Me & My degree: Part 1- The cost of a degree

Within 36 hours, I travelled the width of the country 1.5 times. Between intermittently chatting to strangers about the science behind religion, explaining the Battle of Hastings (albeit guessing most of it) and discussing the architecture of York, I decided to read the government paper about Universities and degrees and write about it. Here goes…

Student fees:

Most discussion regarding the white paper are about the further rise in tuition fees. The government’s new policy is that fees will now rise at the rate of inflation. Due to inflation, the real amount* that students are paying this year (compared to 2012 prices) is £8450.  We are paying 6% less than our 2012 counterparts. Its easy to argue that this isn’t fair. If prices were to keep in line with inflation, everybody would pay the same “real”* amount. If university fees rose with inflation, this year we would be paying £9586.

The government have justified this rise as allowing Universities to be able to keep up a high quality. In my opinion degree prices rising with inflation is fair. However my big problem is the original price of a degree. While the teaching standards at my university are generally good, the amount of contact hours and what lecturers do for my education hardly justifies where my £9,000 goes. 60% of students are dissatisfied with their course. You start to wonder whether the quality of teaching undergraduates in the UK is good enough. With the aforementioned statistic, it is difficult enough to justify £9,000, let alone allowing it to get any higher.

I don’t believe that degrees should be free. I have thought about it for a while, but the premium private benefit gained means that I believe a private cost should be incurred by the student. However as there is a social benefit in greater innovation, a greater tax yield and more GDP, it is reasonable to argue that they are partly subsidised by the government, therefore equalling the social benefit with the social cost. I don’t know the numbers myself and therefore can’t mathematically come up with a figure that considers the private and social costs and benefits. However it is my personal belief that a fee of around £5,000 would be a justified “real price”*.

Student population:

The government were very quick to highlight how their fees weren’t deterring people from university. There is an increase in the number of students. This is good for the government, good for GDP, good for productivity. However, if you are a current undergraduate/graduate it is bad for you and it is bad for me. From a selfish, economically rational perspective I wish there were less people at university. There are three main reasons for this:

  1. The main one is my/your future wage. Imagine a job that requires a degree. Wages, like most things, depend on the supply of qualified labour and the demand for qualified labour. Basic economics dictates that an increase in the supply of a good in the market reduces the price (in this case my/your wage). The labour market is no different.SD1
  2. University resources are finite. The reason that the amount of people going to university has increased is that universities are no longer capped with the amount of people they can accept. More people don’t neccessarily want to go to uni, it’s just the case that more people can. However as more people go to a university, resources become more stretched. More people want to borrow the same finite amount of books, the amount of contact hours is reduced and a person’s education isn’t as good as they don’t get as many of the finite resources. This is despite them having payed more than those before 2011.
  3. Another financial reason linked to the second idea is the increased rent. There was a housing shortage in Exeter that I and many others suffered through. The increase in demand allows a price increase for properties, meaning I have to pay a much higher level of rent as more people go for an amount of student accomodation, a commodity that has a highly inelastic supply**.

I am aware that this does make me sound like a nasty cynical human being who doesn’t ant people to meet their dreams. But that is not true. I am in favour of social mobility. If you come from a poor background I believe you should have a fair chance of being at university. This can be achieved by lower grade offers, more grants as opposed to loans (cough, David Cameron, cough), higher loans for those from disadvantaged backgrounds and subsidised fees for those in disadvantaged backgrounds who have been more put off by the increase in fees (They are the ones who are put off most). The increase in university places hasn’t helped the lack of social mobility though as poor people are still 2.4 times more likely not to go to university. That can only be considered a governmental failure.

I would also clarify that there are many benefits to the national economy of an increase in the number of universities. A more educated labour force means more innovation, invention and an increase in the quality of life. A 1% increase in graduates leads to an increase in productivity between 0.2% and 0.5%. University education is also one of Britain’s big exports. More international students studying in the UK improves Britain’s GDP as well as our worrying large current account deficit.

The concerns that I stated were micro-based in that they concerned the individual, whether that be me or you, as a fellow undergraduate. This does provoke an economic thought. Should we be more concerned about ourselves as individuals, or the welfare of the country? Think about that.

Swift Economist

Footnotes (Definitions)

*Real price – a price adjusted for inflation

**Inelastic supply – Supply has very little responsiveness to a change in demand

*** Current account – (Exports – imports). It is not good or sustainable to have a large current account deficit as we do.

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