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Graduation and earnings? (Source: News Corp Australia)
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The mistake we often make is to assume education policy alone can drive social openness to upward mobility.
It is difficult for us to give up the idea of the omnipotence of higher education.
Human capital theory assumes that education determines marginal productivity, and marginal productivity determines earnings. With some caveats, the value of investment in education is a function of lifetime earnings.
They are heroic assumptions. First, and fundamentally, as the OECD puts it in Education at a Glance, ‘‘a host of education-related and context-related factors … affect the returns to education’’. Analysis tries to remove all factors other than the education itself, but this means separating elements that in reality are not wholly separated. After all of the other factors have been taken out, the residual is often a weak rather than strong relationship.
Earnings are affected by social background, by family income, by type of secondary school attended, by social and family networks at the point of entry to higher education, by networks in the transition to work and networks through the career, by custom and hierarchy in professions and workplaces, by the system of wage determination, by the industrial balance of power, and by the configurations and fluctuations of national and regional economies.
Some quantitative studies find that the relationship between graduation and earnings is non-linear. The apparent income effects of higher education are magnified at the top end of incomes - though here also the effects of family background on job and income are also magnified; the income effects of attending an elite institution tend to inflate; and field of study differences in earnings fade away.
In combination, these findings suggest that other factors such as family connections and super-manager salaries are likely to be driving returns at the top end. This not only underlines the point that factors other than the education itself are at play, it also suggests that the ratio between the different causal elements is itself variable: higher education has less effect on high-income earners than on people in the middle.
Also it is often difficult to accurately attribute enhanced value to individual employees who work in a combined workplace, as do most employees.
Fourth, students often fail to follow a human capital logic in real life. The private benefits associated with education include social status as well as incomes. Many though not all studies find that status effects, status signals, and variations in status by field of study or type of institution, appear to be stronger than income effects.
Prospects of assuming a managerial role seem especially important, relative to earnings, for graduates from prestige higher education institutions, and those with generic degrees working in the public and non-government organisation sectors, which includes many women. Moreover, students rarely take forgone earnings into account when making enrolment decisions, and when doing so they mostly know only about earnings in their chosen occupation, not in other fields.
Finally, the fit between higher education and labour market occupations is only partly coherent - especially in relation to graduates holding generic degrees, and also in the case of the many graduates who work outside fields of specific training, a trajectory which often but not always generates income penalties.
In Britain and the US, the growth of social and economic inequality is taking place in societies in which formal participation in higher education is at a historic high. Is higher education then responsible for the pattern of unequal earnings? If education produces human capital, which determines marginal productivity, and that determines wages then the quantity and quality of higher education is responsible for growing income inequality.
Is it really the case that inequality of individual skills and productivities is greater in the US today than in the half literate India of the recent past or in apartheid South Africa? If that were the case, it would be bad news for US educational institutions, which surely need to be improved and made more accessible but probably do not deserve such extravagant blame.
Despite the meritocratic legitimation function of higher education, and prestige consumption of Ivy League and Oxford/Cambridge degrees, among the super-rich the role of the sector may be declining. As private fortunes grow, and especially as inheritance returns to a primary role, it becomes less essential to go to university.
In the US, Joseph Soares finds that 22 per cent of the children of high-income professional families enrol in tier 1 and 2 universities and colleges, and only 14 per cent of children from high-income non-professional families.
For most rich children an Ivy League education is not essential. In fact 19 per cent of the children of all high-income professional families, and 36 per cent of those from other high-income families, do not attend college at all. If the powerful become more decoupled from higher education, this will further fragment consent to higher education as a common social project.
The paradox, of course, is that higher education remains potent in creating new prospects for individual students from low SES backgrounds who lack family capital, even while it has a truncated impact on the overall distribution of opportunities.
Research finds that students from social groups under-represented in higher education gain the largest benefits from it, relative to their compatriots who do not participate; and these students also benefit especially from education in elite institutions. Conversely, students from socially advantaged backgrounds depend on higher education the least for access to social status, income and professional work, even while they participate at the highest rate.
What higher education cannot do on its own, despite the supply-side promise of human capital theory, is expand the number of high value positions in society, so as to enable expanded mobility into the middle and upper echelons of society.
In the absence of absolute growth in the number of opportunities - or what has always been more unlikely, a redistribution which would reduce the opportunities to some families from the middle and/or upper layers of the SES distribution - competition into and within higher education can only become more intense, as middle class families jostle for position and bring every possible asset to bear on the competition to secure advantage. Until the political economy changes, that is the future of British (and Australian) higher education.
Simon Marginson is professor of international education at the Institute of Education, University College London. This is an edited extract of his speech to the Society for Research into Higher Education’s 50th anniversary conference in London last week.
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