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.