Job market has changed but universities pump out graduates

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Job market has changed but universities pump out graduates

Vangelis Tsiligiris 26 August 2012 I

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With the rise in fees in the UK and elsewhere, higher education institutions have started exploring ways of responding to anticipated increased expectations of students. Investment in sport and IT facilities and additional teaching are some of the ways in which institutions are trying to respond to the ‘value for money’ conundrum. However, I think that we are missing a really important trick. Presumably, for a change, we can all agree that if we were to ask current and future students what they would consider to be the most rewarding outcome of their time and money investment in higher education, they would answer “a job”. Sadly, not many institutions can guarantee students that they will be able to find a job any time soon after graduation. In the recent past, employability has been one of the most popular catchphrases in higher education. However, employability does not mean employment; it means the propensity or the readiness of students to fulfil employment market requirements. So perhaps the main question that should be asked today is: to what extent is the global economy able to create new jobs at the same pace that higher education institutions produce graduates? Rise of derivatives has changed employment In my opinion, the rise of markets for financial derivatives that are primarily traded outside the main stock exchanges – the so-called over-the-counter (OTC) markets – has altered the essence of wealth creation and consequently employment under the capitalism system as we knew it. The main advantages of these financial products are low taxes and the direct negotiation between seller and buyers with or without minimum interference by the authorities. To conceptualise the size of this market, consider the latest report by the Bank of International Settlements, published in May 2012. It states that the total notional value of OTC derivatives reached US$648 trillion at the end of 2011. This is almost nine times the gross world product which, according to the CIA Factbook, was estimated at US$70.16 trillion in 2011. Thus, today an investor can choose to invest in an extensive selection of financial by-products that can generate profits even in cases where the markets concerned are in decline. Moreover, investors are not required to have capital to invest in these financial derivatives; they can simply borrow to invest. This means that almost any individual is able to make money out of money and, most importantly, by investing money they do not have. Where are the jobs? But what has all of this got to do with higher education? For years now, higher education has been considered as the means to social mobility and better employment prospects. Whatever the view you take about the role of globalisation, human capital is considered the cornerstone of the modern economy. This is according to the Marxist view of the capitalist system as being based on the production of goods and services for the creation of wealth. It is also assumed that this production process, whatever its nature and scale, involves some employment, even if that is at a reduced scale as a result of technological advancements. Nevertheless, modern financial products have made this traditional ‘investment-production-wealth’ process less attractive to investors. Today, an investor is much less likely to invest in a factory, a plant or any other form of production of goods or services, when the same investment can generate a higher return in the short to medium term without the risks involved in managing people, inventories and production operations. So the question that arises is: where are the jobs going to come from? That is something very few in higher education, not least in economic policy, have thought about. There has been an over-concentration on ‘producing’ employable graduates, but no one seems to recognise that the economy has been slower and slower at creating jobs. Higher education authorities have been busy projecting a booming future for graduates while there is very little evidence to reassure graduates that they will land a job. A recent report published by the International Labour Organisation states that youth unemployment is rising in all parts of the world and the global rate is projected to reach 12.7% by the end of 2012, with a further negative projection up until 2016. The same report states that education tends to act as a shield against unemployment; however, education does not guarantee employment. Another report, published by the Office of National Statistics in the UK, reveals that the percentage of graduates employed in lower skilled jobs increased from 26.7% in 2001 to 36% in 2011. In specific parts of the world, graduate employment prospects are clearly worse than they used to be. For example, in the US, according to a publication by Associated Press, “the job prospects for bachelor degree holders fell last year [2011] to the lowest level in more than a decade”. Economic change and tuition fees At the same time, within this changing global economic environment, governments tend to receive no income from tax-free financial transactions while the income from corporate taxes is constantly in decline, primarily because of modern tax avoidance practices adopted by corporations. This affects the ability of governments to contribute financially to higher education and consequently increases the need for direct financial contributions by students and their families. In turn, this creates a vicious cycle of students becoming more demanding about ‘value for money’ with a strong emphasis on finding employment after graduation so they can get a return on their investment. Higher education institutions end up with less financial support to meet higher student expectations. Furthermore, the booming derivatives market has changed the mechanism of money creation in the economy. As a consequence, macro-economic policy is becoming ineffective, making economic recovery a painful and unrealisable task while worsening the prospects for boosting employment. In a depressed economic environment there is a danger of having too many highly employable graduates but too few jobs, something that is in line with the findings of the recent reports discussed earlier. This graduate surplus affects the type of jobs accepted by graduates, devalues undergraduate degrees and puts the emphasis on vocational qualifications. Higher education policy has failed to respond At an economic policy level, we have failed to recognise the dramatic change that has occurred in the global economic system over the past 20 years or so; while at a higher education policy level we continue focusing on widening access and achieving recruitment targets without considering the consequences of the oversupply of graduates. So, there seems to be a forthcoming challenge for higher education, both at a policy and operational level, as we enter a period of high student expectations and high graduate unemployment. * Vangelis Tsiligiris is college principal of MBS College in Crete, Greece, and a PhD candidate at Birmingham City University.