Britain's problem is not a shortage of highly skilled graduates but the failure of UK employers to make good use of them, a think tank report argues today. There is no evidence of an overall, high-level skills gap and there could even be a "glut" of graduates by 2010, with an estimated 2m new graduate jobs but 2.3m graduates, says the Higher Education Policy Institute.
Libby Aston and Bahram Bekhradnia conclude there is a skills gap in jobs requiring intermediate skills, some of which are being filled by graduates, but there is no conclusive evidence that they are "growing" these jobs into graduate jobs.
There is going to be continuing strong demand for higher education - the government's 50% participation target, they believe, is perfectly possible - as the alternative opportunities for non-graduates shrink.
"Because the assumption is made by employers that graduates represent the top end of the population cohort in terms of skills and ability, the higher the participation rate, the less opportunities are made available to non-graduates. As the participation rate increases, it becomes rational for anyone within or near that ability spectrum to enter higher education; they feel obliged to in order to ensure they have access to the jobs they want," argues the report, Demand for Graduates - a review of the economic evidence.
They quote Alison Wolf, of the London School of Economics, to show that when only 10% of the population have degrees, someone in the top 25% of the ability range will still have plenty of job opportunities and it is a rational decision not to bother with university. But once more than 50% of the population holds a higher education qualification, the same employer that was targeting the top quartile of the population in terms of ability will now make the assumption that they require a graduate.
"A non-graduate will not be able to apply for this job. Their ability has not changed, and the job requirement has not changed, but they can no longer access this job opportunity. It has become rational for that individual to choose to obtain a degree qualification ... this is why student numbers will continue to grow."
With inequalities in wages growing in the UK and US, the social case for widening access to working-class and ethnic minority families becomes stronger - and realistically this means increasing student numbers.
"As participation in HE continues to increase, and the opportunities for non-graduates continue to decrease, the strength of the social case for widening participation becomes increasingly compelling. This in turn generates a strong case for increasing participation, because, realistically, it is not feasible to widen participation without increasing participation. To do so would necessitate a forced reduction in participation in higher education from the middle classes, which in political terms is highly unlikely."
The economic case for the UK producing more graduates is less clear-cut even if, as predicted, 80% of new jobs will require graduate skills. The majority of vacancies will still be replacing old jobs, and the skills gap identified for technicians and skilled trades is unlikely to be met by higher education; Ashton and Bekhradnia are sceptical that the much-trumpeted foundation degrees will fulfil this function.
Young people don't want to do a lot of training to go into a declining industry and, considering that new growth areas in the service industries require broader, generic, more flexible skills, it is rational for them to choose broader qualifications rather than specific vocational skills. According to them, the jury is still out on whether graduates going into jobs such as marketing and sales, advertising managers, physiotherapists and social workers, are transforming the jobs or simply edging out non-graduates.
They also question the optimistic "new growth theories" and "endogenous growth models" that have driven the Blair government's policy and inspired several other countries to expand higher education. The key claim is that a more highly skilled worker is a more productive worker. "The logic of the argument is then very appealing. An increase in skills produces an increase in productivity, which in turn produces an increase in GDP per head, thereby achieving the ultimate aim - economic growth."
But although there is a strong correlation between spending on higher education and economic growth, researchers have not been able to demonstrate that one causes the other. "There is no clear evidence that graduates add value simply by virtue of being graduates. They may, but this is unproven."
In any case, a shortage of graduates is not likely to be a problem in the UK, the paper argues. Skills and knowledge do not in themselves necessarily add value in the workplace unless they are combined with capital investment, innovation and effective use of technology.
Rather than go for high performance, British firms all too often seek competitive advantage through mergers or cost-cutting, including moving manufacturing abroad. "Increased high-level skills are a necessary but not a sufficient condition to increase productivity ... The stubbornly low demand for high-level skills and their utilisation in the UK needs to be given equal focus to the supply of high-level skills."
Universities have a key role to play in innovation and the creation of new knowledge, however. The UK has a strong science base but lags behind in patenting and commercialisation, say recent reports. So there is a need for a substantial number of highly skilled and educated individuals, add the authors, who warn that for this reason the quality of higher education must not suffer in the coming expansion.
"Considering the projections of increasing demand for higher education and the continued pressure of limited availability of additional public funding, a scenario can be envisaged where an increase in the number of graduates actually has a negative impact on economic growth because the highest levels of quality have had to be sacrificed.
"This scenario is by no means inevitable: a fully-funded expansion would not imply a reduction in standards or quality, but it is important to be aware of the possible consequences if it were to happen. The government's determination that the expansion of HE will not result in quantity being substituted for quality is an essential commitment on its part."
Demand for Graduates - a review of the economic evidence, by Libby Aston and Bahram Bekhradnia, is available at www.hepi.ac.uk
