No-one denies the problems surrounding higher education in the U.K. Rachel Johnson and Toby Young discuss some of these in a recent episode of Spectator TV. Problems are as apparent to students as they are to those of us who observe from a distance. Many students feel that universities are shortchanging them with low teacher contact time in some subjects. They see ‘rip-off’ courses with many of the contact hours being virtual, a never-ending student debt to repay and often come in time to realise the irrelevance of their higher education, having chosen subjects before they know what they want to do with their lives.
Grave though this is from the students’ perspective, there is another aspect of higher education that one never hears spoken – the cost of diverting and frittering away the productive working time of the young, an invisible drain on our society far larger than the apparent costs of higher education.
On the face of it, the costs of higher education seem modest. In round figures, the 2022-23 budget for tertiary education from central Government was £5 billion. On top of that, students paid fees of £9,000 each, a further £20 billion. Two thirds of the students were in accommodation away from homes which, at around £5,000 per student, adds another cost of £7 billion to the bill, making a total of £32 billion. This is comparable with the cost of pre- and primary education and much less than the £54 billion of secondary education. What’s more, most of this expenditure comes from the willing future pockets of the students who happily agree to pay 9% of their future income in excess of the repayment threshold. (I admit some irony here.)
But what this doesn’t take into account is the opportunity cost of years spent at university.
The opportunity cost of any activity is the loss incurred as a result of choosing that activity instead of doing some alternative. Students are becoming increasingly aware of the opportunity costs to them of higher education. With fees and accommodation, they know that, fees and accommodation together, a three-year course will run up a loan of £50,000. On top of that, they look at their contemporaries who choose to work instead of studying for a degree. While they are at uni for three years, their working friends earn around £20,000 a year, a total of £60,000. So the total cost to a student of a degree is the £50,000 of education costs plus the £60,000 of lost income. A degree, therefore, costs well over £100,000 – more than twice the cost of what ends up on their student loan.
In the same way that students are subject to opportunity costs as a result of higher education, society as a whole is also subject to opportunity costs. Let’s see how they arise.
The Gross Domestic Product (GDP) of a country is the total value of all the goods and services produced within a country. For the U.K. in 2022 it was £2,230 billion.
Who produces all this value? Why the workers in the country of course – about 30 million people working in 2022. With simple division we see that the GDP per working person is £74,000. That means that, on average, every working person in 2022 generated goods and value worth £74,000.
Again in 2022, the average wage was about £24,000. I find it helps to think of these two figures, average wage and average value of goods and services produced, in terms of running something like a bus company or a house building company.
In this analogy, the average bus driver paid £24,000 is expected to earn about £74,000 in ticket sales on his bus. In the same way an average bricklayer, paid £24,000, is expected to build walls worth £74,000. The difference between the wage and the value of services or goods produced goes principally to two things: the cost of the things needed to do the job (premises, buses, bricks etc.) and taxation to pay for things like education, health, defence etc.
What happens if, instead of plying the worthwhile trades of bus driving or bricklaying, these two individuals choose to go to university for three years? The answer is simple. The economy contracts by, on average, £74,000 per student, while they sit in a lecture theatre, watch a lecture online or lie in bed. Instead of producing £74,000 worth of goods and services, they do nothing productive. The opportunity cost to society for every student is £74,000. Sure, education is a good thing. We get greater productivity later. But do we? And how much?
The increase in the proportion of the population going into higher education from 5% in 1960 to 37.5% in 2022 corresponds to an extra 1.8 million students in higher education in 2022. What is the total opportunity cost of all these students going to university? Or, let me put it in another way: how much better off would our economy be if all of those students were working instead of studying? The answer is simple: 1.8 million students multiplied by £74,000 per student – a total of £133 billion per year.
The total cost of higher education per year is the sum of the actual costs of £32 billion plus the opportunity costs of £133 billion. That is a total of £165 billion, nearly enough to cover the whole cost of the NHS, or 25% more than the current budget deficit.
In 1972 the school leaving age was raised to 16. In 2013, the Gove-Cameron partnership raised to 18 the age for leaving education. Now we understand the opportunity costs of chaining our young people to education, we can see how frighteningly expensive are the real costs of imposing extra education on large segments of the population.
Each year cohort – 16-year-olds, 17-year-olds etc. – comprises about a million young people. Raising the educational leaving age for half a cohort takes half a million out of the workforce – an opportunity cost of nearly £40 billion.
Imagine if the focus of education were to shift just a little to reduce the numbers under its sway by a million. What benefits would we see?
We’d see an increase of GDP of over 3% caused by a million more people working. The need for immigration would reduce by the same number. Since we would not be taking in a million from overseas, it would reduce housing demand by 250,000. And, if half a million of those moved into work were students currently studying away from home, that would free up 125,000 houses. This provides a total improvement in the housing shortage of 375,000 houses. This is worth comparing with 192,000 houses that were actually built in 2022.
Nellie Foster started school at the age of five. In 1939, at the age of 14, she left her secondary modern school and started working in a cake shop, developing a skill in tying brown paper packages that always amazed. A few years later she recognised her interest in teaching and, after being a childminder, moved to a nursery, which enabled her to take her NNEB (National Nursery Examination Board) diploma. At that time the NNEB was a qualification obtained part-time, alongside working.
In September 1949, at the age of 24, Nellie Foster completed a one-year “course of training for the teaching profession… with special reference to the requirements of children aged five to nine years”. And from then on she was a qualified teacher. I worked with many such emergency-trained teachers at the start of my teaching career. Despite their education having lasted a mere 10 years, compared with the 20 years for most teachers nowadays, they were indistinguishable in their knowledge and teaching ability, if very much less woke.
Without knocking our current education system, it is worth thinking about the fearful costs involved and gently pointing to the potential benefits that would result if we could achieve similar standards in just a little less teaching time.
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It’s a while since I worked with people in that age group, but in 2006 the firm I worked for did recruit apprentices between 16 – 18. I had one guy working in my group who was 17 at the start. We paid for part-time education at a local secondary college, and I got the impression that he could have made it to a uni if he wanted to, but it seemed to me that it was a wise choice to work with us, rather than clocking up a massive debt.
We need to be reminded of how things used to be done more often. Back in the 50s, 60s, 70s, 80s there were very good training schemes or learn on the job paths in many organisations (banks, engineering companies, scientific civil service institutes, large retailers management schemes, British Gas, the water boards, elecrity boards etc etc). You could enter after O levels, A levels or degree. A key point is that 5 O-levels gave you a functional level of education and knowledge…the exams mostly required essays as well as short answers, so students were fully literate, capable of writing a report, and numerate. I recall seeing a comparison made sometime in the 80s of what age you’d reach when you caught up with lost years of earnings from age 16 even if you started later on more pay with higher qualifications .. if you did A levels it was some time in your 20s, a degree was much later, well into your 30s, and a Ph.D in your 40s.
The underlying lesson is of course that someone, somewhere, is making a fortune out of the student debts. The UK copied the US system to generate individual debt, but corporate wealth, off the next generations.
Indeed. The Government sold a tranche of student debt to Income Contingent Student Loans 1 (2002-2006) Plc, a group of silent investors, raising £1.7 billion. Further sales continued.
We do software at our firm
We have a mixture of graduates and non graduates. What sets people apart in my experience is their aptitude, application and passion, not whether they have been to university. This may be different in other lines of work.
JFTR: I’ve been working odd jobs in IT and software development since about 1995 and have been a full-time software developer/ software engineer since 2004. And I’m entirely self-taught despite various abortive attempts at getting a degree. I can program computers. I cannot handle the social chaos at a university. The outcome was invariably that I’d end up sitting at home and writing (toy/ learning) code instead of going there.
After a day of fighting my way through various changes to a somewhat complex codebase (main parts ~7300 LOC), I’ll now leave the most recent weird bug for tomorrow in order to have a pint and read through the next bit of a history book.
I think if someone has aptitude and passion for coding they can teach themselves enough to show a potential employer with imagination and a good recruitment process what their potential is. After that, so much of IT is about learning new stuff that’s relevant to what you or your firm do, so spending years at university isn’t really needed, unless you go there for the social life or you want to go into something very specialised and do research.
I did full time Uni after 13 years in the workplace. My course was well chosen, and relevant to my goals. Because I was used to an ok salary beforehand, I was fully aware how much it was costing me, which in turn meant I buckled down.
I’m so glad I didn’t do my first choice degree at 18, even though I would have qualified for a grant way back then. That degree wouldn’t have made me happy and I applied only because it was expected.
We’d have far fewer ‘educated’ know-it-alls if it wasn’t a default choice to attend at 18. Unless you’re absolutely certain what you want, work in the world, take the knocks, realise what you want to do and then jump into it properly.
I doubt many Humanities courses would be chosen if people started using this approach.
An absolutely first class article. Many thanks.
Thank you.
The opportunity costs extends to the staff at universities. No doubt many of them could become decent tradesmen. And what about the buildings? Surely they would be better used for housing Albanians.
The vast majority of students, especially in the arts or theoretical disciplines, could work part time whilst completing a degree remotely. That may of course not give them the ‘university experience’ they are looking for.
It boggles the mind that some (most) parents are ok with sending their kids far away where they will be exposed to not only the usual depravity (or maybe that’s old school now), but also left wing thinking, not to mention the woke insanity.
I’m not looking forward to having this debate with my wife in 8 years time when my eldest would go to university (she’s very bright so no doubt she will want to and be able to). Whilst my wife is on the same page as me (largely) regarding politics, but she’s socially aspirational and status aware in a way that I’m not, and unfortunately that extends to my daughters’ educations. Living in London they could feasibly study here, and stay at home for free food and laundry; at least they would remain our orbit of influence.
I told my daughter when she was in 6th Form that just because the expectation was that she would go to Uni, it was her life, her choice & she didn’t have to do what was expected of her. She should do what she wanted to do. She was shocked as she thought that I wanted her to go to Uni. I told her that all I wanted was for her to make the decision about Uni for herself.
She chose to go to Uni & thoroughly enjoyed her degree. She’s now using lab skills developed within her degree in a histopathology lab in a cancer specialist hospital. She’s content. What more can one wish for one’s child?
You do not say when she went to university, and that clearly matters.
It’s a stereotype, but I wouldn’t want my daughters to come back for Christmas after their first term at university with a bunch of tattoos, shaved head, an Owen Jones biography under their arm, removed breasts, “vaccinated”, and a 200 pound girlfriend in tow.
Children remain impressionable and vulnerable well into their twenties and it’s madness to send them off to fend for themselves at the age of 18.
Yes, we are all inclined to do the same as others and gain the protection of ‘herd immunity.’
I went to art college for an HND in the 1990s and went back for a year to top it up to a degree in the 2000s, because I was sick of being turned away due to my industry-based HND being treated as ‘Has No Degree’ by HR departments. I got in there the second time in the last year before fees started. I can say without shadow of a doubt that I didn’t learn a single thing the whole three years. There were no exams, I submitted my work on time, got what I needed, but there were almost no lectures after the first year. When I did need help, I felt unsupported. I made it clear I was stuck on something and the lecturer ultimately told me I was an ‘idle bastard.’ One of my friends had figured out what to do – you know how sometimes something doesn’t click and you literally need someone to show you and it all falls into place? – showed me and I got on with it. But that lecturer treated me like crap afterwards – once you upset him, which asking him for help did apparently – you never got back in his good books.
I felt at the end of that first year that there were relationships building among a lot of us students that could work out well in the second year, but I never saw most of these people again, due to the lack of lectures and the head of course being made redundant with no replacement that directly interacted with the students. Effectively, there was no head of department. I was fortunate to get a weekend and night job in the industry I went to the college to learn to work in, so spent most of my time doing that.
When I went for the top up year a decade later, the new head of course took against me immediately because I’d already worked in the business. All could think was ‘What have I done to deserve this? It’s the first day!’ When he asked my background and I said I’d worked the previous three years in London, his face was a picture. I could hear the shutters falling and the guns being loaded. I was treated as a threat, basically. And without blowing my top, I did know more than this guy when it came to the everyday business. His knowledge was out of date. I mentioned a job I was doing and he denied I could do that job on the equipment I was using. Almost everyone was using that kit for that job by then. His lecture on ‘How to burn a DVD’ ended up with him – after 20 minutes of failing to get the computer and projector to work, face looking like he was eating stale pilchards – asking me to demonstrate it. I ended up with a 2:2 because he gave my end-of-year project a crap mark, which astonished my friends on the course, who were convinced my collaborator and I would get a first for it. To be blunt about it, you should have seen most of the other projects!! It was unquestionably personal and I felt worst for my collaborator, because he deserved better.
The fact is, the state paid for the course, though, so I didn’t worry as much. The Monday before the results came through, I had started a full time job doing what I wanted to do, so I moved on quickly. I had taken out a basic £3,000 student loan for living expenses and moved back in with my folks for that year, so I got by and paid off the loan hen I started working. If I had been paying £9,000 a year or some such, I’d want to sue. The course had completely failed to take into account the digital revolution and had us using out-of-date kit, with lecturers years outside of the business, that taught us nothing of use.
In London, I was working in a facility where an 18-year-old chap had gone straight in from school on the lowest rung. He was used and abused and worked his arse off. Nine years later, I see he’s a head of department there. Too many of us waste our time on unnecessary courses, often because HR departments insist on degrees that are utterly unnecessary. As a chap working at Tesco at the Click-and-Collect point said to me a while back: ‘You’d be amazed how many people working on the shop floor have degrees and Master’s.’
“What’s more, most of this expenditure comes from the willing future pockets of the students who happily agree to pay 9% of their future income in excess of the repayment threshold. (I admit some irony here.)”
Huh? I’d be very surprised if we get HALF of the loans back. Ever.
“Without knocking our current education system”
Why not? I was lucky – privately educated in the 50s and 60s, I was taught properly and taught to question everything, and to find out for myself about whatever. Now it would seem pupils and students are taught to question nothing, and the increasing presence of the Left in teaching and academia – c80% – means most kids only ever hear one side of the story.
Were I a parent of school age kids now, I’d home school them.
Costs should include the blob’s salaries.
much of the student loan cost is never repaid. That does not much affect the total but it does make the impact on tax payers generally more significant.
Education is expensive, but the price of ignorance is much, much higher. Just saying.
So not going to university is a win win then?
I understand from a recent show on the New Culture Forum that the majority of graduates go into the public sector. In other words they don’t create any wealth through their entire lives.
And don’t forget that many of the 3-yr degree courses don’t result in a degree which will be a passport to a highly-paid career. They are an indulgence neither we, nor the student can really afford …… but the University Chancellors love them ….. keeps the taxpayer-funded money rolling in and their remuneration sky-rocketing.
In around 2009 my eldest son decided against university and at age 18 took a job with the local golf club where he had worked casually for 2 years. He lived at home and they sponsored him through a part-time Business degree at Surrey University, getting a First.
After a compulsory additional year at the Golf Club post degree, he moved to a major international company and has steadily worked his way up their career ladder and is earning well over double the national average salary + perks. He bought a flat in leafy Surrey, a very expensive area, when he was 25.
Most of his friends went to Uni. And he’s done better than all of them.
Higher education is an obvious racket now, but it’s a little foolish to argue that an 18-year-old who defers his entry into the job market for a few years reduces GDP by the full value of an average contribution. I recall joining the GEC in 1975 and Mr Les Preston, a veteran production engineer, regarding me ruefully and pronouncing that it would be 2 years before I would be any use.
Agree with most of this article, but there is a flaw in the “opportunity cost” calculation. The article assumes that anyone not going to university would otherwise be usefully employed.
Of course in reality they might be working in a very low value job, or even unemployed.