Great Expectations

Great Expectations

by / June 4, 2013 / [ 7 Comments ]

“We are looking for a talented, ambitious and focused intern for up to 6 months. This is a full-time, unpaid position.” So read Greenpeace New Zealand’s advertisement on Careerhub. The idea of an unpaid full-time internship—working 40 hours a week and being paid nothing—should be bizarre. However, the recent recession has spawned new absurdities in the job market, as more and more overqualified graduates compete against each other for fewer and fewer jobs. While the recession has exacerbated the job crisis, the basic problem—that, every year, university degrees are worth less than they were the previous year—has been developing for a long time. Jobs which once required only undergraduate study now require Honours, BA-grads are stranded in hospitality, and school-leavers struggle to findwork outside a supermarket. This phenomenon—known as ‘degree inflation’—is forcing young people into ever-increasing amounts of study, with dismal job prospects even for those who have completed degrees. While tragic, it has not been inevitable. Rather, it is the necessary result of an unnecessary Government policy.

In 1956, Norman Shaw left high school and got a job with the Commercial Bank of Australia. Despite his only formal qualification being his School Certificate, he worked with the bank for a number of years, first as a postage clerk, and then later on as a teller. He went on to have a successful career in sales and marketing, working with a number of textile firms before eventually ending up as a marketing executive with Nylex Ltd., a vinyl wholesaler. This is a position that would now require three or more years of university study, but back then it was possible to work into these positions from the bottom up. When we talked to Norman last week, he told us that he’d never regretted foregoing university study. “You might be the brightest bastard in the world, but an ability to learn and an ability to do a thing are entirely different matters.” His lack of formal qualifications had not stopped him getting into certain jobs. “It was never a factor. Managers wanted experience, not degrees. References from positions you’d done in the past were much more important.”

Norman does regret the massive growth in tertiary education through his lifetime. “Young people are not doing anything until they’re so bloody old—we went into real life fighting wars, now kids are still hanging around at incredible ages. It’s a shame as a lot of them would like to be out there working. It’s very disheartening for a lot of people.”

He attributes the shift to the nature of the job market. “In the older days there were different jobs. The whole base of employment has changed. Even the banks—technology has done away with a lot of the staff. A lot of the things we used to do are gone, such as tellers and ledger-keepers. Computers have fucked the world because they’ve taken a lot of the jobs people used to do.” Still, he doesn’t see the explosive growth in university education as inevitable. “The problem is every fucker needs a degree to get into the job market in the first place. It used to be simple to get into work for there was a shortage of anyone who wanted to try. Those starting blocks are gone.”

In 2012, Carole McGee* graduated from Victoria University with a Bachelor of Arts, majoring in English Literature. Since then, she has worked as a receptionist at a real-estate agency, and she is about to start a new admin job in the public sector. After three years of study and having built up a Student Loan of over $30,000, her career consists of answering phones and filing paperwork.

We asked Carole whether her degree had helped her in her working life. “Not at all. [My BA] is unlikely to help me in anything except literature research. Most undergraduate degrees aren’t worth much unless you are really specific about what you want to do with it—for example a business degree in HR [if] you want to be a recruiter. I know people with Science degrees that are worth very little, and Business degrees as well. I guess Architecture or Law would be a little different.”

When we asked her whether she thought her degree had given her ‘abstract thinking skills’ such as ‘critical analysis’, she laughed. “To be honest I think I could already critically analyse pretty well. My degree probably did build my research skills, [but] a lot of research is common sense.”

Carole is torn as to whether she regrets having a degree. “Degrees are basically mandatory now. It used to be considered good for someone to finish high school. Now a degree is just expected if you are applying for almost any halfway-not-shit job. I don’t regret studying; I think it is nice to have completed something and committed myself to something, and I enjoyed the university ‘experience’ and culture a lot. But I do wish that people hadn’t urged me so much to ‘do what you love’.” She laughs, a little tragically: “So yes. I regret my degree.”

Norman’s and Carole’s stories represent dramatic changes in New Zealand’s job market, where the level of education required for a job has exploded in the past few decades. When degrees are worth so little, one can’t help but wonder why we bother with university in the first place. Answering this question is the key to understanding degree inflation. The most common answer is that university helps you learn skills which will be useful in the job market. In technical language, it builds your ‘human capital’. This is the obvious explanation for why those with degrees tend to earn more than those without degrees, and why postgrads tend to earn more than undergrads. But if the ‘human-capital’ understanding of university were true, degree inflation shouldn’t be nearly as bad: more degrees would add value to the economy rather than merely making the rat race more brutal.

Why would people get a tertiary education if it doesn’t add value? We believe it is about sending a signal to potential employers. The ‘signalling model of education’ holds that the wage premium from having a tertiary degree comes from the signal of a person’s abilities relative to others. It’s based on the observation that most formal tertiary education is taught by professors with little experience outside the ivory tower, and that most courses are concerned with academic theory and not tailored to specific occupations. Why would these be any use in the real world? Research into the ‘transfer of learning’ suggests that education does little to actually improve intelligence or critical-thinking skills in the long run. Consider the way you approach your own education. Most of us spend weeks cramming for our final exams, but aren’t at all worried if we forget much of the material the second the exam is finished. Most of us rejoice when a class is cancelled because it means we have less to learn. But there is no proportionate reduction in fees for the cancelled class—shouldn’t we be outraged? If education is about building human capital, why isn’t our focus on accumulating as much knowledge as possible? If it’s about signalling to employers, we can understand that the most important thing to come out of our education is the piece of paper at the other end.

The signalling model predicts degree inflation well. If more and more people have undergraduate degrees, then the signal that such a degree sends becomes less powerful in the job market. This is why smart students are forced into taking postgraduate study—they need to retain their comparative signal. Meanwhile, those who choose not to take a tertiary qualification seem like total slackers by comparison. The signalling model transforms tertiary education into a game where only your relative level of qualification matters.

Canterbury University economist Eric Crampton is the closest thing New Zealand has to a ‘public intellectual’. He blogs at, and regularly appears in New Zealand media to bring an economic perspective to issues such as alcohol regulation, breakfast in schools and the Christchurch earthquake recovery. According to Crampton: “The signalling model says that the value of education mostly comes from the little piece of paper certifying not that the graduate has learned anything but rather that the graduate is the kind of person who is able to put up with a few years of grinding pointless work without quitting, can complete assignments on time, and is smart enough to have made it through. While it would be easy to provide cheaper signals of intelligence, there isn’t a lower-cost way of signalling the ability to put up with years of grind-your-way-through assignments. So it isn’t implausible that much of what goes on at university is providing that signal.“

Crampton believes that degree inflation could continue to get worse in the near future: “About the same proportion of our majoring students go on to pursue an Honours degree now as was the case a decade ago; we haven’t really changed the standards for entering Honours, and our Honours students place as well at Treasury, the Reserve Bank, the bureaus, and the trading banks as they ever have. I expect that this will have changed in a decade’s time; a lot of places are repackaging Honours degrees as Master’s. If employers only pierce the credentialing veil imperfectly, then we could wind up with Master’s being the new Honours.”

By getting a degree and sending your signal, you are helping yourself by hurting others’ chances in the job market. This is the problem with the current approach to tertiary-education policy. By encouraging as many people as possible to study, you leave nobody better off. In standard economic theory, when one person’s action hurts other people, you should discourage that action, perhaps with taxes or regulations. Instead, this Government—and all Governments prior—has a policy to encourage that action, to subsidise tertiary education and make as many students study as possible. Similar to previous Governments, the current Government intends to spend $2 billion over the next year, encouraging school leavers into tertiary study by taking on most of the cost of their university fees. We can only hope that they’ll be ineffective.

A common response to the degree-inflation problem is to focus on job creation—ensuring that there are exciting and interesting careers available to students when they finish university. As VUWSA President Rory McCourt has said, “what students need [are] real jobs when they graduate”. If the issue is a mismatch between the skills and expectations of graduates on one hand, and the jobs available on the other hand, then we might well think that the best solution is to transform our economy so that it supplies the jobs graduates want to work in.

‘Job creation’ sounds like an appealing concept, but it’s unclear what it means in practice. Does it mean hiring more Sociology graduates to be policy analysts, each with a $70,000 salary attached? New Zealand has one of the most effective public services in the world. Bloating the bureaucracy with unnecessary employees seems like a wasteful use of finances that could otherwise go toward more meaningful social development. We all want an economy based upon meaningful jobs, but the fact that these jobs aren’t being provided at the moment suggests that, in general, they’re not worthwhile. Governments don’t have the capacity to create jobs for free, and it’s unclear why we should prioritise creating such jobs over the other, more important roles of the state.

We believe that while tertiary education builds some skills and knowledge, it’s primarily about demonstrating personal attributes. Even if we could create the sort of jobs that graduates feel they’re entitled to, there is no reason to keep pumping resources into higher education. Employers who are offering meaningful work, and so demand bright, hard-working employees, will select those employees with the information available to them. A graduate in a system where everyone has a university degree will be treated the same as a school leaver in a system where most people have no higher education. A job applicant’s qualification is only important relative to the other applicants, and so job creation—if it is possible—does not mean that we can’t deal with the degree-inflation problem.

Josiah Bartlet was wrong: education is not the answer. Our current tertiary-education system costs students tens of thousands of dollars and years of their lives. This is unnecessary. Tertiary education is about showing that you’re better than the rest, but when ‘the rest’ also have degrees, nobody is better off. Governments fuel this problem through policies deliberately designed to maximise the number of tertiary students. By funding our degrees, the Government is condemning society to demand ever-higher levels of education, thus condemning school leavers to ever-longer periods of study. We should be outraged that the Government is subsidising our tertiary education.

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  1. Grant Nail says:

    Wow, so much moaning and the solution is… not fund tertiary education? Education is about discovery and pursuit. It’s about finding things that you like or that you’re good at (both if you’re lucky) and pursue them. You decide which to pursue – will it add value to society? Will there be jobs? The government (and hence the taxpayers) supports those who thinks it’s a good investment and make it accessible to anyone because only you should decide whether to go on studying, not your bank account.
    It is not the government’s fault that people choose degrees that don’t add any value. What sort of jobs do people with BA in English literature really think they’ll have once they graduate? Professional poets? Some, like Carole, do find a job in other fields and are now “answering phones and filing paperwork” as if it’s so derogatory, as if it is so beneath her. Well too bad, the reality is, that IS working from the bottom up. Having a degree does not (and did not) automatically give you a cushy white-collar job. Having a BCom in Management does not mean companies will put you in charge of 20 veteran engineers. If anything it’s the expectation from the graduates that are over-inflated. Everyone wants a cushy job while there are pages and pages ( of long-term skill shortages, a lot of them trades that do not require tertiary education. It’s not a matter of cannot start from the bottom. It’s a matter of not knowing or not wanting to.
    What we have here is not a problem in government overfunding tertiary educations – it is a disconnect between students and job markets, between what they want and what society wants. Going back to the dark ages where only the rich can afford to study will only destroy our economy.

  2. aimee w says:

    While you do make a good point, and one with which I broadly agree – that everyone having degrees is not only not useful, but actively anti-useful – I’d like to make one small point myself…

    Tthis article, like so many, doesn’t seem interested in distinguishing between different _types_ of degrees and their value.

    For example – we need more engineers. And engineers? I _definitely_ want them to have at least one engineering degree under their belt. Ditto microbiologists, for example, and indeed most of the scientific disciplines (not necessarily computer science, of course). Do we need more film and media degrees? Or BComs? Or more English Lit degrees? Quite possibly not… And we definitely need to get over looking down at vocational qualifications – not everything is suited for being taught at a university, and nor should it be.

  3. Nick Cross says:

    Firstly it should probably be noted that although our names are both on the article, Wilbur did the majority of the work for it.

    Grant: Education can absolutely have non-pecuniary value. However in this country we justify massive government spending in tertiary education because we see it as an investment with economic returns, I really don’t think ‘discovery and pursuit’ are a substitute for that. There are many things which can provide happiness and fulfillment besides education. And while many people enjoy tertiary education and spend a lot of time pursuing it (on average people from white, privileged backgrounds are over-represented), others get little out of it.

    Aimee: It’s absolutely true that the extent to which education provides necessary skills will vary by field. But degree inflation can occur in any field, i.e. there might be jobs in engineering where the requirement for the average entrant has gone up from a bachelors to a masters.

  4. LG says:

    Isn’t the problem the idea of universal access to tertiary education?

    The belief that the ability to do tertiary level study and therefore gain access to higher paying jobs is not limited (too much) by you/your family’s financial circumstances. Either you heavily subsidise tertiary education and make it ‘too accessible’ or you lock people into inter-generational low income levels.

  5. FS says:

    Swiss cheese has fewer holes than this article.

  6. Abebe Bikila says:

    There has not been any mention in this article about brain drain; where the young and bright leave for higher salaries to Australia. It would be interesting to know if there is a positive relation between brain drain and the increase funding to tertiary education by NZ government.

  7. Pop cultcha says:

    @Abebe Ummm, have you seen The GC