Wednesday, December 09, 2009

Degrees: Supply and Demand

Monday night's Standard/Yesterday's Metro story that the value of degrees has been slashed "by 75%" is hardly surprising, though the Department for Business, Innovation and Skills flat-out denial of it is. Interestingly, the story isn't online for Metro, and the BBC hasn't covered Lord Brown's comments - their last mention of him was a month ago when his review was announced.

The claim is that degrees add some X thousands of pounds of salary per year, and therefore graduates can afford to pay lots for their education. This was clearly true and X fairly large when 5% of the population went to university and graduates went into The Professions. Now the figure is more like 50%, and sending half of the population to university is a stated goal of the government.

As should be fairly obvious to anyone with a grasp of even the most basic economics or intuition about business, hugely increasing the number of graduates in the job market reduces the value of a degree - in fact, anecdotal evidence is that jobs now demand degrees where previously they were happy with A-levels. The simple fact is that the distribution of jobs available is broadly similar to what it's been in the past: a few % of high-paying professional jobs, a large block of office work, another block of services, and then unskilled/semi-skilled manual labour. The salaries are commensurate with the work involved and are unlikely to have changed much in real terms - after all, inflation tracks GDP reasonably closely so any increase in earning power is cancelled out by an increase in costs of living.

The inescapable conclusion is that a degree in 2009 is worth less in real terms than a degree in 1999 or 1989 or 1979. Why is DBIS denying something so obviously true?

- KoW

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