The following is a guest post by David M.A. Green, professor of economics and vice chancellor at the University of Worcester, in England.
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The briefing to the news media, before the U.K. prime minister’s big speech at last month’s Conservative party conference, was that David Cameron would call on people to pay off their credit card debts. An eleventh hour re-write was ordered, however, when it was realized that the message could prove economically as well as politically disastrous.
Economists rapidly calculated that if everyone did simultaneously clear their credit card bills, the economy would shrink by 15 percent. Clearly, one person’s spending is another person’s income. The prime minister changed his lines.
A similar muddle over investment versus debt is currently afflicting political rhetoric over higher-education reforms in Britain. On the one hand, government ministers say investing in a more skilled, more college-educated is vital for economic recovery, yet on the other we are told that higher education is an expense which must be drastically cut to help reduce the nation’s debt.
With the withdrawal of well over three quarters of all U.K. government money for under-graduate teaching and its replacement by a loan system to students for university fees, higher education is fast becoming seen as a service to be bought and consumed rather than an investment in the country’s future.
As an economist and vice chancellor who sees people grappling with these ideas on a daily basis, I find it completely obvious that any country that wants to do better should invest in higher education.
Yet in the United Kingdom, there seems to be a common view that we have too many students, and too many university graduates. This ignores the fact that graduates are unemployed much less than those without a degree, they are generally significantly more productive, and they go on both to create new businesses and perform professional jobs that create more employment opportunities generating more tax revenue. Society depends on them, and all major knowledge economies you can conceive of in future will need their skills.
The Confederation of British Industry is predicting a big increase in the number of jobs requiring a university education by 2017 and a significant shortage of skilled graduates in some important areas. By 2017, the organization predicts jobs for those with university qualifications will rise by 56 percent while jobs requiring no qualifications will fall by 12 percent. Meanwhile, figures out in September showed that youth unemployment in the country rose by 78,000 to 973,000 young people without jobs. Against this backdrop, it makes no sense at all that U.K. universities are actually “fined” if they overshoot student intake limits set by the government. To make matters worse, this year 2,000 places were cut from English universities. Next year there will be a further cut by 10,000 – despite the fact that more than 200,000 people were unsuccessful in securing a university place last year and this.
For prospective students and their parents, it must be hard to follow the economic logic of these policies when they are being told that higher education is such a good investment that they should be prepared to take on future debt to cover tuition fees that are nearly tripling to up to £9,000 starting in September 2012 for most universities
Parents and prospective students alike are increasingly wondering why higher education is a worthwhile investment for them, yet apparently for the country it is merely a consumer good. In the present economic environment, even more than in easier times, it is a serious mistake to lump all public spending together as simply “consumption.” Spending on education is an investment. To get out of the current stagnation we need investment in productive capacity. This means investing in both physical infrastructure and “human capital.” Britain has no worthwhile economic future without a well-educated, highly productive labor force. No government or society has ever cut its productive investment and then achieved prosperity.
