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Is University Overrated?

Phil Rennie



It’s now accepted wisdom that you need a degree to have a successful and rewarding career. The last 15 years have seen a doubling in the number of students at tertiary level, mostly at university, and since the 1960s the increase is ten-fold.

But is university suited to everyone? Do we really need so many students, especially when it’s so expensive for both the taxpayer and the individual? Should we aim to have every single young person in university, and if not, when do we say enough is enough?
A number of prominent commentators believe we are well past that point. They argue that university has become the world’s most expensive form of childcare, a sanctuary to avoid the responsibilities of adulthood for a few years.
Three years ago a press release by Dr Andrew West, Chairman of the Tertiary Education Commission (TEC) caused enormous controversy among universities. His crime was to urge high school students to think carefully about their study options, and consider the trades rather than blindly jumping into a degree. He dared to question whether New Zealand really needed so many university graduates.
Columnist Colin James agreed, writing that “Tertiary institutions are stuffed with teenagers who don’t really want to be there… The time has come for some rationing.”
I think they’re both right. Thousands of young people with good practical skills and smarts could be making a great career in the trades, where New Zealand has serious shortages. Instead it’s pressure from parents and their peers who force these round pegs into a square academic lifestyle. As a result, universities are bloated with tens of thousands of students who really don’t need to be there.
Let’s look at some of the arguments for and against this proposition.
The end of elitism
Traditionally, universities have been elitist institutes for only the brightest of students. Up until the 1960s few secondary students stayed on past the age of 16, with even fewer carrying on to university.
From the 1990s onwards the number began to skyrocket, despite the introduction of student fees and loans. New Zealand now has 448,000 tertiary students enrolled in 900 different institutes, all in a country the size of Sydney. 140,000 of these students are at university.
Why such a big jump? The wonders of modern technology play a big part. The demand for unskilled labour has dried up, thanks to computers and new machinery. It’s no longer possible to leave school at age 15 and walk into a job, and even technical and trade professions now require a lot more specialised knowledge these days.
This became especially apparent in the 1980s when New Zealand’s economy was deregulated. Up until then almost anyone could get a job in the public service, shuffling paper in a bureaucracy or digging holes for the forestry department.
But the idea of a job for life is archaic in the modern free-market, with most people now expected to make several major career shifts in their lifetime. For most people university is now like a job factory, where you invest a few years of time and money to set yourself up for a decent career and income. Realistically, that’s why most students are here.
Peter Saunders is a Professor of Sociology who spent 25 years teaching in universities around the world, and witnessed this change first-hand.
“There’s now a fear amongst young people that if you don’t go to university, you won’t be able to get a good job,” he says. “It used to be seen as an advantage, but now people are afraid if they don’t go they’ll be disadvantaged.”
This explosion in numbers has seen an inevitable decline in the quality of education, according to the Professor.
“You still get the bright students coming through, but there is a long tail of more average students which affects the size of classes and the intensity of the lessons. We ended up with a majority of students who were not really interested or engaged, or had even done the readings.”
While the academic requirements for entry to university are largely unchanged, there are far more students staying on longer at school to reach these benchmarks. And alternative pathways to university are now open, such as for ‘mature’ students aged 20 and over who have guaranteed entry.
Professor Saunders remembers one student he taught who struggled so much she was given counselling and special testing. “They found she was educationally sub-normal, yet somehow she ended up in first year sociology at university.”
“I’m just not convinced we really need this number of kids going into higher education.”

Is it really worth it?
At first glance, it seems that getting a tertiary degree is a pretty good investment. Ministry of Education figures show that adults with a tertiary degree earn 29 percent more on average than those with only an ‘upper high school’ education.
It also helps your chance of getting a job in the first place. University graduates have an unemployment rate of 2.1 percent, around half the rate for those with no qualifications beyond high school.
The problem with these figures though is that they are the average outcome for everyone aged up to 64 years old. What we need to know is the marginal benefit, i.e. how much benefit is each new student gaining, in particular those with only average academic ability.
These questions are difficult to answer, but they’re worth thinking about given the high opportunity cost of university.
Let’s take the hypothetical example of Joe Kiwi, an average student who doesn’t particularly enjoy the academic side of school but pulls through with good enough grades for university.
Joe will pay around $12,000 in fees for a three-year BA in Media Studies. If he lives away from home and doesn’t get an allowance (like most students) then he’s facing another $24,000 in debt from living costs. So that’s a student debt of $36,000 to start with.
Will this degree make him a job magnet? Not to start with. Once he graduates, there is only a 50 percent chance he’ll be working full-time within the year. He is just as likely to be working part-time or doing a bit of further study.
But the biggest cost is what he’s missed out from working. If he had taken a basic job in a bar, earning say $25,000 he would have made $75,000 over the three years. So the difference between going to university and working was actually $111,000, enough to buy half a house or spend many years travelling overseas.
Of course Joe might not want to work in a bar all his life, but even a job on the minimum wage opens a lot of doors and gives you the opportunity to work your way up. Some of New Zealand’s wealthiest people started out in pretty modest professions, learning as they went before going into business for themselves. Bill Gates and Sam Morgan are both university drop-outs.
There are plenty of alternatives that could offer Joe a better equation, like a diploma or certificate, or a trade apprenticeship which allows you to earn while you learn.
The big mismatch
For many jobs a university degree is required to even get an interview, so it’s a necessary investment. But employers are increasingly frustrated at the mismatch between tertiary and trade-based education.
Phil O’Reilly is the head of Business NZ and represents employers around the country. He regularly complains that many students are attending university who really don’t need to be there.
“A problem I see is that students with skills more suited to trade-based careers are often inappropriately encouraged to go to university.
“At the same time, many young people are coming out of the university system with either no qualification or one of limited value – and a student loan. There is strong evidence of wasted time and unnecessary debt resulting from a misplaced emphasis on university training.”
New Zealand’s shortage of tradespeople is well documented. Builders, carpenters, mechanics, electricians and plumbers are in huge demand and earning big money, especially if they go into business for themselves. But serious skill shortages also exist for certain university courses – especially engineering.
Demand for engineers is now so high that students are offered jobs long before they graduate, and government programmes spend millions of dollars of taxpayer money promoting this subject.
Meanwhile there is no shortage of lawyers or arts graduates. In fact, only about half of all law students actually become lawyers.
West noted this mismatch back in 2004. “New Zealand is dependent on having sufficient people with the right skill mix to power our businesses and industries,” he warned. “It would appear we don’t have the best mix at the moment.”
It is no wonder then that a survey of employers in 2005 found that skills shortages were their number one problem. This mismatch has become worse in recent years, despite billions of dollars in extra funding for tertiary education. Clearly, something is going wrong. In defence of a university education
Of course, this is not to say an arts or law degree is useless. Far from it. University helps you to think for yourself, to analyse, critique and understand all kinds of complicated information.
University also helps you to ‘find’ yourself by exploring ideas and literature, and figuring out what you like, believe in and are passionate about. Often this comes about not so much from the actual courses, but the people you meet, the experiences you have and the general environment.
These are all worthy goals, and for those with an academic bent it would be a waste of potential not to further yourself at university. But for those with more average grades and interests in other areas, are these benefits really worth the opportunity cost of $111,000? Why is there such a mismatch?
Surely people aren’t dumb. So why is there such an obvious oversupply of university students?
Phil O’Reilly from Business NZ says outdated attitudes from parents are a big part of the problem. “Plenty of baby boomers still seek something better for their children than ‘working with their hands’,” he says.
“There is a widespread attitude – among parents, teachers, students, peers, careers advisors, neighbours, family and friends – that the only path to success is through university. That is simply not true.”
“We need to confront cultural biases and common views of trades as dirty and unimaginative.”
This view is backed by careers research, which suggests parents are still the biggest influence on a student’s choice of what to do after high school. In support of this it’s worth noting that many of the baby boomer, middle class parents never actually went to university themselves. To them, they still think having a child at university is a proud achievement, no matter what outcome it produces.
A true free-marketer might be horrified at some of these conclusions. How dare we criticise the choices that rational adults choose to make?
In reality, a market can’t function to its full potential unless consumers have ‘perfect knowledge’ about their choices. And clearly, many 17 and 18 year olds (and their parents) will struggle to predict exactly which course of action will give them the best outcome over the following 50-odd years.
It might be too cynical to call university ‘expensive babysitting’, but there is no doubt that generations X and Y are taking longer to reach adulthood than our parents. In 1970, for example, large numbers of people left school to start work at age 15 and the average age of marriage was 20.
These days we don’t really ‘mature’ until much later. Young people are staying at home for much longer, and wanting to travel, study and build a career before having a family. University is more like a rite of passage for many middle class kids, just like an OE or getting a tattoo.
This is reflected in the popularity of general courses, like arts (and even law) where career options are kept deliberately open. There is no need to make a scary vocational commitment as with engineering or medicine.
But perhaps the biggest problem is the government, because the education market is hardly going to work properly if the price signals are distorted. By subsidising 75 percent of course fees (around $12,000 a year) politicians are making university appear artificially attractive. Interest free loans only increase this problem.
By contrast, if you want to be a builder or a plumber there are only a limited number of apprenticeships and capped funding. It’s little wonder then that so many young people choose university when the government is effectively paying them to do so.
What to do about it?
The government is well aware of this problem, and is bringing in major reforms to the tertiary system. It wants to ensure greater quality and relevance of courses, and to move away from student choice. Previously, students were the driver – the EFTS (equivalent full-time student) funding system meant that government funding would follow the student wherever they chose to enrol. Now, the government will take a more hands-on role and decide which courses and institutions are in the public interest and deserve funding.
Unfortunately, state planning doesn’t necessarily have a great track record either. Across the Tasman the Australian government funds a limited number of places available in different courses, based on what they think is the appropriate level. But they still have exactly the same problems with skill shortages and an over-supply of university graduates.
Perhaps the answer is not to give up on student choice, but to make that choice a little more realistic.
The first part of this would be through treating trade education on an equitable basis. It isn’t fair that there are caps on the number of number of plumbing and building apprenticeships, yet unlimited places for arts graduates.
The second (and less palatable) part of this would be higher fees for students. Historically, governments subsidise university education because it is assumed to have some spill-over public benefit to society, by making us more civilised and productive and therefore richer as a nation.
It’s impossible to get the figure exactly right, but surely its time to re-evaluate whether the benefit to society really is 75 percent. Given the massive skill shortages, the billions extra poured into tertiary education and the questionable outcomes produced, this handout from the taxpayer needs a lot more scrutiny. Is it really fair that working class families are taxed so that middle class families can ensure their children remain in the middle class?
Of course no politician will have the guts to do this, because students and their parents are such a powerful voting lobby. But the longer this distortion carries on, the worse these problems will get.