University Challenged?

February 11th, 2016

I was giving a lecture on ‘The Intelligent Organisation’ 1 to a group of final year undergraduates and we got to that bit at the end……..

“Any Questions?”

…..which is so often experienced as a profound and embarrassed silence punctuated by the occasional bleep of a digital device…………

“Lecturer nearly finished yakking, with you as soon as it is decent to leave, lol J”

But from the depths of the room came the question:

“So, is coming to Uni worth it?”

I adopted the classic line:

“That rather depends what you do with what you have learned, come back in ten years and tell me what you have achieved and I will tell you whether I think it was worth it”

It did make me think though so, with the students, I did a rough analysis:

3 years fees @ £9000 = £27000
3 years accommodation @ £5000 = £15000
3 years food, beer, sports, iffy t shirts (and a book) @ £5000 = £15000
Direct Cost = £57000
3 years loss of earnings (opportunity cost of Uni) @ £12480 = £37440
Revised = £94440

I have, as you can see, estimated that an 18 -21 year old can generate gross annual earnings of £12480 (that is about 40 hours a week at £6 per hour – splitting the current difference on minimum wage between 21 and under 21). It is possible, even likely, that someone capable of benefitting from University would earn rather more than that if they entered a modern apprenticeship or studied for a professional qualification or a degree while working. I am told that a figure nearer £50000 would be about right in some sectors.

So, we have a rough cost of going to university of £94440 including money spent and money not earned. The interest cost per year, assuming that the student is entirely funded by loans and that the rate is constant, is a further 0.9% (current rate) on the average of the amount borrowed over 30 years.

Interest Cost  =          £   7500

Total Cost    =          £ 101940

On the other side of the equation many graduates earn more, there is, seemingly, a graduate salary premium. This is estimated (see refs) as being on average £200k over a working life

According to authoritative sources2 it is £242k for men and £168k for women – so there is another problem to be tackled!

Anyway, treating everybody as being equally average, we will stick with £200k – this is a blog not a thesis.

Graduate Premium  =          £200000

Less Total Cost (which I know is spuriously accurate) =          £101940

Net Premium             =          £ 98060

Now, if we divide that by 40 years – which looks like it will be the average working life for the foreseeable future – then we end up with a net annual gain of £2451 or £47 per week (and dealing with the apparent range it is between about £30 per week and £70 per week).

If overtime is paid at time and a half AND the non-graduate is only ever paid the 2016 over 25 living wage of £7.20 per hour then he or she need only work 4.5 hours overtime every week to earn the same as the ‘average’ graduate.

So, is University worth it?

Now, I can imagine the raised eyebrows and the tutting over tiffin in the senior common rooms of our ancient institutions and the rending of plastic wrappings from factory made sandwiches in the Dilbert like pods of more modern institutions as academics, with a collective sigh, proclaim:

“But a University education is not about money, it is so much more than that! It’s about learning just for the sake of learning, about learning to live an independent adult life, learning to analyse, learning to think, to reflect, to make judgements based on evidence”

And, it is easy to agree with all that, perhaps that IS what attending University SHOULD be about – but I don’t know, we haven’t had that debate!

But then, what if we look at the evidence:

A vice-chancellor claiming that his institution has insufficient resources to provide all the library facilities he would wish;

Another vice-chancellor (or rather more than one) demands the freedom to increase fees – because of the cost of the institutions;

An ‘average’ Vice-Chancellor receiving a salary of £2724323 (an annual amount greater than the lifetime graduate premium gained by his or her average customer);

Others continue to invest (with borrowed money?) in student accommodation which they must unceasingly ‘market’ themselves to fill – in effect turning themselves into property companies whose tenants pay rent and are rewarded by a “credentialising” process which churns out degrees. A process in which the paying tenant sees him or herself as a customer and ‘expects’ a degree to be awarded as a consequence of attendance rather than achievement (and yes, most of us have met one or more of them!);

Ouch!! THAT one is harsh – but not necessarily untrue!!

The growth in numbers over recent years combined with the introduction and growth of student fees, the shift in emphasis of institutional funding and the effects of REF – and in due course, TEF, render a university education as a product in a consumer market place – the greatest volume of customers are the students, and, like the Research Councils and other grant makers, they will demand value for their money.

A tough but perhaps not yet fully understood reality is that, whether we like it or not, not all of our institutions can continue to grow indefinitely, not least because of demographic change. Notwithstanding recent immigration, the population of the UK is ageing overall. Some institutions, because of change in student numbers, the cost of borrowing, incursion of private institutions into student numbers, growth of degree-bearing apprenticeships or a shift in appreciation of the quality of their product, will fail.

Meanwhile the current marginal value of university attendance as measured by the yardsticks that most people will use – money out versus money in (however morally and intellectually indefensible that may be) will not suffice.

£2500 (£1500-£3500 in the range) a year will not cut it!

In the 1960s and 70s, throughout the industrialised nations there was an industrial scale denial of the shift that was happening in the world. Institutions in the UK at both Director and Worker level – British Steel, British Coal, British Leyland, British Shipbuilders and many many more – decried the quality of imported products, sought to defend the status quo, to increase the prices of products whose characteristics were lacking when compared with the competition. Similar behaviour was seen in many other industrialised nations. Recession(s) ensued.

If Universities in Britain are to sustain their position of global pre-eminence – and yes we do have many of the finest universities in the world – if they are going to succeed in maintaining and growing their business then they need to stop bleating about the inequity of it all (see the Times Higher most weeks!), stop demanding additional resources and start working on how to increase the value gain for their customers.

That means they must do more for less, must fundamentally rethink what it means to BE a University in 2016 and beyond, comprehend what the value proposition looks like from the perspective of the student as consumer and organise themselves to deliver it.

The alternative is unthinkable.



1 Beckford, J., 2016, The Intelligent Organisation, Routledge, Oxford, UK

2 200000-says-new-report/2006574.article