system may be, able students from non-traditional backgrounds will never go to university in the desired numbers so long as the system looks too expensive, too risky and too complicated. Every perceived barrier needs to be removed, otherwise these students in particular will not even entertain the idea. They’ll never discover that the financial hardship may be more manageable than they might believe.
Don’t be mistaken though—students would be contributing—just as much, in fact—but just not quite in the same way. The CBI would undoubtedly argue that higher taxes on employers lead to lower wages. In other words, the total of pay and NI might be unaffected. This wouldn’t bother the graduates: ask any student whether they’d rather earn £27k five years after graduation and owe £40k, or earn £25k and owe nothing. I’ll give you odds they’ll plump for the latter.
I said that students would probably contribute just as much. It is possible graduate pay would not fall. But if Lord Leitch was right about the rising demand for graduates, the competition to recruit them may indeed keep their pay buoyant If so, it would demonstrate that graduates really do offer sufficient value to their employers and, if that is indeed the case, it’s only fair (for their sake and their universities’) that they should be paid accordingly.
But what happens if graduates aren’t worth it in the job market? Universities can’t keep funding themselves and would stop admitting so many students. Demand would eventually meet supply and the cycle would begin again.Personally I believe more graduates are needed, not fewer, and their pay will hold steady, but if higher education isn’t that valuable after all, we ought to let it contract.
But what about the arts? What about social workers and nurses? Won’t universities stop providing these courses because they don’t command high salaries?
Firstly, the gender pay gap for arts and STEM courses is not as significant as some people think and the demand for these types of graduates will be led by what employers are willing to pay. If the nation finds itself in need of nurses because universities don’t want to teach them, it would have to start paying higher salaries to attract people into the profession, making it more worthwhile to teach those courses. In the short term, for certain ‘reserved’ professions, it would be consistent with the idea of ‘the beneficiary pays’ if the Government subsidised such courses directly to maintain labour supply. After all, taxpayers do benefit from good nursing.
Secondly, there are not endless numbers of students wanting to study STEM subjects. Universities have to respond to the supply of raw materials and they may find they can earn a better living teaching art history to students competing hard to join those courses than they can by churning out reluctant engineers. Arts courses cost much less to run, so again with a smaller income, the profit margin will still be high.
Some objections have been raised but I can respond to most of them. There’s probably no perfect system for funding HE, but it is certain that one day HE will receive the funding it needs, the Government’s current plan is a cart hurtling down a track. The stakeholders – students, universities, employers and taxpayers – are four horses pulling the cart, but each has been harnessed in a different way, pulling against the others. Sooner or later, this cart is going to end up in pieces or in a ditch. Unless our solution gives everyone a reason to pull in the same direction, then it’s not a solution.