Monday, 3 July 2017

The vexed issue of University Tuition Fees

A long time ago, when I attended university, barely 10% of young people did so. By contrast the Higher Education Initial Participation Rate (HEIPR) which estimates the likelihood of a young person participating in Higher Education reached 48% in 2014/15.

When the government decided that half of young people should go to university, it quickly became apparent that this target could not be practically combined with a continuation of the free university university education of my era. This would impose too great a burden on the taxpayer, particularly the half of each generation that would not receive direct benefit from the scheme.

The idea of so-called ‘top-up’ fees were floated. Ministers justified these on the grounds that graduates earned, over the course of their working lives, a substantial premium compared with non-graduates and therefore should themselves take more responsibility for funding their own courses.

Back then The Times (UK) was obliging enough to publish a letter from me criticising the economics that apparently underlay this thinking. Essentially, my argument was that graduate salaries were then high because graduates were rare and demand exceeded supply. Once the supply of graduates was substantially increased, the maginal wage of graduates would be forced down until the expected wage premium was reduced to zero or even beyond. These surplus graduates would then not be able to afford the repayment of their student loans. What I predicted has now come to pass.

Meanwhile well-trained craftsmen, artisans and technical operatives have not only seen no such government backing for an increase in their numbers, but have in fact seen numerous potential recruits to their ranks diverted into universities. Accordingly the marginal craftsman now earns more than the marginal graduate.

Apprenticeships are usually financed by employers, so there are no fees, though apprentices receive lower than normal wages to take account of the fact that in the early stages of their training their value-added is negative, (because experienced workers are diverted from production into training).

Whereas a graduate now enters adult life saddled with a debt of tens of thousands, a time-served craftsman has no such burden and hence is better placed to take on a mortgage and acquire his own home. He is also better placed to contribute to the necessary re-balancing of the UK economy.

I suggest that the commitment to excessive university education was unwise. Rather than attempt once again the failed past experiment of financing its cost from general taxation, we would do better to reduce HEIPR to a level the economy actually requires.