In all OECD countries, higher education is financed by a mix of public contributions (e.g. income taxes levied on labour income) and private contributions (e.g. tuition fees paid by students). Often, the public share clearly dominates. However, within the last two decades almost half of the OECD countries have introduced or increased tuition fees. During the same period, the number of international students has risen rapidly.
In tertiary education systems that are partly publicly funded, there are two possible causal relationships between student migration and the financing of higher education. First, it may be that the migration decisions of students are affected by the extent of private contributions, e.g. tuition fees. While comparably high public contributions may attract students from abroad, high tuition fees can prevent young people from studying in a foreign country. The empirical evidence is however not fully clear. The contradictory state of research in this area motivated us to analyse whether the second causal link – namely, that student migration induces changes in governmental policies – may also be possible. Continue reading →
Does an individual’s educational achievement at university affect their pay later in life? Looking at evidence on degree classes and UK graduate earnings during the expansion of higher education, we find that it pays to study hard: there is a significant hourly wage premium for a getting a first or upper second class degree.
Since the early 1960s, with developments in the field of human capital research, analysis of the returns to education has established robust evidence of a strong positive association between earnings and years of schooling or level of qualification attained. But there has been little analysis of how returns vary according to the level of academic performance – for example, what US universities measure as students’ ‘grade point average’ – conditional on the level of qualification. Continue reading →
In the UK, as in most other developed countries, the substantial increase in participation in higher education observed during the past three decades, has been accompanied by an increase in inequality in access. Indeed, the rate of participation of those coming from more affluent families grew much more than that of those coming from poorer backgrounds. Coupled with the substantial raise in the returns to higher education, this generated a significant exacerbation of within generation inequality.
Since the late 90s’ the UK has been trying to reverse this trend not just through the institution of loans and grants for students from low income families, but also through action aimed at removing some relevant non-financial barriers, namely aspirational ones. The Widening Participation (WP) policy, started in 1998, today receives over 350 million pounds per year of public funds to inspire youths from low socio economic background to go to university. My recent study evaluates the effectiveness of this policy among students who were in high school between 2004 and 2008.
My findings show that the WP policy succeeded in raising the aspirations of students eligible for the programme, and also positively impacted their likeliness to stay on at school. But this did not translate into an increase in college enrollment, except for those from the most affluent families.
One of the main aims of the government’s 2012 reforms to higher education was to create a more marketised system. By increasing the tuition fee cap in England to £9,000 per year, the hope was that universities would compete on cost. The attempt was fruitless; little variation in fees emerged and the average cost of university remains stubbornly close to £9,000. However student financial aid has become marketised over the past decade. This has resulted in huge variation and vast inequalities in the amount of financial support received by students. And with the recent abolition of maintenance grants, these inequalities are set to deepen.
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.