If you are like most parents, you have aspirations of sending your kids to college. A college degree is seen by many as the best path to personal prosperity. A lot of families borrow heavily to put their kids through college. Outstanding student loan debt is now well over $1 trillion–double the amount outstanding eight years ago. The politicians want to make college more affordable for families. Some even want to make it free.
That sounds generous, but as an astute observer of markets might ask, if you make college free, don’t you increase the supply of graduates and thereby drive down their wages?
As Quartz reports, that would indeed seem to be the case in the United Kingdom. In the U.K. where almost half of young people (up from 11% in 1979) go to higher education, graduates are taking a greater share of jobs traditionally occupied by non-graduates. Before you go deep into debt to send your kids to college, make sure you are confident the payoff will be worth the investment.
A growing number of these graduates went on to take jobs that were traditionally occupied by non-graduates. With little evidence to suggest that these jobs required the skills new graduates bring, the report “raises the question as to what the graduates themselves, and what society at large, gains from their university attendance.”
In 1979, only 1.6% of police officers had a university qualification, by 2014 that number jumped to 34.1%. While 22% of teaching assistants entered their jobs with a degree in 2014, only 4.2% did so in 1994.
With average graduate debt now totaling £44,000 ($54,077), and 45% of graduates not earning enough to repay their student loans, the report questions the logic of getting more young people into university. Even in jobs that now require more skills, the report suggests that lower-cost alternative routes could, or in many cases, do, exist.
The report calls on the government to promote alternative, vocational pathways into work, such as high quality apprenticeships. A 2016 survey of 1,000 16-to-18-year-olds by the Association of Chartered Certified Accountants found that one-third (pdf) of respondents had never received advice on apprenticeships, with 61% believing employers prefer graduates and 65% saying their parents wanted them to go to university.
The report also suggests that the existing quality of vocational education and training could be improved. Currently, nearly two-thirds of all apprenticeships are created at Level 2, roughly equivalent to a US high school diploma, with just 36% at Level 3, which is roughly equivalent to requiring some college level coursework at the US high school level. The report argues that unless the number of high-quality vocation is increased, the government will fail to address the bias towards university education.
Jeremy Jones, CFA
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