Degree Inflation: Undermining the Value of Higher Education
Instead of increasing social mobility, the vast growth in degrees has had the opposite effect.
For the past few months, I have been thinking about the future of higher education. The result is a paper published online by the Centre for Independent Studies: Degree Inflation: Undermining the Value of Higher Education.
Summary
The last 20 years have seen explosive growth in universities. At the same time, vocational education and training (VET) faced a tsunami of financial challenges. As a result, VET is now stigmatised as a second-class education option, and employers demand university credentials for jobs that formerly did not require them. This credential inflation severely disadvantages those with the ability and experience to perform a job but, for one reason or another, are unable to study at a university. Instead of increasing social mobility, the vast growth in degrees has had precisely the opposite effect.
As the number of graduates increased, the economic value of their degrees withered. Twenty per cent, or more, of today’s university students would have been better off financially by skipping university and going straight from school to work. The same is true for the thousands of students that drop out of university each year.
Yet, universities continue to churn out more degrees, each worth less than the previous one. They justify their behaviour with fatuous “economic impact” studies designed to prove that universities are engines of economic growth. Even a cursory look at these studies reveals a shaky foundation of assumptions, assertions, and guesses. Because they ignore opportunity costs, economic impact studies are of no value in helping politicians decide where to focus government spending.
As degrees proliferate, many graduates find themselves working in fields other than the ones they studied at university. Universities claim their degrees remain relevant because they endow graduates with higher-order cognitive skills applicable to any job. They offer no objective evidence for this claim.
An end to degree inflation would bring many social and economic benefits. Employers would have access to a larger and more diverse pool of potential employees whose experience and skills render them equally, or even better, qualified than applicants with degrees. The value of further education, trade schools, military training, and on-the-job apprenticeships would be enhanced, as would life-long learning. Young people who aspire to climb the career ladder but whose circumstances preclude higher education would be spared spending fruitless years in university running up debt.
Universities are expensive to run because they are pre-industrial craft industries in which productivity gains are rare. They find it difficult to control their costs and rely instead on increasing their income by enrolling more students. This business model has made Australian universities among the largest universities in the world, but the quality of the education they provide has suffered. The ratio of staff to students has deteriorated, and tutorials barely exist.
Because good students already attend university, expanding enrolments requires lowering admission standards. Universities have nothing to lose by admitting poorly prepared students (and failing to provide them with remedial support) because they keep the fees even when dropouts and graduates fail to repay their loans. Although the graduate premium is shrinking, marginal students continue to enrol in universities because they also have little financial risk; taxpayers pick up the cost of their unpaid loans.
Degree inflation and the perverse incentives of the funding system have combined to blight the life chances of many members of the young generation. Without any change, student debt will continue to mount, large amounts of capital will be misallocated, and social mobility will remain stalled. It is time for a policy reset.
A just distribution of risk, subsidies and resources would benefit students from disadvantaged backgrounds as well as the wider society. Fair equality of opportunity would be enhanced by adopting five policy proposals.
1. Where feasible, drop degree requirements for jobs. Overnight, the value of professional societies, vocational schools, online educators, specialised training, and the military would be enhanced.
2. The esteem of VET would also be improved by combining it with higher education and allowing students to include VET subjects in their degrees.
3. Reduce regressive subsidies and ensure that universities and graduates carry more of the risk of non-repayment.
4. Reform regulation and accreditation to encourage innovation and experimentation rather than conformity.
5. Brilliant academics represent Australia’s finest intellects, but we cannot expect to find a world-beating genius standing in front of every lecture theatre. For most academic staff, teaching should be their job and doing it well should be the basis of their career progression.
Perhaps the biggest challenge of all is the reinvigoration of the cultural, moral, and character-building functions of higher education. It is not easy to challenge the myth that universities exist solely for economic advancement, but it is worth trying.
Media
The Australian: Too many Aussies going to university: Steven Schwartz
Far too many Australians go to university and more than 20 per cent of graduates would be better off if they had skipped their degree and joined the workforce after school, says former vice-chancellor Steven Schwartz in a new report for the Centre for Independent Studies.
The Financial Review: ‘Greedy’ unis leave grads with debt, low-value degrees: former VC
Instead of increasing social mobility, the vast growth in degrees has had precisely the opposite effect, a new paper by Professor Steven Schwartz argues.
This seemed obvious to me when the push for greater uni education began. For many people, it was a waste of time relative to alternatives better suited to their capacity, aptitude and interests; supported by excessive public expenditure, which perhaps pushed unis to focus more on numbers and income rather than providing a quality education to those who could benefit from it. And hence a shift to revenue-raising rather than best-practice education. [I grew up in a poor fatherless family and got a scholarship on merit to LSE in 1961, at which time about six per cent of students went to uni.]