How valuable is a University education these days?
In the United States and England, over a 60 year period, the cost of university has risen sharply, leading to increased indebtedness among graduates; a depressed job market that has seen many young graduates forced into low-paid, non-graduate work; and the proliferation of alternative educational opportunities online, which are generally cheaper and require a lower time investment than a traditional education. 
The American venture capitalist Peter Thiel has been a particularly vocal critic of the modern higher education system. His criticisms largely align with all of the aforementioned; his biggest concern being that higher education is a bubble.
1. Rising costs of education (and the attendant debt) with no discernable improvement in quality.
2. Acquiring a university degree is more about social signaling than actual learning.
What this means is that a large number of graduates are pursuing degrees for fear of being socially stigmatized as unintelligent and/or lazy. This type of herd mentality means that people do not think through the value of a university education for themselves and are instead compelled, through social pressure, to pay premium rates for an over priced product; leaving them, Thiel argues, at the end of their lengthy university education with considerable, paralysing debt – costs which they might never totally recoup.
This runs contrary to the conventional wisdom, which says that graduates earn higher incomes than non-graduates and can expect, over time, for their investment in education to pay off.
The historical data certainly bears this out. The Fusion Network recently published a fantastic interactive chart (factoring in the opportunity costs and debt of a four year degree), which demonstrates the differences in lifetime earnings, in the US, between graduates and non-graduates: on average, graduates earn more over time.
Similarly, in the UK, the average graduate can expect to outperform non-graduates in lifetime earnings. In fact, the economic outlook for the average non-graduate with only a GCSE level qualification (21% of the population) is pretty bleak. By the age of 32 they can expect their annual salary to peak at £19 000. For the average A-level graduate (21% of the population), their prospects are only marginally better: a maximum of £ 22 000 a year by age 34.
This, compared to the average graduate (38% of the population) whose annual income peaks at age 38, at £ 35 000.
Of course, the biggest problem with this data (and which the statisticians openly acknowledge) is that it is backwards looking. It examines the lives of people who made career decisions over twenty years ago, under a very different set of historical circumstances.
Can we always use the past to accurately predict the future?
To emphasize this point, Peter Thiel draws a comparison, in this Intelligence Squared debate, with sub-prime mortgages: In 2005, the historical housing data would tell you that house prices always rise.
That is a sobering thought indeed, and it does seem to be the case that many of today’s indebted graduates are struggling to establish themselves, delaying marriage, family and mortgages for a longer period than previous generations.
The other important thing to consider, Thiel argues, is that the increasing amount of onerous debt that graduates are forced to take on, prevents them from participating in risky entrepreneurial ventures, limiting their range of potential career choices.
It also means society, overall, is deprived of high-value innovation.
Of course, many technological innovators don’t have degrees. No doubt this is what Thiel is partially informed by. You don’t need to do a degree in computer science to learn how to code.
But what about the unquantifiable benefits of university?
Is it not valuable simply on its own terms? A university education provides access to history’s great minds and ideas, an intellectual experience that you won’t get anywhere else.
Although this is certainly not a misleading argument, it may been stronger in the pre-internet era. Nowadays, however, young people have an unprecedented level of access to information. There is a plethora of educational resources online, most of which are significantly cheaper than the average 3-4 year bachelors degree. Although, the actual market value of these qualifications has yet to be conclusively proven. They are too new.
Of course, there are some degrees which will probably always require long periods of skill acquisition and study: medicine or architecture, for instance.
But do you need to make a similar time and financial investment if you’re pursuing a degree in business or graphic design? That’s less certain.
In fact, Charles Murray, co-author of the controversial book, The Bell Curve (1994) argues that the bachelor of arts degree is a meaningless qualification that signifies nothing concrete to a potential employer. You’re better off, he says in the same Intelligence Squared debate as Peter Thiel, getting a professional diploma of some kind that can take as little as six months to complete, but which equips you with practical, recognizable skills for the job market.
It is a common cliché that after each educational milestone, at the start of the next phase, be it middle-school, high-school, university or postgrad, you are told to forget everything you have hitherto learned about your discipline and start fresh. The previous phase was just an academic, hurdle-jumping exercise to get you to the “real” stuff. I always felt like that to an extent when moving onto a new stage in my education, mainly to the difference in structure and teaching style, but never so much as when I first attempted to enter the working world.
I spent a year trying to break into the job market after my undergraduate degree, before eventually realising that if I was going to get anywhere I needed to achieve a higher level of education. During this time I spent 6 weeks in an unpaid internship at a think tank in London where I was asked by the Director about my career aspirations, when I mentioned possibly going into academia, I was told in no uncertain terms “don’t become an academic, the whole bloody thing is so corrupt”.
So has it become little more than a racket?
Some degrees lead you to a job (the real world), others to just to more academia (the opposite); in which case, if you want to enter the real world you have struggle to get onto the ladder and leave your degree behind. The trope of referring to the career ladder as the “real world” is not entirely unjustified when you consider what the academic world is. When you describe a position of hypothesis as purely “academic” it is conjecture, of no consequence. Academia teaches you, in some sense, how to learn but not how to live and survive. After the first few months of applying for jobs and attending interviews, I began to get the impression (unfairly, I think) that employers saw undergraduate and post graduate degree as four years spent out of the real world. That is not to say that the qualification itself is without merit or useful as a prerequisite to something else.
I can certainly rise to the defence of my masters as far as its content was concerned, it was one of the most challenging and enjoyable experiences of my life, but the sense in which it was a box-ticking exercise was still ever-present. What I do know is that my undergraduate degree was not sufficient to get my foot in the door for the kind of work I was applying for, so ultimately I had to invest in a bigger foot. I went to University at a time when ex-technical colleges were being converted to universities and Blair’s New Labour in their infinite wisdom (“education, education, education”) decided that a university degree was something everyone should have. By the time I finished undergrad in 2006, a humanities degree didn’t mean what it used to and there were all kinds of anecdotes flying around about PHD graduates applying for plumbing internships and the like.
So then the next dilemma presents itself: Do I struggle into the working world from the bottom or do I put it off further to get more qualified? The risk of that being another year spent out of the job market. While I don’t regret my decision my timing was appalling – I finished my masters in September 2009, in the bleak nadir of the economic crisis, and spent 8 months temping in admin jobs before a research consultancy took a chance on me and, while I am sure my MA added a great deal to my CV, an interview situation is a great playing-field leveller. Having now recruited employees myself, I know that the degree is largely only a preliminary consideration.
And then you have arrived and that is that. Nobody wants to know about your degree when you have been working in your field for four years – there are much more important considerations. Why is this? Well this problem is more acute with humanities and other content-based disciplines – if you study nursing you will most likely become a nurse, engineering an engineer etc. But the only way to truly follow a humanities degree through to career level is to go into academia. I know many English and History graduates and none of them are English Professors or Historians.
Harvard Uber Alles
There is still enormous value, though, in acquiring a degree from a prestigious institution.
Graduates of Harvard University are some of the wealthiest and influential in the world. It counts more billionaires amongst its alumni than any other Ivy League institution and has educated the majority of elected US presidents.
A powerful selling point, a degree from Harvard confers a great deal of social capital on its graduates who are perceived to be intelligent, hard-working and competent. It sends an extremely strong signal, as do qualifications from other elite institutions.
Conversely, a degree from a poorly perceived university can send the opposite signal.
This is where the opportunity and financial costs of university are almost impossible to justify. In fact, they may even be harmful.
There is no refund for a degree from a university that has the potential to actually damage your prospects in the job market. Undiscerning students hopeful that just possessing a degree will be enough, irrespective of the quality, need to be made aware of this.
Universities are somewhat culpable in this regard. It’s not only the exploitation of the hopes and dreams of inexperienced eighteen year olds, but that the enormous rise in fees is largely to do with the fact that universities are using them to cross subsidise research activities. In effect, people are not paying for the product they’re being sold.
The universities are behaving rationally, because they are ranked according to their research output, but it does present a huge conflict of interest when selling a very expensive degree to a prospective student. The phrase “ripping off” comes to mind when the actual market value of that qualification is low.
So, is it worth it?
It’s usually pretty lame to conclude an essay with a wishy washy “time will tell” or “it’s all relative anyway.”
Except in this case.
We don’t know yet whether higher education is a bubble, as Peter Thiel argues it is. That will only become apparent later. Right now, prospective students have to trust historic data. That is their decision. A risk they must be prepared to take.
The value of nascent online opportunities is also not yet clear,
The only reliable advice that can be given to academic hopefuls is to resist social pressure and really examine the product they’re purchasing. Make sure it’s right for them.
Because, unlike any other large purchase, this one cannot be refunded, sold or traded. You are wedded together, for better or worse.
(Important to mention: This is mainly relevant to people who have studied in the US and the UK. This is because more people go to university in these countries, so understanding the positional advantage of university is more interesting in that regard, than in developing countries where the general level of educational attainment is low and university graduates form a small proportion of the population.)
We won’t get into the cost of living debate. Too complex and wide ranging to go into here. But might be a good future topic.