the third shift: reimagining britains higher education

If university education has traditionally been the reason why working class people have

not been able to enter white collar jobs, what do you do to increase class mobility? You

encourage more people to go to university from various backgrounds. At least that’s

what Tony Blair thought when he famously pledged to widen higher education

participation to 50% of young adults and declared that success depended on

"education, education, education." The following article provides historical context to

the student loans system operating in the UK and aims to argue that it is now outdated

for its purpose. It also compares how a university degree return may vary based on

degree, university and the student’s sexual or socio-economic status – thereby allowing

 the reader to come to their own reasonable conclusion on whether university education

 is truly worth any more.

 

This was an acceleration of ongoing policy since the 1960s, dating back to the 1963

Robbins Report, which established the principle that universities should be available to

all who are qualified by ability and attainment to pursue them and who wish to do so.

Successive governments broadly upheld this commitment over the following decades,

expanding the number of universities, and later, through the 1992 Further and Higher

Education Act, converting about 35 polytechnics into universities. This aimed to

increase social mobility in the UK and to also increase the number of highly educated

workers in the UK to support the economy. Because during this era the UK economy

was also shifting from manufacture economy to a service economy, meaning that

manufacturing steadily gave up its place at the centre of the economy, with millions of

job losses concentrated in sectors such as coal, steel and shipbuilding. At the same

time, the UK policymakers leaned into services such as finance or healthcare with the

notable 1986 “Big Bang” deregulation of the London Stock Exchange, which was

explicitly designed to restore London’s position as a major financial centre. Since these

emerging service sectors were assumed to demand higher-order, non-manual skills

than the manufacturing jobs they replaced, the policymakers reasoned that a larger

pool of graduates would be needed to staff them. This logic rested on a version of

Human Capital Theory: the idea, associated with economists like Gary Becker, that

formal education directly raises a worker's productivity and therefore their value to

employers, meaning that the supply of graduates would more or less generate its own

matching demand.

 

Except how are they going to fund the sudden increase in people in education?

 

The answer was to change the funding streams. In 1990, maintenance grants were

supplemented with government-backed maintenance loans. In 1992, tuition loans were

introduced for first-time, full-time students while the tuition fees were substantially

increased afterwards, twice. Thus, for the first time, going to the university meant that

students would incur debt. The rational argument for this was that higher education can

deliver large private financial returns alongside wider social returns; so, the

beneficiaries should arguably cover much of the cost themselves (Milton

Friedman,1955). And because even to this day graduates earn about 36% more than

 non-graduates across their lifetimes (niesr.org), ultimately a degree would probably

benefit them.

 

However, this particularly applies to graduates from the older generation. For example:

someone who was born in the mid-1980s, went to school in the UK, and had started

university in 2004 would only pay £1,000/year flat-fee for their tuition, just before the

jump to £3,000 in 2006 - only a fraction of what students pay today. Conversely, the 90s

and early 2000s massively benefited from this increase of graduates coming into the

economy, with the GDP growing and social mobility occurring. BIS estimated that the

rising share of graduates in the UK workforce contributed to roughly 20% of GDP growth

between 1982 and 2005, and that at least a third of the 34% rise in UK labour

productivity over 1994–2005 can be attributed to the accumulation of graduate skills in

the workforce. On the social mobility side, higher education participation among poorer

students grew rapidly during this period too - meaning more working-class young

people were reaching university and, from there, graduate-level jobs than ever before

(Blanden and Machin, 2003).

 

Then the 2008 financial crisis happened.

 

The resulting fiscal squeeze led the incoming coalition government to make deep cuts

to public spending, and higher education was hit especially hard, forcing universities to

find a new source of income just to stay afloat. The government's own response, the

2012 Browne Report, recommended removing the cap on fees and introducing a more

progressive interest rate on loans, which was settled to be £9000. In contrast, the wider

economy of the UK entered a decade of unusually weak productivity growth following

the 2008 collapse of London's high-productivity finance sector. Thus, the flow of new

graduates kept climbing rather than slowing to match a shrinking pool of appropriate

jobs. NIESR estimates that roughly 30% of UK graduates today are working in roles that

don't formally require a degree at all. Approximately 30% of graduates are employed in

roles that do not formally require a degree, and the graduate wage premium has fallen

from around 50% to 36% for working-age adults since 2007. The graduate supply had

clearly begun to outrun the graduate demand.

 

Suddenly, students are put to think about the return on investment of a degree, as

they would most likely end up with about £50,000 debt by the time they graduate.

 

According to Institute of Fiscal Studies report, about 20% of women and about 30% of

men who go to university might be financially worse off in their lifetimes because they

went to university, compared to if they had not gone. Meaning that on average one in five

graduates might not get any return on their degree. Accounting for the fact that these

graduates usually enter the workforce later, losing years of their early earnings - the

financial returns of a new graduate job will most likely not be big enough to allow them

to offset the cost of student loans that they racked up in their undergraduate years.

 

It also became clear that not all degrees are the same in terms of graduate prospects.

 

The IFS also estimates some subject-specific returns: Economics and Medicine stand

out for having really high returns. Economics specifically offers a relatively small

number of people – people who desire to do banking and finance related jobs in big

cities - with extraordinarily high returns. Medicine also offers very high average returns

– but the spread is even narrower than Economics. Even the slightly lower value

medicine jobs, such as nursing in the public sector for a fixed wage – would usually have

a higher insurance value since the demand for that job is really high. Law, Business,

Computing and Engineering are also often associated with having a good career with

plenty of fast earning growth. Conversely, for Creative and Performing Arts, the net

return is close to zero. For a Social Work related degree as a man, the net return is

actually negative. The financial return for degrees such as Philosophy and English is

also regarded as lower than other Humanities degrees. The IFS also finds a striking

gender gap in the returns to a degree: among this cohort, women who attended

university earn about 56% more by their late 30s than women who didn't, compared to a

28% premium for men. However, after the 30s age their returns relatively stabilise. In

contrast, their returns keep increasing on average until their late 50s. Men graduating

from Russel Group Universities are estimated to get twice the amount of return as men

otherwise, while for women, there is not much difference in degree return between

 Russell Group and non-Russell Group graduates. Graduates from higher socio-

economic background are more likely to get a higher return on their degree compared to

someone from a lower socio-economic background, the IFS also reports.

 

Notably, these estimates are drawn from studying the careers of people who graduated

between 2005 and 2015 - a cohort whose early careers were shaped by the financial

crash. Therefore, it is hard to say what the current prospects are for those coming out of

university now. If we assume the past is a reasonable guide to the future - that today's

students, still operating under the same student loan system and broadly the same

curriculum as previous cohorts, will follow similar trajectories - we can begin to predict

what kind of return current and incoming graduates might realistically expect from their

degrees. Given the nature of current socio-economic and political conditions of the UK

– it would not be bold to presume that these trends will only get starker. Those who

 actually get some sort of return on their degree will become a diminishing proportion of

 overall graduates. And so inadvertently, by trying to expand the higher education sector

 with the introduction of tuition fees, that might have actually led to a stagnation in

 class mobility in the UK.

 

We are clearly seeing a third shift in our higher education. In order to actually increase

class mobility in a country, the government must ensure that the working class people

can actually access the higher power and higher paying jobs – and not just a degree.

That means taking stricter measures: lowering tuition fees, reducing interest rates on

student loans, or reviving a proper scholarship system. The current bursary model –

where each university sets its own subjective criteria for who qualifies and how much

they receive – would simply not suffice. We need a more consistent, government-

backed scholarship programme, so that students from lower-income backgrounds have

a genuine chance of breaking into positions of power.