Universities should not shy away from their economic purpose

Higher education is about more than giving graduates an earnings boost, but institutions should be able to detail such returns among evidence of their many contributions to society, argues Anna Vignoles

September 21, 2019
Hand holding growing pile of money (economic growth)
Source: iStock

In recent years, there has been much criticism of universities. Students, partly in response to higher tuition fees, are demanding more from universities. Policymakers have questioned whether a degree still represents good value for money and suggested that the UK already has too many graduates. Critics also point to the significant minority of graduates who do jobs that historically have been done by non-graduates.

Universities, naturally, have pushed back on this criticism, arguing that they don’t exist just to train people for work: they have a higher purpose.

It’s true that higher education’s role in society certainly goes far beyond the economic. Universities seek to develop students’ critical thinking, provide an enriching and enjoyable learning experience, impart and create new knowledge, offer a pathway to independence and the opportunity to meet a diverse range of people. And they contribute more broadly to society culturally and intellectually.

They have also historically provided a route to upward social and economic mobility for some. And increasingly, many UK universities are global, with alumni who go on to share their experiences, ideas and values around the world – an “export” that we should value more highly.

That said, we cannot disregard the economic purpose of higher education. Universities do have an important role in preparing students for the world of work, and they receive state funding partly on the basis of what they do for the economy. Even more crucially, students, and particularly those who are the first in their family to go to university, are very focused on their degree as a route to a better job: employability and career prospects are undoubtedly key issues for them.

But hard evidence on whether universities really do provide good economic value for students is crucial, particularly for those whose families have little experience of higher education and who cannot provide the tacit knowledge that more privileged families can.

I collaborated with the Institute for Fiscal Studies to study the value of different degrees in the labour market. We show that even in the early years of their career, female graduates benefit from their degrees (earning 28 per cent more than similar non-graduates) and male graduates continue to have significantly higher earnings (8 per cent higher than non-graduates).

While some courses, economics, for example, offer very large economic “returns” in the form of higher wages, others do not. Even when we compare students with similar backgrounds and A-level grades, what subject you study and where you study it makes a great deal of difference to your earnings. Surprisingly, graduates from some degree courses earn less than the national average for non-graduates.

A key question for students, then, and indeed for the state, is whether the low graduate wage premiums from some degrees suggest that they do not offer value for money. In a competitive labour market, an individual’s wage reflects the supply of and demand for their particular skills.

Knowing that economics graduates’ skills, for example, are valued more highly than those who studied creative arts does not inform us about the quality of the university provision in creative arts, nor about the social value of the degree, nor about the intrinsic value of the learning. It is simply a reflection of the labour market demand for those particular skills.

Similarly, a nursing degree might have a smaller impact on a student’s earnings than an economics degree, but it does not mean that the former is not valuable. Indeed, one can argue that we should focus state subsidies on degrees that offer relatively low wage premiums for students (and hence might not be attractive to them economically) but offer very high social value. Nursing might well be a prime candidate.

However, I do not think we can be silent on the diversity of labour market outcomes from higher education. Students do need information on what different types of graduates are earning and which skills are in particular demand in the labour market.

Such data might also encourage universities to consider how these valuable skills might be embedded into courses irrespective of degree subject. For example, might we need our students to study a broader range of subjects before specialising to better embed such skills in our degree programmes, perhaps in a similar manner to many US and other European degrees?

Universities need to acknowledge that for many students (and many politicians) the economic value of a degree is an important factor in students’ choices. But equally, it is imperative that institutions convince the public and the government that the wider purpose of higher education is also crucial and justifies strong state financial commitment. The two are not mutually exclusive.

We can have a truly informed public debate about the purpose and value of higher education only if we have good empirical evidence on its intrinsic and extrinsic intellectual and social value, as well as robust data on the economic benefits of a degree to students’ futures.

Anna Vignoles is professor of education in the Faculty of Education at the University of Cambridge.

Anna will be discussing the value of higher education and whether or not university is a good investment at THE Live, 27-28 November 2019.

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Reader's comments (1)

Why the large discrepancy between the impacts on male and female earnings? Does it factor in the effect on fertility between graduate and non-graduate women, as the graduates focus more on careers/jobs?

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