Yes higher education is worth it

At HEFCE, we have been reviewing evidence on the contribution of higher education and research to productivity. One area where there is considerable consensus among economic experts is the valuable contribution that the expansion of graduates in the country makes.

This is reflected in the Government’s productivity plan, which sets the goal of enabling anyone with the right qualifications to study at university, and incorporating degrees into apprenticeships, which are also expanding.

In parallel, universities are currently finalising entry decisions on students for 2015-16. In this climate, we hear comments in the press, and among employers, about whether the UK produces too many graduates. Students (and their parents) now applying to university also worry about whether they will get a ‘good’ job at the end.

So how do we explain the mismatch between macro-economic views about the importance of increasing graduates to improve productivity and the public commentary?

Centrally this is about the long-standing challenge of forecasting skills needs in the economy. Universities need to develop graduates for long-term careers in an ever-changing world of work.

What does the evidence show?

At the macro-level, evidence that expanding numbers of graduates improves productivity seems compelling.

The London School of Economics led Growth Commission concluded that the expansion of higher education had been a reason for the catch-up in UK productivity improvement in the 1980s.

The National Institute for Economic and Social Research similarly has concluded that the expansion of graduates has a good basis for productivity improvement.

An evidence paper from the Department for Business, Innovation and Skills (BIS) on the contribution of graduates to productivity estimated that a 1 per cent increase in the share of the workforce with a graduate qualification raises long-run productivity by 0.2 – 0.5 per cent. (Increasing the stock of graduates in the overall economy added 20 per cent to GDP between 1982 and 2005.)

A study from the University of Strathclyde on productivity estimated that employing graduates had a positive impact on productivity in both manufacturing and services – it projected that doubling the proportion of graduates would increase productivity by 14 per cent.

Looking at the micro-level, the evidence we have to make judgements on the short and long-term need for graduates is inevitably imperfect, though seems to show positive signs at the moment.

From the 2013-14 Destinations of Leavers from HE (DLHE) survey, 70 per cent of students in employment were in professional or managerial occupations, and 42 per cent said that the degree qualification was a formal requirement. A further 23 per cent said it gave them an advantage.

This is only 6 months after graduation, so before some students will have settled into their long-term career development. In a separate follow-up survey that asks students what they are doing roughly three and a half years after they leave, 85.8 per cent of graduates were employed with a further 8.1 per cent in further study.  81.8 per cent of graduates said that they were satisfied with their careers to date.

Now and looking ahead

But inevitably public debates are about our experience, rather than dry statistics. Some of our public and personal experiences of work now relate to a recent period of recession, and then sluggish productivity improvement.

Part of the productivity challenge is that we have too many people in low productivity jobs and not enough in high productivity ones. Part of the Government’s plan is about supporting the creation of these high productivity jobs through investment, innovation and the like.

Critically then, we need to develop graduates to fill the jobs that we aspire to have, not just the jobs we have now. If higher education does not deliver on this agenda, our next problem will be a lack of graduates in areas that hold back the UK’s improving productivity, competitiveness and exports.

The issue of what is a graduate job is anyway by no means clear cut, increasing the challenge of predicting how many we might need in the long run. Typically we associate graduates with traditional professions such as doctors or engineers. Forces such as technological change and the greater knowledge basis to modern employment mean, however, that new jobs are constantly being invented, and old jobs done in entirely new ways. These changes, some suggest, are producing category changes in the nature of the workforce. Recent research from the Work Foundation even argues that the interplay of technology with intellectual and human capital has fostered a new type of worker – the ‘knowledge worker’ – in the modern economy.

Commenting on anticipated radical changes in the world over the next 50 years, the LSE Growth Commission concluded that the UK needs to focus on policies that encourage flexibility, and put ‘a premium on systems that celebrate and encourage entrepreneurship, innovation, opportunity and discovery’.

Higher education needs to be vitally alive though to the challenge of producing the ‘best’ types of graduates, who can serve the economy and society for the short and longer runs.

The LSE Growth Commission stressed the importance of continuing to increase university-employer links.  HEFCE itself is committed to a long-term programme of work to study employability and skills trends and use our analytical expertise and funding, such as for STEM provision, to help universities produce the right types and mixes of graduates.

As part of this, we need to continue to examine the powerful effects that higher education has on the inclusion of all of society in productive work, reflecting that the Government has made using the talents of all a key aspect of the productivity plan.

Enriching lives

Finally, in commenting on the extent to which the country is benefiting from graduates, we need to take into consideration that higher education has always sought to develop the person, to enrich their life and the lives of others, as much as their employment.

After all, the ultimate goal of increasing productivity for the people of this country is not to do more work, but ultimately to improve their quality of life.