Hundreds of thousands of students will walk into university campuses for the first time next month. They have been sold a dream about intellectual nourishment, greater life opportunities, and a step up into a professional career. In practice, most will spend much more time down at the pub than in class.
Universities have expanded in recent decades under the guise of building a modern high-skill economy. The proportion of graduates in the working age population has risen from 17 per cent to 42 per cent between 1992 and 2021. And indeed, the median graduate receives an annual salary premium of £10,000 compared to non-graduates.
Yet not all is so rosy. The value of a degree has dropped as more people have one. The Higher Education Statistics Agency, in a 2021 report, found that graduates born in 1970 benefited from a 17 per cent wage premium by age 26. By comparison, graduates born in 1990 had a benefit of only 10 per cent – and just 3 per cent for those who pass with a lower second or below grade.
It’s also not clear that the graduates who earn more do so because the university imparts valuable knowledge. It is equally possible that universities are largely a sorting process; that is, by picking the top students from schools and giving them further examination, universities signal who is the most intelligent and diligent to employers rather than providing meaningful skills. Thus, universities act as glorified human resources departments.
The British generalist model demonstrates this phenomenon. Many bankers, consultants and politicians studied subjects like classics and go on to barely use anything they learned in their day-to-day work. Or, to put it differently, how much of all that knowledge from exam cramming can you remember, let alone is useful to your job?
Economist Bryan Caplan, in The Case Against Education, highlights research that demonstrates the graduate salary premium falls by more than half after controlling for IQ test scores, school results, teacher ranking, family background and location and measures of conscientiousness and conformity. Caplan also finds that the wage premium is much higher for those who complete their degrees compared to those who do one less year (known as the “sheepskin effect”) – indicating that the fact of having a degree, rather than the education you receive in those years, is what matters. He even points to evidence that most graduates do not have improved critical analysis skills and are incapable of transferring learned concepts into new settings.
That is not to say that everything you learn at university is useless; there’s clearly underlying knowledge necessary to be a doctor or a chemical engineer, and maybe even concepts from a statistics course can come back in handy in the workplace. But the idea universities significantly improve human capital is suspect.
There may be other positives from a university education – like broader intellectual horizons, building networks and a few years of partying before entering the workforce. It is also rational, at an individual level, to go to university, so you too can signal your ability. But these benefits should be balanced against the associated debt and lost earning potential, along with the need to consider alternatives like on-the-job learning,vocational education and apprenticeships.
“In college, philosophy majors study if the glass is half full or if the glass half empty,” comedian Jay Leno says “See, this prepares them for careers later as waiters.”