Proportion of Graduates

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					Higher Education and the Crisis for European Youth.
                               Andy Green

                         Presentation to ISA Conference
        ‘Social Justice and Participation: the Role of Higher Education’
                       Nicosia, 25-27th November 2011
           Structure of Presentation
•   The Context
-   The economic crisis
-   The crisis for youth
-   Public spending cuts

• The Restructuring of HE: Expansion and Differentiation
- Increasing costs to students
- Institutional differentiation

• Effects on Labour Market Outcomes for Graduates
- Declining wage returns
- Increasing differentiation of wage returns

• Social Effects

• Conclusions – funding higher education equitably
    Higher Education and the Global Crisis for Youth

The global economic crisis – the deepest and longest since the 1930s –
has affected all groups in society, but the worst effected have been
young people.

The problems faced by higher education are part of the bigger
economic crisis and, in particular, the unfolding crisis for youth,
manifested in rapidly declining opportunities for work and housing.

The crisis has not only spawned growing anti-capitalist movements
amongst youth. It has also intensified the inter-generational conflicts
which have been rising for some time.
             Parameters of the Crisis for Young People

The general parameters of the crisis for young people are plain to see.

•   Rapidly declining job opportunities
•   Rising unemployment
•   Stagnant graduate incomes
•   Unaffordable housing (to buy or rent)
•   Paying higher contributions and working longer for smaller pensions.

In many European countries young people face poorer prospects
relative to their parents than at any time during the last century.
             Why Young People have been hit hardest

Economic crisis has impacted particularly on young people because
• employers stop recruiting
• Part-time and temporary workers (often youth) are first to go
• older workers accept short time working and reduced pay to hold onto their jobs.

Longer-term trends also reducing paid jobs available for youth:
• The displacement effects of unpaid internships and other forms of ‘volunteering’
• Older workers in some countries retire later as statutory retirement ages are raised
   and by choice to compensate for declining pensions

-     Recent evidence for the UK suggests that over half of all new jobs go to those over
    - Polls suggest that with removal of statutory retirement age some 4.5 m. older
      workers intend to work on average six years longer before retirement.
      Youth Unemployment in Europe
The youth unemployment rate in EU27 is over double the overall
unemployment rate.

Percentage of young people aged 15-24 in Sept 2011 who are without
jobs and looking for work:

EU 27: 21.4%
Eurozone: 21.2%

Lowest rates: Austria (7.1%); Netherlands (8.0%)

Highest rates: Spain (48%) and Greece (43.5%)
Unemployment rates EU-27, EA-17, US and Japan, seasonally
       adjusted, January 2000 – September 2011
          Long-Term Decline in Graduate Prospects
Graduates have much better employment prospects than non-graduates. On average
in OECD one third as likely to be unemployed. However, in many countries we can see
a long-term trend towards declining graduate prospects.

Middle class incomes declining or stagnating as increasing share of GDP goes to profit
and high earners (16% of UK GDP went to bottom half of in 1980, 12% now).

• Major declines in middle incomes in countries worst hit by the crisis (eg Greece,
  Ireland, Spain etc)

• Stagnation in UK and US.

- Average middle class household incomes fell in US from $56 000 in 1989 to $55 200
  in 2010, despite US economy growing by 60%.
        The Rise of the High-Skilled, Low-Paid Job

There is increasing cost competition for high skilled professional
jobs due to:

• Routinization of many graduate jobs (so-called ‘digital

• Out-sourcing of many high skilled jobs to lower wage
  countries. China advancing in key field such as nano-
  technology; super-computers; genomics and stem cell
  research. Up to estimated 29 % of US jobs could be off-shored

• Increasing global supply of highly skilled graduates.
     Globalisation of High Skills and the Challenge to
                 European Graduate Jobs

Rapidly increasing output of graduates and post-graduates from developing

• Participation in HE in China rose from 3% in 1990 to 22% in 2006

• 41% of science and engineering doctorates in US and UK awarded to
  foreign students

• By 2000 graduates made up 35% of immigrants to OECD countries (up
  from 30% in 1990)

• In the UK, an estimated 80% of new doctors and 73% of nurses hired
  between 1997 and 2003 were foreign-born.
                  The Global Auction
Brown et al argue that the ‘neo-liberal opportunity bargain’ - which
promised high salaries to highly trained western graduates ‘outsmarting
workers from other nations’ - has been broken .

‘the global auction is more than a competition for knowledge and ideas;
it is also competition based on price. What is revolutionary about the
globalising of high skills is that it has been combined with low cost
innovation, challenging many of the beliefs about the social foundations
of economic success’

Brown, Lauder and Ashton, The Global Action: The Broken Promises of
     Financial Squeeze on Higher

Higher education funding under pressure from
two sources:

• Increasing demand and rising participation

• Increasing squeeze on public expenditure,
  exacerbated by the economic crisis and
  governments seeking to pay off public debt
Proportion of Graduates
      Proportion of Age Group Graduates by
                 Country Cluster




                                                                                         25-64s   25-34s



       Eastern Europe   Southern Europe   Social Market   Nordic   East Asia   Liberal
Increasing Costs per Student
   Responses to Financial Crisis in
         Higher Education
Governments are employing various strategies to deal
with increasing costs in HE

• Shifting costs to students and parents by raising
  tuition fees
• Forcing HE institutions to raise more research money
  from non-government sources
• Differentiation of funding levels for teaching by type
  of institution
• Concentrating research funding on elite institutions
Tuition Fees by Country
       Trends in UK Higher Education

• Public spending on education in the UK is falling at the
  fastest rate since the 1950s and will fall by 13% in real
  terms between 2010-11 and 2014-15 (IFS, 1011).

• HE tuition fees in England are rising by a factor of three to
  £8000 – 9 000 pa.

• Students will graduate with £40 000 + of debt

• Applications down 8% this year.
        Expansion and Diversification
In the long run, the strategies are likely to lead in many
countries to :

• increasing diversification of HE institutions. Most visible so
  far in English-speaking and German-speaking countries

• more stratification of HE institutions and courses

• more differentiation in returns to degrees by institution
  and field of study.
Trends in Labour Market Rewards
          for Graduates
          1. Declining Wage Returns

Recent research on graduate earnings in the UK provides evidence of
recent decline in wage returns to degrees (wages of graduates relative
to those qualified only at upper secondary level).

• Moderate decline in wage premia for graduates in UK since 2002
  (Chevalier et al, 2004; Purcell et al, 2005; Walker and Zhu, 2008)
• Decline greatest for women at lower end, particularly among arts
• Decline in graduate returns at lower end due to many not finding
  graduate level jobs (Green and Zhu, 2010).
   Declining Pay in Graduate Jobs
• Pay in Graduate entry level jobs in Taiwan has
  been static since 1997.
    Lifetime Net Benefit to Tertiary Education for Men
                     Source: OECD



                                                  East Asia

150,000                                           C and E Europe
                                                  Southern European
                                                  Social Market


          2. Increasing Levels of UK Graduate Over-
Over-qualification among graduates defined as proportion of graduates in jobs not
requiring graduate qualifications for entry. Green and Zhu distinguish between ‘formal
over-qualification’ (where grads do not report under-utilisation of skills) and ‘genuine
over-qualification’ (graduates saying their skills are not fully utilized).

• Long-term increase in graduate over-qualification between 1986 and 2001
  (Felstead et al, 2002)

• Over-qualification rose between 1996 and 2002 from 21.7 to 33.2% (for men) and
  from 23.8% to 32.1% (for women). Most of the rise in 2000s.

• 25% of graduates formally over-qualified; 10% genuinely over-qualified

• Over-qualification associated with wage penalty of 10-25% and lower levels of job
  satisfaction and well-being at work
Increasing Differentiation in
   Returns to Graduates
   Increasing Differentiation in Wage Returns
                   to Degrees

• Increasing dispersal in wage returns to degrees in
  UK for both men and women between 1994 and
  2006 (Green and Zhu, 2010)
• Growing dispersal in wage returns mostly at the
  bottom end and associated with over-qualification
  (Green and Zhu, 2010)
• Within-group inequality of incomes increasing in
  USA (Lemieux, 2006)
            Clark on Expansion and
             Differentiation in HE
‘Expansion into mass higher education has
widened these internal differentials, with
medicine, the natural sciences and sometimes
engineering protecting their standards through
limited access, while other units, in humanities,
the social sciences, and sometimes such
semi-professions as education, take all comers.

(Clark, 1978: 248)
      Increasing Differentiation in Returns by Field of Study

Reimer and Noelke (2008) argue that expansion of HE tends to increase differences in
mean ability of students in different fields as hard subjects (maths, physics, computer
science, engineering) maintain entry standards and ‘soft’ subject (social science and
humanities) allow entry to less able students.

The increasing differences in the ‘signalling value’ of different degrees will lead to
greater differentiation in labour market outcomes for students from different fields.

Their study of LFS data for 22 countries in 2004/5 finds that:

• Higher levels of participation in HE tends to increase the unemployment risk and
  lower the occupational status of humanities degree holders relative to graduates
  from other fields.
• In countries with more occupationally specific degrees, humanities graduates
  seem to fare worse than holders of all other types of degree.
                     Effects of Fields of Study

Over-qualification is more common among graduates from some
fields than others. Ortiz and Kucel’s study (2008) of LFS data for 2003-5
for Spain and Germany suggests that :

• over-qualification is highest in fields related to: ‘services’, ‘agriculture
  and vet’; and ‘social science and business’
• Variation in over-qualification across fields of study is higher in Spain
  than Germany
• Over-qualification is less likely in systems with more occupationally-
  focused degrees.

However, the choice of field of study is a factor in the reproduction of
class benefits in some countries but not others (Jackson et al, 2008)
      HE Expansion and Social Mobility
The declining benefit of degrees in many countries is likely to make
some prospective students wonder whether going to university is
worthwhile, particularly where the costs of going are increasing at the
same time as the benefits decrease.

However, this is unlikely to reduce demand for higher education very
much. Even if the cost-benefits decline for graduates, young people still
have much better prospects in the labour market with a degree than

The effect, rather, is likely to be increasing positional competition
amongst undergraduates for the best courses at the best universities.
         The Opportunity Trap
‘The trap points to increasing social congestion
for decent jobs as people scramble for highly
rates schools, colleges and jobs’ (Brown, Lauder
and Ashton, p. 135).

If everyone stands on tiptoe, nobody gets a
better view. But if you don’t stand on tiptoe,
there’s no chance of seeing.
         Is HE now contributing to Growing Inequality?

Human Capital Theory predicts that, other things being equal, raising
participation in higher education will initially increase inequality, as
rates of return rise, then decrease it as expansion reaches mass levels
and rates of return decline. Providing the output of graduates outpaces
the demand for graduate skills (which appears to be the case in many
countries now), supply and demand pressures reduce the pay premium
for degrees and lower income inequalities. (Knight and Sabot).

However, under some circumstances higher education expansion (at
the mass levels) may actually increase inequality .

If levels of public spending and service quality diverge between elite and
mass institutions of HE, this may be the case (Carnoy, 2011)
       Social Effects of Increasing Skills
• Countries with wider dispersion of adult skills tend to have lower
  levels of social cohesion

• The effect may occur indirectly through effects on income

• But there is also an independent effect of skills inequality.

• This may be due to skills inequality increasing cultural distance and
  high stakes competition which creates status and competition anxiety
  and stress.



                50                                                               CAN

                                               FIN                 IRL

General Trust

                40                                   AU
                                                                          PO                  US

                30                                                 B

                20                                                                           POR


                     1   1.1             1.2                      1.3                  1.4    1.5   1.6
                                                          Education Inequality
         Change in Proportion on |People with Trust in Parliament 2007-2010

ES       -31.64
IE       -31.1
CY       -29.6
GR       -25
SI       -15.3
MT       -14.8
RO       -13.4
HR       -12.7
BE       -11.9
FI       -11.6
DK       -11.4
PT       -11.0
LT       -5.7
FR       -5.7
UK-NIR   -5.4
MK       -3.8
DE-E     -0.4
DE-W     -0.4
TR       -0.3
UK-BGN   1.6
EE       2.2
NL       2.3
AT       2.6
LU       2.8
SK       2.8
CZ       3.0
BG       7.5
PL       8.5
IT       10.2
SE       13.2
HU       32.2
          Implications for HE Funding
Existing systems of funding HE are unfair or unaffordable or both.

Full state funding for mass higher education is probably unsustainable
and represents a substantial subsidy to middle class.

Full–cost tuition fees will deter students from less affluent families and
often do not align costs with benefits.

The case for graduate tax (say 1% income tax levied on all graduates)
• Avoids up front costs and barriers to students
• Progressive tax which aligns payments with benefits
• More equitable inter-generationally
Regimes of Social Cohesion: Societies and the
           Crisis of Globalisation
      Andy Green and Germ Janmaat
                   Palgrave, 2011

        Adult population (25-64 age cohort) with higher education 2009




                                                                         Vocational University

15                                                                       Academic University




     Source: Education at a Glance 2011(OECD):40
Costs and Benefits of Tertiary
   Education for Women
Costs and Benefits of Tertiary
     Education for Men
          HE participation rate and employment rate of the cohort 25-64 (2009)





 60                                                                              HE participation rate


 40                                                                              Employment rate of the cohorts with HE degree





      Source:Education at a Glance 2011(OECD):121

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