The fear that we are over-educating our population is not a new concept.
Back in 1963, when only 1 in every 100 people went to university full-time, policymakers were already convinced that any expansion of the sector would result in an over-supply of graduates – many of whom were incapable of benefiting from higher education – and the inevitable falling wage premium (Barr, 2014).
Fast forward 50 years, with nearly 40% of young people enrolling in university (BIS, 2014), and here we are, still having the same argument. A report issued today by the CIPD argues that the number of graduates has now “significantly outstripped” the creation of high-skilled jobs, and that over-qualification at “saturation point”. This has led to calls for the government to encourage alternatives to university, and for our young people to think twice about going to university.
But do we really have too many graduates?
Whilst there are many ways to answer this question, simple economics can help us here.
Figure 1 illustrates the massive increase in the supply of graduates since the expansion in the HE sector arising from the influential Robbins report back in 1963. Back then, participation among young people was only around 10%. Now it has reached almost 40% (of those aged 20 or below).
Figure 1: HE participation over time
Notes: The Age Participation Index (API) is the number of domiciled young people (aged less than 21) who are initial entrants to full time and sandwich undergraduate courses as a percentage of the 18 to 19 year old GB population. The API was discontinued in 2001 and replaced by the Higher Education Initial Participation Rate (HEIPR), which has a different definition as it covers entrants to HE from different age groups (for the one reported here covering ages 17 to 20).
But we also know that the wage premium for graduates still holds strong. The latest economic research on the financial returns from university education show that earnings for degree holders compared to those with A-levels are between £105,000 and £250,000 over a lifetime (BIS, 2013).
If supply has gone up, and yet the wage premium is still positive, basic economics tells us that there must be a strong and continuing increased employer demand for graduates. So by this definition at least, we certainly do not have too many graduates.
Of course there will always be examples of graduates ending up in low paid jobs. Just as there will always be examples of non-graduates going on to earn millions without a degree.
But the basic economic facts tell us that it is still very much worthwhile, at least financially speaking to attend university, meaning that there is not an oversupply of graduates.
Like in 1963, let’s hope that sensible minds prevail and we continue to strive for a sector where all those who are qualified and wish to enter HE are able to do so.