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Breaking down the value of a university education: Why we should stay committed to our study

We have all had this experience: you have a deadline coming towards you like a Japanese high speed freight train. Glancing at the clock, then at your open word document, then back at the clock. The cocktail of stress and apathy that leads you to a simple question – why am I even doing this?

Then you think of the fees you are paying: how expensive that stress in fact is. It can feel like we are at an elaborate fine dining restaurant where they ask the customers to do the dishes. To make matters worse, leaving university is rarely a smooth process. The straightforward ‘milk-round’ experience that earlier generations might have experienced, where graduate employers competed for graduates, seems to have passed like an overburdened bus.  

So, would we have been better off saving our money and forgoing the entire experience?

Whether university is ‘worth it’ is a surprisingly hard question to answer. You can’t just look at whether graduates earn more than everyone else, after all, since students are not a random sample of the population. Graduates do earn more than non-graduates, but university students aren’t a random subsample of the population. University selects both for academic capability as well as higher social status. Hence, taking university out of the equation, there is hardly a level professional playing field between would-be uni students and the people who do not attend. Maybe we would all be just as well off if we stuck it out and went straight into the world of work.

In favour of education, the first and classic response is to affirm that economic output aside, we can view a university level education as a consumption good, valuable at the point of practice. Granted, when you have a deadline looming or an imminent exam, it might not feel like study is all sunshine and roses. But surely some of the value of studying is that it gives us the time, space, and social environment to enjoy things that are harder to come by in working life: the capacity to flex our mental muscles and relishing the wonders of Nietzsche, string theory, Biblical hermeneutics or a Thursday night bridge with the promise of a Friday spent in quiet recuperation. The refrain learning for learning’s sake comes to mind, after the age-old Humboldtian model of education. 

This line of thought has an emotive pull, especially for those of us for whom the possibility of a lack of education and imposed ignorance because of economic or class-based barriers is a fundamental reality or, for the more privileged among us, is at least within familial memory. But the independent value of the free thought and the expansion of the mind through knowledge acquisition is notoriously difficult to justify – especially given the difficulty of disassociating the independent attraction of education from its status as a signifier of social class and how it is perceived as a tool for ascending social and material hierarchies. 

To what extent, then, are these perceptions correct? It seems obvious to say that studying is an investment. We study in the hope of improving our future labour market outcomes and time spent in education is, we tell ourselves, a way of increasing our lifetime human capital, and ensuring that we can be more productive in later life. For many, that will mean acquiring skills or qualifications that enable us to enter high power professions, many of which have a minimum graduate entry level or are requiring of particular university-level skills, and ultimately, if cynically, earn more throughout our lives. Another consideration might be that studying gives us increased time to ponder a career-choice before we commit to it. Instead of making hasty decisions, we are able to take time to develop, get a taste for what we like and make a more informed choice about our career preferences. And surely: if you enjoy your job, you are more likely to succeed in it. 

Much of this is speculative, however. Increasingly, apprenticeships offer alternative, cheaper pathways into high value professions such as law, engineering and finance for those who are unconvinced that four years of doddering aimlessly around student bars and lecture halls is a valuable use of time. And even for those of us, who have made the choice to invest in an education, the doubt often lingers that education’s promises will be fulfilled. Economists sometimes talk about ‘credence goods’ – products whose value is not possible to determine at the moment of consumption, but only over a long time. These goods require that the consumer ‘believes in them’ for a while, before they have any chance of being effective. You cannot expect to feel the benefits of going to the gym after a single session. The connection that you make between tricep extensions and massive gains is perceptually a very loose one, based on the wise words of fitness influencers and gym operating companies. You have to crush those snagging doubts that the influencers are wrong when you do not immediately see results, in order to eventually see results.  

If education is going to be an economic good, it will be a credence good. And one of the difficulties of credence goods is that their utility, their value is extremely hard to ascertain. Over a long period of time, there are so many variables that enter into the equation regarding the effects of a credence good, that those effects are potentially obscured from view. To make matters worse, it is likely that how education is consumed really matters for how economically effective it will turn out to be. For it to work, you have to commit to it, and trust not only that the overall experience will be worthwhile, but, much like those final, cumbersome tricep extension reps, that the marginal effort of handing in any given piece of work or doing an extra hour’s exam preparation will somehow translate into future benefit.

Thinking of education as a credence good, it is no longer obvious what value it drives. Fortunately, the data still speaks in its favour. A life-cycle earnings model estimated by the Institute for Fiscal Studies a few years ago found that almost all graduates increase their earnings through their education. Around 80%, meanwhile, increase their earnings enough that they are better off even considering the tuition fee repayments they have made. 

Those who do not make a net profit on their degree are generally clustered in a small number of very low return degree subjects and are also disproportionately at less selective universities. Interestingly, the category of subjects for which people are least likely to make a positive return through their lifetime is the creative arts. No doubt many graduates in the creative arts will know they could have earnt substantially more if they had trained as a plumber or a bricklayer, rather than having gone to university. For students of these subjects, one suspects that there is no long term expectation of profitability: it is the enjoyment of creative expression, or consumption value, that counts. 

So, on average, your degree probably is worth it. Like a long-acting medicine or steady exercise regime, it may not feel like it day-to-day, but the hours you’re spending pouring over another history essay is strongly associated with better social outcomes later in life. Interestingly, higher degree performance is also associated with higher lifetime earnings. So, when that poncy undergraduate who is too busy writing poetry to do her essays claims that ‘it doesn’t matter how well I do’, you can tell her how utterly misinformed she truly is.

What are the methods and processes by which a university level education confers (in most cases) economic value? For some degrees, of course, this is obvious. A medical student, for example, can trace a clear causal arrow between their degree and their subsequent job as a junior doctor. For others, there is no direct channel for the conference of economic benefit – especially when graduates enter into professions where they compete with ambitious and capable non-graduates.

Economists generally think of university level education as benefitting graduates via two distinct channels – signalling and human capital. The signalling channel, which is perhaps the most depressing of the two, is the less intuitive. It proposes that graduates earn more than non-graduates because degrees are really hard. They test students on attributes employers care about – willingness to work hard, personal organisation, as well as the student’s skills at writing or solving problems – and can thus be used as a ‘signal’ of worker quality. This channel, of course, suggests that even if all you have to talk about as a result of your study are the reasons for the collapse of the Umayyad empire, your potential employer is not put off. This channel, whilst no less important for us as students, suggests that education is all just a ‘costly signal’ that we use to attract an employer, like an elaborate plumage on a male peacock as it struts around in the hope of finding a mate. 

Secondly, education may well improve our skills. In the case of vocational degrees, perhaps, this is very obvious. A computer science or mathematics graduate might get a job coding probability in a company trading options. But even if you are employed outside of an industry with a clear link to your subject, you will probably use abilities you honed during your degree. As a graduate in Philosophy once told me, “every time I have to write something in a hurry, I feel those hundreds of hours of Philosophy essays come in handy.”

There are also ‘meta-skills’, which are important too. Skills which help in acquiring new skills. You have, doubtless, learnt to learn during your studies. You have probably learnt to manage deadlines. Even the most jaded graduate can surely accept that they are quicker at reading complicated material than they were prior to their studies. When you need to develop and learn in the future, these things will come in handy both for future employers, and to you as a worker, even where your intricate knowledge of British and Irish history in the years 1900-1921 may not. Many important skills of learning are not even domain-specific. If you spend years mastering fine art or music, the odds are that patience, the ability to exert undisturbed patience, and discipline were required and trained. Even if you don’t become an artist, those skills will not be wasted.

So does your degree prepare you for a job? Almost certainly. What job? Now, that is a harder question to answer.

It is difficult for two reasons. Firstly, as already discussed, most degrees do not point towards a clear vocation. Indeed, even the skills portfolio you acquire in studying is not always that indicative about what sort of job you should do.

But it is a mistake to view education as simply an entry point to a career. The idea that you only benefit from what you have learnt in your first job is nonsense. In many ways, it is least helpful when you’re applying for your first job, because employers are overwhelmed by the volume of job applications and use coarse filtering tools, like psychometric or situational judgement tests, for which your actual skills and education are virtually useless. It is in the years after you start working that your ability to progress and find new jobs will depend increasingly on your demonstrated aptitude.

Secondly, it’s hard to know what career paths will even look like in ten, twenty, or thirty years time. New industries and jobs will doubtless spring up, and even in the ones that exist the type of work will change. Who could have guessed that basic computing skills would come to be required in every job when our grandparents were starting their careers? What matters in the long-term is your ability to adapt and learn new things, and general education is a tool for preparing ourselves for that. The need for specific expertise and knowledge will always change over time, but education in a broad sense is unlikely to ever set you back.

So, resist the nihilistic urge to condemn education as nothing but a waste of time. It is a transformative opportunity; one that will benefit all of us throughout our lives. The opening up of university to more people in the UK is a huge change – for generations it was the preserve of the wealthy and the elite. It is a privilege that so many of us are now able to benefit from it.

Resist further the urge to downplay education as nothing more than a signal. Firstly, signals are good. They help to smooth the matching process between employer and employee and help guide us to jobs we are more likely to succeed in. Furthermore, better that we have education as an imperfect signal than even more primitive signals like parentage or postcode. Secondly, whilst it is a signal, for sure, it also provides the first step in building the tools to deal with an uncertain and changing world. Just as once reading and writing were seen as luxury skills that could be monopolised by a privileged few, advanced training is an increasingly vital requirement for working in a modern economy. Even where there is no obvious vocational outlet, study is important.

And finally, do not forget that part of the point of studying is to enjoy yourself. It is, in part, a consumption good. Do not believe older people when they say that university is the best time in your life – indeed your early twenties are often found to be a particularly stressful and difficult time of people’s lives. But full time study is an experience unlikely to be repeated, with many positive components. It is a generational privilege of ours to be so well educated. We might as well take advantage of it, as there aren’t very many others.

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