University trade-offs for middle classes

It’s now accepted wisdom that you need a university 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?

Columnist Colin James wrote in 2004 that “Tertiary institutions are stuffed with teenagers who don’t really want to be there… The time has come for some rationing.” I think he’s right.

Thousands of young people with good practical skills and smarts could make be making a great career in the trades, where New Zealand has serious shortages. Instead it’s pressure from parents and their peers which 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 here.

Traditionally, universities were 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. But from the 1990s onwards the number began to skyrocket. New Zealand now has 448,000 tertiary students enrolled in 900 different institutes, all in a country the size of Sydney.

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 there.

At first glance it might seem like a pretty good investment. Ministry of Education figures show that adults with a tertiary degree earn 29% 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%, 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.

There are plenty of alternatives that could offer a better equation, like a diploma or certificate, or a trade apprenticeship which allows you to earn while you learn.

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. Employers say that skills shortages are their biggest challenge.

Meanwhile there is no shortage of lawyers or arts graduates. In fact, only about half of all law students actually become lawyers.

This mismatch has become worse in recent years, despite billions of dollars in extra funding for tertiary education. Clearly, something is going wrong.

So why is there such a mismatch? I believe middle-class, middle-age parents have a lot to answer for. Many still believe that the only path to success is through university, and that trades are a dirty, low-skilled career choice.

At the same time, many 17 and 18 year olds don’t really know exactly which course will suit them, and end up just following their friends. University is more like a rite of passage for many middle class kids, like doing the OE or getting a tattoo.

But perhaps the biggest problem is the government. By subsidising 75% of course fees (around $12,000 a year) politicians are making university appear artificially attractive. Interest free loans only add to 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.

The government is well aware of this problem, and is promising to take more of a ‘hands-on’ approach to funding courses that are in the national interest. But maybe the answer is not to give up on student choice, but to make that choice a little more realistic.

Higher fees might not be popular, but they need to be considered.

Governments have always subsidised university education because of the public benefit it has for society, by making us more civilised and productive (and richer) as a nation. But given the explosion in student numbers, and the high cost to society, surely its time to re-evaluate whether the benefit to society really is worth 75%. 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.

Phil Rennie is a Policy Analyst at the Centre for Independent Studies.