Theme: Society & Culture | Content Type: Blog

Why Universities Make Inequality Worse (and What we can do About it)

Alan Ware


Vadim Sherbakov

| 6 mins read

University education in Britain currently exhibits two serious problems of social justice. There are far more graduates than jobs requiring the skills obtained in a primarily academic education. For a large minority of graduates their degree does not improve their financial prospects later. Secondly, adolescents from poorer families do not gain proportionate access to the most prestigious universities, from which most high paying careers are then recruited.

Too many graduates

Even five years after graduation, about one third of graduates this century have not been employed in jobs for which a university degree was required. Furthermore, projections for student loan repayments indicate that well over one third of the total will never be repaid, because many graduates’ lifetime earnings will be too low.

This waste is partly due to traditionally high costs of university level teaching when compared to many means of developing intellectual and other skills. Eventually someone has to pay for it. From the sole perspective of financial return, more is being paid by individuals and the state than necessary for servicing the needs of the labour market.

Degrees have become idealized as the ‘gold standard’ of education and training. This has facilitated the emergence of what might be called University Lite, a mass post-18 education system in which some form of theoretical or non-practical training is added on to more practical training, sufficient for acquiring the title ‘degree’. Many skills could be supplied less expensively, and in less time, via non ‘degree level’ qualifications. Moreover, as Ahlburg himself notes in his article responding to my original argument, the price of degrees is increased further by one effect of ‘filiopietism’: low prestige universities charging high fees to indicate supposed high quality to the unsuspecting.

Refuting the arguments in my original article entails demonstrating that something is amiss with data I cite on graduate employment and on the projected repayment rates for loans. Ahlburg's article never discusses them, and the data he relies on cannot address the most important question: is a substantial minority of graduates better or worse off in the longer term than contemporaries who did not go to university? Graduates are now more diverse, with some acquiring skills and knowledge that earlier would have been obtained, for example, via professional and commercial apprenticeships. It is not surprising that these graduates earn so much less than “high flyers”.

The demand for educational credentials

Ahlburg had noted that my claim, that a graduate premium (in pay) is absent for many graduates, ‘largely ignores demand’. But what precisely are employers paying for? He makes the common, but often false, assumption that they pay more to the “best” graduates for their acquisition of knowledge and intellectual skills of direct benefit to a firm. In most labour market sectors, this is not what drives employers’ behaviour. Their demand is derived from a need to minimize risk in recruitment, because in competitive markets weak hiring threatens financial performance.

Firms face a massive information deficit because they cannot know which graduates will prove the “best” from a large pool. To minimize the risk of employing less satisfactory graduates, many concentrate their hiring on the most prestigious institutions because they will contain proportionately fewer mediocre graduates. This was famously parodied in the television series Suits, where the Manhattan law firm would hire only those graduating from Harvard's Law School. While many believe Suits merely highlights a form of social or intellectual snobbery, it is, unfortunately, an entirely rational approach to minimising risk in recruitment. The strategy underpinning it is used in real world hiring, though in more subtle ways. Social justice demands, therefore, that poorer students have access to the more prestigious universities.

Taking social justice seriously

This problem is not one that universities themselves can solve. The better resourced you and your family are, the more you can help improve on your grades when gaining credentials – through private education, additional tuition or living in the catchment areas of the best schools. This is why the affluent gain disproportionate access to the most prestigious universities, and from there into higher paying jobs. The way to counter this is not through a policy of free tuition, but one of each university charging what the market will bear. Free tuition subsidies the affluent, and tends to lead to poorer students going to less prestigious universities, from which they can less easily access the higher paying jobs.

To prevent resulting massive social injustice, fees actually payable by a student must be related directly to family income. This policy would also have to be linked to ones requiring every university to admit a minimum proportion of its student from poorer households and using some of its income to provide maintenance grants for them. If relative performance at school determines admission, as it does now, the wealthier will always be disproportionately admitted to prestigious universities.