Degrees no longer a 'golden ticket'
3 March, 2014

Last week the QS World University Rankings by Subject were released, highlighting the top 200 universities in the world for individual academic subjects. With as much grandeur and status as the Oscars (or the Rugby World Cup), these rankings are considered to be highly influential worldwide in signalling the quality and reputation of universities. 

Those that consistently feature near the top of the list: Harvard, Cambridge, Oxford, and Yale, have reputations that precede them. 

In the past, a degree from such institutions promised a "golden ticket" to employment virtually anywhere the graduate desired. 

On a lesser scale, there has been a persistent mentality in New Zealand that a degree-holder will be rewarded with meaningful, well-paid work, albeit not necessarily with their "dream employer". 

But considering how many now university graduates - even from reputable institutions - struggle in today's labour market, is the sense of prestige attached to university institutions justified? 

It seems that the allure of university study trumps a more rational choice for many; to undertake vocational training. 

University degree-holders lack the competitive advantage they once had in the workforce. At best, degrees are considered the bare minimum to enter many careers. At worst, a university degree is not enough. 

There is a serious mismatch between the supply of graduates and the demand of employers, often blamed on "degree inflation". 

Furthermore, there are many undertaking study whose competency or career aspirations are not necessarily suited to an academically rigorous university qualification. 

Given that tertiary education is currently subsidised by the government, degree inflation is not simply a cost to the individual. It is a cost to the taxpayer as well. In fact, the forecasted government expenditure on tertiary education in 2014, with the inclusion of student support, is $4.15 billion. 

To put this into perspective, core government services (such as the cost of running government departments and official development assistance) are only allocated to receive $4.6 billion, and law and order, $3.6 billion. 

Even more worryingly, the expected cost to the government in 2014 for every dollar lent for student loans is 39.53 cents. In other words, even upon repayment of the student loan, the government does not break even. 
Apart from the financial costs, there is a social cost too. Higher education has long been considered a means of increasing social mobility and reducing income inequality. 

It is no wonder that degrees are so desirable. In a 2009 Statistics New Zealand study, the median earnings of bachelor's degree graduates were about 40 per cent higher than non-degree holders, three years after graduating. 

The New Zealand Initiative has previously written on the impending extinction of low-paid jobs in developed economies. 

In the future, it is likely that the distinction between skilled and unskilled workers will become even more pronounced. 

As technology improves, many of the unskilled jobs in advanced economies such as New Zealand will simply be replaced. 

Even more pertinent, those unskilled jobs that can't be replaced by technology are likely to be outsourced to those who can provide the cheapest labour, namely, developing countries. 

Globalisation has already seen this effect occurring to a large extent. It is for this reason that education will be even more integral in ensuring that everyone has the skills and capabilities to participate in the future economy. 

But why must universities be the only trainers of a skilled workforce? 

While education is indeed important in today's economy, and will be even more important in the future, it does not necessarily mean that every person who wishes to earn a competitive wage in the labour force must be a degree-holder. 

Instead, there is a lot more scope for investment and emphasis on vocational training. Currently, there is an undersupply of skilled workers in the professional trades. 

Rather than consistently encouraging all high school leavers to enter university, regardless of their interests and competence, there ought to be much more encouragement towards industry-based training. 

Human capital manifests itself in many forms, and university degrees are only one signal of this. While the current state of "degree inflation" may be a costly and frustrating phenomenon for university graduates and taxpayers who fund them alike, the answer is not to pump even more new students into an over-supplied system. 

For too long universities have held a premium on offering the opportunity to develop one's work-related skills and be rewarded in the workplace. 

It is not just the significant amount of taxpayers' money at stake. The employment and social mobility of the future labour force also relies on a viable alternative to university degrees. 

Source: Degrees no longer a 'golden ticket'

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