Is a degree worth it?

0:00Paul Kelso:Hello, Ed Conway here. Here is what might sound like a slightly random question. What do AirPods, bananas and a pair of shoddily made running trainers from the 1970s have in common? On the surface, not very much. But on my podcast, Stuff Matters, I will uncover the deeper stories behind each of them. You will see how together they tell a fascinating new story about the world we live in. The first full series of Stuff Matters is out now. Just search for it on your podcast app and follow. Coming up on The Daily, with A-level results out soon and the cost of university at an all-time high, we're asking, is a degree still worth it?

0:40Paul Kelso:Hello, Ed Conway here. Here is what might sound like a slightly random question. What do AirPods, bananas and a pair of shoddily made running trainers from the 1970s have in common? On the surface, not very much. But on my podcast, Stuff Matters, I will uncover the deeper stories behind each of them. You will see how, together, they tell a fascinating new story about the world we live in. The first full series of Stuff Matters is out now. Just search for it on your podcast app and follow.

1:13Paul Kelso:Hi everyone, a very warm welcome back to The Daily, especially if someone in your family is waiting for A-level results. Look, many of us will remember it as a very stressful time, the end of school, the beginning of the rest of your life. and for many that involves several years at university. Now just to be clear, A-level results day means precious little to those with accents like mine. Higher results day in Scotland was almost a couple of weeks ago now. But no matter which part of the UK you're from, you're going to find plenty of people questioning the value of a degree and whether or not university is still worth it.

1:52Paul Kelso:Graduate incomes have been squeezed, the costs of university have spiralled and who knows what AI means for the future of work. Our business correspondent Paul Kelso is here, but before him, let's hear from a couple of students into the final hours of a very nervous summer. First, Lennon, who wants to be part of the world's most important profession. So I plan on going to university because I would love to go into journalism. In my opinion, university is absolutely worth it if you factor in the greater career prospects and average graduate salary in comparison. So it's all about increased opportunity and money for Lenin.

2:28Paul Kelso:What about Django? So I am planning on going to uni and I'm going to be hopefully studying politics and economics. And post-uni, I want to go into some sort of civil service, politics, think tank. The degree really opens up to access to that work. Now Paul Kelso has been taking a look at the utility of university. Perfectly understandable, given his daughter is waiting for her results, just like Django and Lenin. Paul, look, it's fair to say, isn't it, that for a couple of decades now, we have seen governments being keen on as many going to university as possible. Absolutely. We go back just over 25 years ago.

3:06Tony Blair, then Prime Minister, set a target of 50 percent of school leavers going on to get a degree. And at the time, few people would have argued with the logic of that. There's also a way of extending opportunity away from those at the upper ends of the wealth and class spectrum who typically would have enjoyed access to university and a way of increasing opportunity and reducing inequality in society. That certainly was the theory. And that pretty much has continued. It's seen a big expansion of the higher education sector. And it's still, if not quite an explicit policy goal, there is a general aim to want as many people to access higher education as possible.

3:51They are seeking, and I don't think they're the first government to do this, to try and perhaps as a consequence of the focus on university education, there's perhaps not been as much focus as there might have been on vocational skills. They introduce T levels, which are an equivalent to A levels. I suppose we might summarize as more practical career paths and to ensure that we get the skills mix right. So you aren't just producing graduates who can fill white collar roles, but also those in the kind of jobs we need, frankly, to make the world work. Ultimately, there's certainly been no devaluing of university as an option for 18 year olds.

4:31Paul Kelso:One of the big differences between, you know, when my folks were going to university and the situation as it currently stands is the cost, the huge cost. Just try and put into perspective how much it does cost kids these days to head off to uni. Yeah, today's 18-year-olds face costs and challenges that their parents' generation simply didn't. It's been an enormous transformation. When Tony Blair set that goal of 50 % going to university back in 1999, university was effectively universally free. And there were maintenance grants, can you imagine, to help you fund your lifestyle. Tuition fees have gone up this year for the first time in a while now,£9 ,500 a year, often funded by loans.

5:14There are maintenance loans, depending on your parents' income, that are available. The average graduate, though, leaves university at the moment with£53 ,000 of debt, and that is repaid by a pretty new system that amounts to a graduate tax. If you're earning£25 ,000, you'll be paying 9 % of your income above that for up to 40 years.

5:37Paul Kelso:Is that putting people off, do we think? It doesn't seem to be. The number of applicants last year to university went up. My understanding is that the number of applicants that will be published when the A-level results and the university applications that follow will see a small increase this year as well. But it is a fact that when economic times are tougher, academic applications go up. Many people take it. It's often a safe harbour to get better qualifications or seek qualifications rather than diving straight into the workplace. if the jobs market and the economy doesn't look right. University applications are absolutely holding up despite those rising costs of fees and of borrowing.

6:24Paul Kelso:And of course, there is the cost of living crisis that everyone has had to deal with. That at some point has to impinge upon students, even if it only means, you know, not popping down to the union quite as often as I used to. Yeah, absolutely. Imagine trying to live your lifestyle knowing it was all on the never-never. It was all borrowing. but that is essentially certainly for students who are encouraged to devote themselves to their studies and to not dilute their attention on their courses by working. It's a huge burden of debt that's built up. New research suggests it's costing about£20 ,000 a year for undergraduates to live a socially acceptable basic lifestyle through the combination of rent, food and the rest of it and inevitably many many undergraduates have little choice but to work to try and underpin that lifestyle because the borrowing only goes so far and many many people simply do not have the cushion of parental support that will enable them to support their living while they study.

7:25Paul Kelso:But of course part of that cost benefit analysis has always been that if you go to university your starting salary will be higher you have greater earning potential over the whole of your life. I mean, does that still stand up? It does. And this is something that the university sector unsurprisingly points to, but the numbers bear it out. Starting salaries for graduates, put it about£34 ,000. Now, there are many ways of measuring that number, and there are very wide disparities. If you go into an investment bank as a new graduate, you are going to be earning a very different number to if you go into the civil service graduate programme.

8:03Now, the minimum wage sets, if you work a 40-hour week, sets the minimum salary at£26 ,000. Remember, that goes to anyone irrespective of their qualification. And the minimum wage is rising quite fast. That means that gap between starting salary and minimum wage has closed. If you look across a whole career, it's even clearer. There were numbers last year for every graduate between 16 and 64 working last year in Britain, the average salary was£42 ,000. That compared to just over£30 ,000 for non-graduates. So there absolutely is a graduate premium for those who did a degree. Now, of course, all of this is backward-looking data.

8:47Who knows what the job market looks like in future? But you do earn more if you have a degree.

8:51Paul Kelso:So let me coin a phrase here. So as of this point, Paul, we're not seeing people experiencing graduate regrets, you know, looking back at their university education and saying, what on earth did I do that for? No, it was interesting. There's an interesting bit of research from the University of Bristol I came across, which looked at exactly that. Using hindsight, it surveyed graduates and asked them, knowing what they know now, would they have done something differently? And almost half of them said they would have done the same course at the same institution. About a quarter did say they might have chosen a different place or a different course.

9:27And the reason cited for that was they felt the course they'd chosen hadn't set them up as they'd wished for their careers. So there was, people would have liked to have known and made a better choice for the career they ended up in. But only 3 % of the people they spoke to said they wouldn't have gone to university at all.

9:45Paul Kelso:The reason we're talking about this today is that A-level results, T-level results day is Thursday. And your daughter is one of those who will be waiting for her results. I mean, has she been thinking about all these questions, about whether or not university is worth her time? Yeah, I can tell you we're all super relaxed as we approach A-level results day at home. Totally. Really chilled summer. um has she uh she is totally committed to going to university she's been fortunate enough to get some offers that she'd like to pursue a career she has in mind um i can tell you i've been thinking about the cost of going to university quite a lot when you try and make some provisions um but it's going to be expensive for her many many kids go to university because they want to study something passionately and that's still probably the best reason for going of all um so it's absolutely consideration but certainly my daughter goes in with her eyes open as to as to what the the financial consequences will be of choosing to study and pursue a particular career artificial intelligence ai i mean it is changing the way that we work it is changing the job market and i'm wondering whether or not it's it's your kind of view that we are going to see it changing so significantly that people will be considering different courses or considering just not going to university at all?

11:10Yeah, I think it's the big unknown, genuinely unknown, that hovers over not just the question of what graduate jobs might look like, but what everyone's jobs might look like. And nobody knows quite how fast it will happen, but there is already evidence coming through recruiters of a decline in the number of graduate roles being posted and sought to be filled. Ask universities, they will argue that having knowledge of AI systems, of how to use it, how they might impact on the workplace, of being the human in control still has enormous value, but there are huge implications already. Someone who did a modern languages degree, he might have thought they had a career as a translator.

11:55Well, that job might already have disappeared if it can be plugged into an AI. It's the biggest question hovering over the entire economy globally, let alone universities. It is a consideration. Law, accountancy, think of computer science, which was the absolute key to future relevance. Most of that coding can be done now by an AI. So there is an enormous transformation going on. My hunch is the kids who are going to be deciding whether to go to university when they get their A-level results will be better placed to work it out than I am and we are.

12:28Paul Kelso:Now, of course, we've mentioned the fact that successive governments have maintained that university, if you want to go there, get yourself there, it's a great idea. But I am right in saying that we have also, over the past handful of years, started seeing politicians eulogising apprenticeships, you know, the Labour government at the moment, talking about getting people into the trade, sparkies, chippies, plumbers, so on. Yeah, absolutely. Some of the things we do know about the economy, We've got an energy transformation going on at the moment that's going to require an enormous amount of hardware to be built.

13:01We need the people to design and build that. Now, some of that requires degrees. Some of it doesn't. That's just one example where there are alternatives to university that the economy is going to need. And at the moment, there are still jobs AI can't do. I mean, it can't change your washer. It can't change your catheter. Probably about the mix of skills we have. I think one of the main things is to perhaps to not make the degree the be all and end all. Perhaps that has devalued in the eyes of some, or we might call harder skills, more practical skills. And I think that is what's going on right now as governments, not just here, but around the world, try and work out how many people we are going to need to do what to deliver a thriving economy that delivers for an aging population and all the rest of it.

13:49These are big decisions.

13:50Paul Kelso:One thing we don't seem to hear a lot of these days is people supporting the idea of study for study's sake, of going to university and choosing one of those topics that doesn't naturally lead you to a career. I mean, is there a bit of truth to that? I mean, if you want a job, shouldn't you be doing something that leads you to a job? There's certainly a sniffiness and a bit of snobbery around. And it's striking to me how much of it, how much many of the people casting doubt on the value of degrees comes from people who have got degrees, who enjoyed a free university education. The university sector has expanded massively.

14:27And are all degrees equal in the eyes of employers? No. But who's to say where the value lies? you might study medicine and emerge after seven, eight years as a doctor, serve the NHS faithfully for your working career. Is that valuable? Absolutely. There's not a career in English literature, but the skills that you learn help you in your working life. Equally, there are enormous numbers of people with no qualifications at all who prove to be hugely successful. Who's to say what we will do individually with the education we're given?

15:01Paul Kelso:Look, if we are seeing people for whatever reason, choosing not to go down the university route, people that would ordinarily have or have been expected to back in the day. Are we heading towards another kind of divide in society with the blue collar workers and the white collar workers, those that possess the university education and those that don't? Or are we living in slightly more egalitarian times than before. I think there's a danger as university becomes more expensive that access once again becomes effectively the privilege of the wealthy and the elite. Now that is as long as degrees and the right degree and the right kind of university, the status around universities, which those institutions are very keen to protect, still matter and still open doors.

15:53And we're going have to look at how many of our prime ministers went to Oxford to suspect that that still does apply. But if the changes in the workplace we've been talking about are right, then perhaps the value of the degree itself is changing and that might offset that change. But I would say that perhaps the biggest concern will be that this rising cost means that only those whose parents bluntly can afford to support them, can afford to go, will just entrench the inequalities that ultimately opening access to university 30 years ago was supposed to try and address.

16:30Paul Kelso:Paul, I can feel your nerves ahead of that envelope being opened in the not too distant future. Best of luck for tomorrow. Paul, thanks very much. Thank you very much, Neil. Take care. Thanks, Paul. And the very best of luck to everyone getting their results. The Daily's back again tomorrow.

16:51Paul Kelso:Hello, Ed Conway here. Here is what might sound like a slightly random question. What do AirPods, bananas and a pair of shoddily made running trainers from the 1970s have in common? On the surface, not very much. But on my podcast, Stuff Matters, I will uncover the deeper stories behind each of them. You will see how together they tell a fascinating new story about the world we live in. The first full series of Stuff Matters is out now. Just search for it on your podcast app and follow.