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Education, education, education is harming the economy

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I have a confession to make.  In the past, I have actively engaged in what is now known as “degree inflation.”  I ran the kind of organisation highlighted by Preston Cooper in Forbes:

“Employers [that] increasingly require college degrees from job applicants, even when applying for positions that did not previously require such credentials.”

I did it for exactly the reason Cooper raises:

“In the aftermath of the Great Recession, when the number of jobseekers well outstripped the number of job openings, many employers added college-degree requirements to job postings as a way to whittle down the pool of candidates.”

It is simply more convenient to sift through perhaps 10 job applications from people with degrees than it is to sift through maybe 100 from people without.  And while this might mean missing the one ideal candidate, you can be reasonably confident of finding someone good enough among the 10 degree-level candidates.

This, at least in part, explains all of the degree educated millennials who can be found serving coffee and fast food these days.  The downside, of course, is that when the economy picks up and unemployment/under-employment rates fall, those graduate employees are far more likely to move on to better jobs or to demand improved pay and conditions.

 “So what if multinationals like McDonalds and Starbucks end up having to pay better wages?” I hear you say.  Well, as Cooper points out:

“The most obvious consequence of degree inflation is fewer opportunities for workers without college degrees. These workers might have the necessary skills to do many jobs that demand a bachelor’s degree, but find themselves shut out due to their lack of the right credential.”

These, of course, are precisely the kind of people who tipped the balance in favour of Brexit and Trump.  Indeed, much was made at the time of these surprise votes of the lack of formal qualifications held by Leave/Trump voters.  We are now reaping the political fruits of a system that systematically excluded the poorest performing school students (often those from the poorest households) from qualifications of any kind.

For the past 40 years we have tolerated a high dropout rate.  The neoliberal approach to education and training has been to let someone else train the workforce and then poach their best employees.  This is not just a private sector practice either.  As we are currently discovering, without a steady flow of highly educated and trained clinical specialists from abroad, the British National Health Service would have collapsed long before Jeremy Hunt got his hands on it.

Tuition fees were, in effect, an extension by other means of making someone else – the students themselves – pay the cost of their own education.  Employers were supposed to reap the benefits in reduced training costs and higher productivity.  Students would supposedly benefit from higher graduate salaries.

As with so many of our contemporary crises, the growing problems with education relate to the unprecedented (in the whole of human history) 20 year economic upswing between 1953 and 1973.  More value was added to the global economy in those two decades than had been added in the 150 years previously.  They were years of huge technological developments and huge increases in social complexity.  The upshot of this was that the nineteenth century education system that – with minor reforms – persisted prior to the Second World War was no longer fit for purpose.  In my book, Britain’s Coming Energy Crisis I give a potted outline of this:

“From the mid-19th century, technological developments demanded that our economies produce an educated workforce in which a growing proportion of the workforce were literate and numerate, while a smaller proportion were educated to a high enough level to turn out the technicians, engineers and academics required to maintain growth.  This tended to result in state-funded public education systems that mirrored the industrial economies that they were established to serve.

“In time, these education systems encountered two key problems.  First, and most obvious, selection bias tended to favour the sons and daughters of the elite rather than the people best suited and endowed to become the best engineers, technicians and academics.  This resulted in the demand – which remains unrealised even today – for “equality of access”.  Second, the system is reactive when the economy needs it to be proactive.  That is, it turns out engineers, technicians and academics ideally suited for the economy as it was a decade ago!  The main response to both of these problems has been to broaden the base – if we push enough students through the industrial state education systems, hopefully a sufficient number of good, forward-looking engineers, technicians and academics will come out the other end… we hope.”

The culmination of this approach came in the late 1990s as the Blair government sought to honour the “education, education, education” election slogan by massively broadening Britain’s university sector.  The aim was for 50 percent of Britain’s youth to obtain degrees – setting us up for degree inflation on steroids.

The big difficulty with this was that the British state lacked the means to adequately fund such an expansion of higher education.  In the late 1980s, the Thatcher government had already phased out maintenance grants and replaced them with loans.  The Blair government piled on the debt by introducing tuition fee charges that would also be covered by student loans.  The proposition was that since (prior to degree inflation) university graduates have significantly higher salaries when they enter the workforce, they would be able to repay their student debt.

Degree inflation undermines this premise.  As Cooper points out:

“If degree inflation turns the purpose of college into satisfying job posting requirements rather than building skills, the hundreds of billions [invested] annually in higher education will not yield economic dividends. As more people pursue college degrees, it will become harder for employers to maintain the wage premiums they currently offer to college graduates. Eventually, returns on investment in higher education will fall. Bachelor’s degree holders may see their credentials lose value.”

More degree educated people have not translated into more genuine graduate level jobs.  Instead, it has left an increasing number of graduates doing non-graduate work.  This was (just about) tolerable in the years prior to 2008 when banks were bending over backward to create new currency in the shape of new loans.  Today, with much tighter debt conditions and an economy that has only barely scraped its way into positive per capita growth; the idea of carrying an unsecured £50,000 debt into adult life looks far more daunting.

There is, of course, nothing wrong with debt… so long as you live on an infinite planet.  On the small rocky sphere that we are speeding through space on, however, debt is a problem when you can no longer create the real wealth with which to repay it.

Real wealth is created when we use energy to transform raw planetary resources into useful goods and services.  Unfortunately, the economy that we built in the boom years 1953-73 came on the back of a once-and-for-good expansion of our consumption of fossil fuels.  Put simply, we burned our way through all of the cheap and abundant deposits and are now falling back on scarce and expensive deposits like shale oil and tar sands.  The growing shortage of affordable energy – a particular problem in the UK – renders the mountain of (private and public) debt unrepayable.  This has profound implications for public services like education.  As I pointed out in my book:

“So long as the economy had access to a growing supply of cheap energy, it could afford to educate a growing proportion of the population to degree level and beyond.  It could also afford to let large numbers drop out at the bottom.  However, as energy supplies dwindle and become more expensive, this becomes much less affordable.  Society cannot afford to support large numbers of illiterate and innumerate adults.  Nor can we bear the costs of producing over-educated but under-utilised graduates.  Pushing more than half the population through university becomes an unproductive overhead, effectively draining energy and resources away from more important sectors of the (shrinking) economy.”

Since education is now seen as a right, its university variant is not going to shrink easily.  Government may get away with some spending cuts at the fringes.  And as Cooper suggests, corporations could do much more to reverse degree inflation and to deliver more on the job training.  However, the most likely trigger of a higher education collapse will be a crash in the student debt market (as part of a general debt crisis) leaving potential students unable to secure the necessary loans to attend a university.  This, in turn, is likely to trigger the kind of student activism and political unrest last seen in the late 1960s.

As you made it to the end…

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