Friday, 21 February 2014

Graduate Premium not worth having?

There's a piece in the Speccie that's taken me a day or two to get around to. When I was a youngster, one of the things that astonished me was the graduate premium - the earnings excess that a graduate could expect to accumulate during his / her lifetime against, say, a skilled plumber. At age 16 the lines on the graph started together, but the graduate's earnings remained flat for the following five years whilst the plumber's rose rapidly. In their 20s the plumber's earnings rose and the graduate's rose slowly to meet it. The lines crossed at about 30, after which the graduate earned more. At 45 the plumber's line hit a plateau and at 60 dropped sharply whilst the graduate's line continued to rise until 60 then flattened for the next ten or fifteen years. The area between the lines - the balance between the negative and the positive - was the lifetime value of the graduate premium. 

Forgive me for the somewhat tedious foregoing. The point is, when I learned of it, the graduate premium was an astonishing figure, something in excess of £1m even at the NPV of the 1980s. The current table in the Speccie shows something far less attractive, with a mid-range graduate barely making an extra £150k over a working lifetime. Either plumbers are earning a damn site more than they used to, or the GP has been seriously eroded. £150k over a (now) 50 year working life is £3k a year - not worth getting out of bed for.

Of  course, back then when only 5% of us rather than 50% as now went on to higher education we also had the choice to become plumbers. I'm not sure that today's youngsters even have that choice any more.


Anonymous said...

Perhaps the graduate premium also reflected the often free higher education and the student grant.

After leaving university a graduate might have, what £30,000 debt. He or she marries another graduate and, bam!! they're £60,000 in debt. She now gets pregnant and takes five years off to see her children into school, they are struggling with £60,000 student debt, £250,000 mortgage debt on one salary.

I think I'd rather be a plumber.

Weekend Yachtsman said...

"Either plumbers are earning a damn site more than they used to, or the GP has been seriously eroded"

Well both, of course.

Have you employed a plumber recently? Their rates would make your eyes water (which is why I do it all myself).

And the graduate premium you refer to will now include graduates in hairdressing studies from the University of Nether Wallop and suchlike, people who frankly aren't worth half a plumber's money.

So no surprises really.

Nigel Sedgwick said...

You have raised an interesting question ... and then answered it: with five to fifty.

Irrespective of all the vocational training for highly skilled jobs, there are the issues of rarity and, also very important, pecking order.

All educational qualifications contribute to signalling one's place in the pecking order. And the efficiency of that signalling was (and still should be) an important thing.

In the old days there were those who peaked at various levels of certification: CSEs, O-levels, A-levels, HNC, HND, polytechnic degree, university degree and better/top university degrees. And, very importantly, there were sensibly distributed percentages of young adults in each category, and getting into the correct category mattered a lot.

Now we have enthusiasm for everyone to be certified, but with purposeful governmental action on two aspects: firstly to confuse and waste the useful signalling effect by distorting the meanings of the categories and unbalancing the proportions in the various categories; secondly (as especially seen with A-level grades) to wreck the sensibly measured spread of labelling of even a single exam type, so all can have first prize.

To this damaged signalling system is added a wasting of educational opportunity, and this in an age where vocational education is becoming increasingly critical to economic success, both for the individual and for the nation, and the costs of it (especially in hi-tech) are increasing. In its enthusiastic hunting for equality, government has given up providing an education for all at the fastest rate they can themselves learn: it aspires only to 'educate' at the average rate. In addition, many do not need to remain in full-time education until their late teens and early twenties; they would improve their own prospects and make better use of their time and efforts: by learning on the job, together with part-time courses. Those who would benefit from continued full-time education should be stretched all the way.

So government action, presumably intending to improve things, actually ends up wounding us.

Best regards

FrankS said...

Thanks to the higher education racket spawned by that ludicrous "50% shall have degrees" mantra of T Blair and al, the employment prospects of most graduates are no better - probably worse - than those of a 19-year-old school leaver with 3 A-levels a generation or so ago.
And that school leaver didn't have a £30,000 student loan to pay off

Elby the Beserk said...

Most degrees are now useless. The concept of the university has been debased by the universitification of polys and CFEs. The state education system is a screaming disaster.

English Pensioner said...

Do the figures take into account the university fees and living costs along with the lack of earnings for 3 or 4 years?
My younger daughter went out to work after her "A" levels, has been steadily climbing within the company and is now earning considerably more than new graduates, has no debts, an extra 3 years earnings and lots of experience in her chosen field. Comparing her position with those school friends who went to university she is convinced that she is better off and will be so for a number of years.

Anonymous said...

This all presupposes that education is for the benefit of the person receiving the education.