The Move to Mass Higher Education in the UK: Many Questions and Some AnswersAuthor(s): Ken Mayhew, Cécile Deer, Mehak DuaSource: Oxford Review of Education, Vol. 30, No. 1, Special Issue: Business, Education andVocationalism (Mar., 2004), pp. 65-82Published by: Taylor & Francis, Ltd.Stable URL: http://www.jstor.org/stable/4127152Accessed: 25/12/2008 19:02

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Oxford Review of Education Vol. 30, No. 1, March 2004

SCarfax Publishing Taylor & Francis Group

The move to mass higher education in the UK: many questions and some answers Ken Mayhew*, C6cile Deer & Mehak Dua University of Oxford, UK

This article describes the course and causes of the expansion of higher education in the UK since the 1960s. The number of university students from modest social backgrounds has increased, but they comprise much the same proportion of the university population as they did 40 years ago. Though personal rates of return from higher education are generally substantial, subject choice matters, while the extent of the returns to society is more problematic. Despite government statements to the contrary, there is still doubt about how productively new graduates will be employed in the labour market. Meanwhile, the sector has had to meet this expansion with tight public funding since the early 1980s. The article considers the impact of this and of the increase in compliance and audit costs. Finally it suggests that the incentive structures applied by the government may have made the different parts of the sector more homogenous than is desirable.

1. Introduction

Recent years have witnessed a significant expansion of higher education' in the UK. This article considers the economic, social and educational consequences. It argues that, particularly in the light of targets for yet further expansion, it is vital to define and explore a number of unresolved questions about the relationship between the sector and the national economy. Specifically it casts doubt on the extent of the economic and social returns from higher education. Section 2 outlines the main features of the expansion and Section 3 is concerned with its causes. Section 4 discusses the consequences for individuals, for the national economy and for the sector itself. Finally some policy questions and conclusions are presented in Section 5.

2. The course of expansion

The Greenaway Report (Greenaway & Haynes, 2000) provides an excellent and succinct picture of the expansion of the sector. Much of the material in this section is a brief, updated version of material in that report.

Figure 1 shows the trend in the age participation rate since the early 1960s. The

*Corresponding author: Pembroke College, Oxford OX1 1DW, UK. Email: ken.mayhew@economics.ox.ac.uk ISSN 0305-4985 (print)/ISSN 1465-3915 (online)/04/010065-18 ? 2004 Taylor & Francis Ltd DOI: 10.1080/0305498042000190069

66 K. Mayhew et al.

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Figure 1. Higher Education Age Participation Index (API), 1961-2001: GB institutions Sources: Greenaway Report (2000) until 1996-97 and DfES for 1997-97 to 2000-01.

expansion has not been evenly paced. It was rapid between 1960-1961 and 1972- 1973-from 5% to a peak of nearly 14%. Thereafter the participation rate changed little until a sustained rise started in the early 1980s. By 1988-1989 it had reached

17%. In the subsequent four years the rate shot up to 30%. The index peaked at 34% in 1997-1998, but since then has altered little, standing at 33% in 2000-01. Thus there were two waves of particularly fast expansion, one in the 1960s and the other at the very end of the 1980s and at the beginning of the 1990s.

The expansion of the 1960s, which occurred before and after the publication of the Robbins Report (1963), was met in large part by an increase in the number of universities-from 33 in 1960-1961 to 44 in 1970-1971.2 With the exception of the

Open University, the universities founded in the 1960s were of two types (Carr-Hill, 2001): 'new' universities, like Sussex, York and East Anglia, and 'technological' universities which developed from Colleges of Advanced Technology, like Lough- borough, Bradford and Brunel. This expansion was well funded (Perkin, 1991).

The second rapid expansion coincided with the end of the binary divide between

polytechnics and universities,3 though there was also internal growth within individ- ual institutions, particularly the ex-polytechnics. It was this second wave of develop- ments that resulted in Britain acquiring what might be called a mass higher education system (Scott, 1995). In comparison to the expansion of the 1960s, it was not well funded. In fact, as Figure 2 demonstrates, public funding tightened significantly in the early 1980s and even more so in the 1990s.

In the 20 years from 1980 to 2000 the index of public funding to higher education fell in real terms from 100 to 52.5, with capital expenditure in particular being squeezed in the 1990s. Thus from the early 1980s the expansion was accompanied by a dramatic tightening of public financial provision. As a consequence, the unit of resource (defined as total public funding divided by the number of full-time

equivalent students) fell year by year, as depicted in Figure 3.

The move to mass higher education 67

100

90

80

70

60

50

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Figure 2. Index of Public Funding to Higher Education, 1980-2000 (Total funding) Sources: DfES, Greenaway, HEFC.

Since the early 1960s most other developed countries have expanded their higher education systems. The absolute differences between countries in enrolment rates are of limited significance, because of differences in national definitions of what constitutes higher education. However, comparisons of the trends are revealing. Two things stand out about the UK (OECD, 1988-2002). First, the expansion initially was slower than in most other developed countries, but from the late 1980s and early 1990s became more rapid. Second, in most other countries the expansion was not accompanied by a sustained decline in the unit of resource such as

experienced in Britain. However, the British unit of resource was high compared to most other countries in the early 1980s and, even after its sharp decline, it remains

higher than, or at least comparable with, that of many of these countries. At the

160 150 140

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90 _fXI,4 IMP 642 "1 1? -dL~ Il'~ 80

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1960-61 1970-71 1980-81 1990-91 1996-97

Figure 3. Unit of Resource 1960-61 to 1996-97 (index: 1960-61 = 100) Notes: The unit of resource is defined as total government spending in real terms on higher

education divided by the number of full time equivalent students enrolled. Source: Annual Abstract of Statistics, Universities UK (2001).

68 K. Mayhew et al.

same time the unit of resource in the UK today is not significantly different from what it was in the early 1960s. However, both international comparisons and

comparisons over time within the UK are bedevilled by the fact that, as compared to most other countries, the UK figures include a large element of support for student living expenses. At the same time, countries differ immensely in the

proportion of their higher educational establishments which are 'expected' to do

research, and in the proportions of public and private funding. Thus, although it is

commonly perceived, at least within the UK university community and also by the

government's latest White Paper (DfES, 2003), that public funding is scarcely adequate, it is difficult to judge the precise severity of the financial problem by the use of simple international or historical comparisons. The issue of adequacy is further complicated by the financial impact of the increase in the number of foreign students attending British universities (Greenaway & Tuck, 1995; Higher Education Statistics Agency, 1997; OECD, 2002).

3. The causes of expansion

In large part, but not entirely, the expansion in higher education was a matter of

government decision. However, this statement begs a number of questions. The first is what purposes officialdom saw higher education fulfilling. The

Robbins Report (1963) identified four major purposes: (a) instruction in skills; (b) promotion of general powers of the mind; (c) the advancement of learning; (d) the transmission of a common culture. Robbins also stressed that HE should not be

supply constrained. As the Report put it, 'courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so' (Robbins Report, 1963, p. 8).

By 1997 the Dearing Report identified (para. 23) the following main purposes: '(a) to inspire and enable individuals to develop their capabilities to highest potential levels throughout life, so that they can grow intellectually, are well equipped for

work, can contribute effectively to society and achieve personal fulfilment; (b) to serve the needs of an adaptable, sustainable, knowledge-based economy at local, regional and national levels; (c) to play a major part in shaping a democratic, civilised, inclusive society'.

As the above indicates, it would be unfair to contrast the phraseology of the two

reports and conclude unequivocally that narrow 'vocationalism' had entirely over- whelmed other justifications for higher education. There is a liberal, non-economic

justification in the Dearing Report. Nevertheless it is true that the passing years saw a major change of emphasis. Recently there appears to have been far greater stress on the economic purposes of higher education and far less on the advancement of

knowledge and on the transmission of learning for its own sake. To use the phraseology of some educationalists, official attitudes have become more instrumen- talist and vocationalist.

Improving the economic performance of the nation was always one justification for expansion. So was widening access, but as the instrumentalist, and even more specifically economic, justification became more dominant, even the desire to

The move to mass higher education 69

achieve greater access came to have a narrower economic motivation. To the extent that official documents continue to discuss the advancement of knowledge, as

opposed to the production of graduates as lumps of human capital, here also the

phraseology has become more instrumentalist, with particular emphasis being placed on British universities 'catching up' with US universities. Thus the 2003 White Paper baldly declares that the long term challenge for British universities consists of: (i) improving standards; (ii) widening access; (iii) strengthening links with business; (iv) competing globally. This, the White Paper goes on to state, requires universities to make better progress in harnessing knowledge for wealth creation (DfES, 2003, p. 17). Charles Clarke, the present Secretary of State for Education and Skills, has suggested that wider non-economic benefits are 'over- rated' and that 'universities exist to enable the British economy and society to deal

with the challenges posed by the increasingly rapid process of global change'.4 The second question relates to numbers. Whilst the government effectively

decides what is a university and what is not, how much control does it actually have over or exercise on the numbers admitted by universities?

For most of the post-war period, governments did not try to directly dictate admissions numbers to universities. If people were offered university places, local authorities were obliged to pay tuition fees and also, depending on parental income, maintenance grants. The constraint was the physical and financial capacity of the

admitting institutions, as perceived by these institutions. This changed in 1994- 1995 when HEFCE capped numbers (HEFCE, 1994). The reason for this was that, in the previous three or so years, students numbers had increased significantly more

rapidly than expected by the government, thus applying unanticipated pressure to

public funding. The cap was removed for the 2001-2002 academic year. However, governments can exercise control over numbers more indirectly by their

financial provisions. This is indeed what governments have always attempted to do

(Warner & Palfreyman, 1996), but the late 1980s heralded more systematic attempts than before to use funding formulae to influence university behaviour (Tapper & Salter, 1994; Deer, 2002). In 1988 local education authorities lost control of the polytechnics, whose funding became the responsibility of the Polytechnics and

Colleges Funding Council (PCFC). The University Grants Committee (UGC) was abolished and was replaced by the Universities Funding Council (UFC). The UGC had been established in 1919. It was under the Treasury until 1964 when it was

brought under the Department for Education and Science. The UGC was a body dominated by senior academics and it acted as a semi-independent buffer between Government and the universities. The UFC was composed largely of non-academics and was explicitly excluded from any planning role. Its remit was simply a funding one. Both the UFC and PCFC created a type of 'managed market' that 'encouraged a rapid expansion of student numbers at marginal costs' (Shattock, 1998). In 1992 the PCFC and UFC were replaced by separate funding councils for England, Scotland and Wales. These were each responsible for the traditional universities and the former polytechnics (Higher Education Funding Councils for England, Scotland and Wales).

The mistakes of the UFC and consequential early experience of the Higher

70 K. Mayhew et al.

Education Funding Councils provides a good example of how funding formulae do not necessarily work in quite the ways intended. In the early 1990s it was the massive expansion of student numbers that led to the 'capping' described above. It also led to an unbalanced growth of the system. While many of the old universities

expanded slowly because they wished to maintain entry standards, some of the new ones rapidly doubled their intake.

Governments react to political, social and economic pressures. One of these

pressures might be demand for university places, as indicated by applications. A

problem with using applications as an indicator of demand, or more generally of

public pressure, is that a version of Say's Law ('supply creates its own demand') may well operate in this sector. Bearing this qualification in mind, it is noteworthy that between 1970 and 1990 the ratio of applications to acceptances hovered either side of the 50% mark. The massive increase in demand for places in the early 1990s can be attributed to various causes. A HEFCE Report (HEFCE, 2002) cites two forces in particular: first, the increase in the number of pupils staying on at school beyond 16; second, the changing occupational structure of employment, increasing demand for those with level 4 qualifications. A more cynical explanation, not inconsistent with these two 'forces', is simply the very slack labour market of the early 1990s. What else could young people do, in the absence of available jobs?

From the early 1990s the ratio of acceptances to applications increased apprecia- bly-from 50% in 1990 to 71% in 1998 to 84% in 2002. The extent of this increase is in part a statistical effect caused by the inclusion of ex-polys (whose admissions ratios were historically higher) in the UCAS dataset from 1992. However, even

allowing for this, in a very proximate sense these figures might be interpreted as

representing substantial progress towards satisfying increasing demand. The increased demand for university places seems rational given the high esti-

mated private rates of return. Estimation of rates of return is one of the most researched aspects of the economics of education. Chevalier, Conlon, Galindo- Rueda and McNally (2002) provide an excellent survey of the relevant literature, as it relates to higher education. There is not space here to do justice to the extensive

array of work done in the area and evaluated in their survey. Rather we pick out some aspects that are of particular relevance to the arguments of this article.

The first point to make is that the private returns are estimated to be high. Take, as an example, the work of Blundell, Dearden, Goodman and Reed (2000). They use data from the National Child Development Survey (NCDS). This is a continu-

ing survey of all individuals born in Britain between 3 and 9 March 1958. The authors take a subsample of the NCDS, containing those who obtained at least one A level. They compare those who went to university with those who did not.

Controlling for ability at age seven, region, school type, ability tests at 16, A level scores, family background and circumstances, and several features of the individuals' jobs, the estimated rate of return is estimated to be 12% for men and 34% for women (based on hourly wages at age 33). When the authors also introduce controls for subjects studied and for 'qualifications obtained as adult learners', the estimates fall to 10% for men and to 29% for women. As compared to these returns, the returns to non-degree HE courses were higher for men and lower for women, whilst

The move to mass higher education 71

the returns to higher degrees were lower for men and higher for women. However, there are a number of provisos. All such estimates rely on the control variables

capturing the relevant differences between those who go on to university and those who do not, or, in the case of this particular study, those who do not but who have A levels. In other words can one be confident that: (a) there are not other factors

affecting earnings which are not included in the regression; and (b) that these other factors do not also have an impact on the individual's educational choices. In this context the rates of return for women are suspiciously high-is the control group really identical except for the fact its members did not attend university? It is also

important to note that the group being studied made their choices about education in the late 1970s and early 1980s. The numbers in higher education were much lower than they are today. The impact of the numbers in higher education will

depend on how rapidly the demand for graduates has expanded in comparison to their supply.

Having used Blundell et al. as an introduction to some of the issues involved, we now report some of the main conclusions of Chevalier et al. Returns vary significantly by subject, as does the risk of unemployment. Blundell, Dearden and Sianesi (2001) start from dissatisfaction with the fact that the literature has exhibited a wide variety of empirical approaches and methodologies and a wide range of results. They evaluate and develop alternative 'methods and models for the esti- mation of the effect of education on earnings'. Using the NCDS dataset, their

preferred estimates of the return to HE for men generally range between 17 and

20%--rather different from the results reported in the previous paragraph. Dearden et al. (2000) attempt to measure the 'impact of each qualification held by an individual' rather than 'simply including the individual's highest qualification in the estimated equation'. Using the NCDS dataset, they estimate the return to a first

degree for men to be 10% and for women 26%. The bottom line is that, for all of the methodological uncertainties and notwith-

standing the relatively wide range of estimates produced, it seems clear that it has paid individuals to go into higher education, with the very important proviso that subject choice matters (Vignoles & Dolton, 2000).

4. Consequences of the expansion

First, we consider the consequences for individuals. As we have seen, the private returns to a university degree are high, but histori-

cally people from lower socio-economic groups have been far less likely to get to

university than those from the higher socio-economic groups. Government declara- tions have stressed the importance of widening access. Figure 4 shows the social mix of the student population and demonstrates how little the representation of the three 'lowest' socio-economic groups (IIIM, IV and V) has increased as a percentage of the total student body. Often this is portrayed as a failure of government policy. However, it should be stressed that in absolute terms their participation rate has increased. Figure 5 gives a longer run perspective on the participation rates of the three lowest groups as against the three highest. Access has improved, though not as

72 K. Mayhew et al.

Figure 4. Socio-economic Participation: Universities 1979-2001 Sources: UCCA Statistical Supplement; UCAS Online Data Archive.

significantly as policy makers might have wished. Specifically, despite the expansion, the relative chances of lower socio-economic groups have hardly altered.

As we have seen, rate of return analysis shows that it pays an individual to go to

university, but there is a qualification to be made relating to the reference to Say's Law in the previous section. An important counter-factual is how much these same

people would have earned, and what their labour market fortunes more generally would have been, had the supply of university places not expanded from the levels of (say) the mid-1960s, and consequently they had not gone to university. Did

university education make them more productive and hence higher earners? Did it sort high ability people more efficiently, than would otherwise have been the case,

60

40

3 01 1 30 0-In--hIM IV, V 0

1 20 S C

10

0

1960 1970 1980 1985 1990 1995 2000

Figure 5. Higher Education Entrants by Social Class Sources: The Future of Higher Education, DfES White Paper, 2003; Cameron & Heckman (2001).

The move to mass higher education 73

into the 'better' jobs, thus altering the identity of those who were destined to be high earners? If so, did this more effective job matching increase the productivity and therefore the pay of these jobs? If, for a subset of university graduates, screening is the dominant function of higher education, then it still makes personal sense for them to enter HE. But there are two key questions. First, were these people screened into jobs they would have obtained anyway? Second, could the skills and capabilities they acquired have been acquired more cheaply or more quickly by alternative means? In other words, the system may have changed in such a way as to create more hoops through which they have to jump to reach much the same destination as before. People probably react rationally to the incentives they face, but this does not mean that the system that produces these incentives is necessarily socially sensible.

This naturally leads to discussion of social rates of return to higher education. We have voiced some doubts about how much trust can be placed in estimated private returns, but these are minor compared with our doubts about social returns. The social return comprises the social benefits of someone going into higher education net of the costs to society. The central component of the social benefit is, in economic theory, defined as the social value of the extra output produced. Since this cannot be observed, problems occur as soon as we turn to measurement. Typically, econometricians proxy it by the private earnings premium we have already de- scribed. In using this proxy, a number of critical assumptions have to be made.

Notably we have to assume that extra earnings reflect the extra social productivity of the individual. At the extreme, this presumes perfect labour markets and perfect product markets. We also have to assume that the extra productivity is the direct

consequence of the individual's higher education. If, by contrast, higher education serves a screening role, this empirical approach would be likely to produce an over-estimate of the social rate of return. At its most stark, a screening interpretation would imply that HE did nothing to increase the labour market capabilities of an

individual, simply signalling to potential employers that the individual was, and always had been, better possessed of those capabilities than someone who had not

gone to university. An intermediate position would be that an individual's capabili- ties are indeed enhanced by HE, but that these capabilities are not utilised in the labour market.

The importance of social rate of return analysis is simple. High returns can be used to justify expansion of the HE sector. Thus the Dearing Report concluded that the size of the sector was about right largely on the basis of the then estimated social rate of return, which was close to the relevant Treasury test discount rate. Since then the present government's target for a 50% participation rate has sometimes been

justified, at least in part, by newer, and higher, estimates. Layard, McIntosh and Vignoles (2002) report a rate of return of 9% for all first degrees, for men and women together. However, the research results can sometimes be potentially embar- rassing for the government. Dutta, Sefton and Weale (1999), for example, calculate social rates of return to three subject categories of first degree. The return for the first category was estimated at 11.4% for men. The subjects concerned were medicine, agriculture, physical sciences, mathematics and computing, social

74 K. Mayhew et al.

Table 1. Social rates of return to tertiary education (1999-2000)

Social Return in Tertiary Education

Men Women

Canada 6.8 7.9 Denmark 6.3 4.2 France 13.2 13.1 Germany 6.5 6.9 Italy 7.0 Japan 6.7 5.7 Netherlands 10 6.3 Sweden 7.5 5.7 UK 15.2 13.6 USA 13.7 12.3

Note: The rate of return to tertiary education is calculated by comparing with those who have upper secondary education. Source: OECD (2002).

studies, business studies and design. For the second group of subjects (engineering, architecture, mass communication and education) the return was 7.5%. For the third group (biological sciences and humanities) it was actually negative at 3.5%.

How seriously we take such estimates depends on how seriously we take the

methodological qualifications outlined above. A revealing insight is given by some OECD estimates set out in Table 1.

Making all due allowance for different national definitions of the sector, do we

really believe that the returns to higher education differ so much from country to

country? The most reasonable interpretation is that any single estimate for a

particular country is highly error-prone. The countries showing the highest returns tend to be the ones with the greatest earnings dispersion. It is hard to believe that

greater earnings inequality necessarily implies a more socially productive higher education sector. Therefore it is dangerous to use social rates of return to justify, after the fact, previous expansions of the HE sector, and equally dangerous to use them to justify proposed expansions.

The OECD estimates above exclude certain outcomes that many would regard as

important social contributions of higher education. Two such outcomes are any externalities stemming from having a bigger stock of skilled people, which tend to

improve everybody's pay, and any broader benefits (in terms of social attitudes and

behaviour, or artistic and cultural standards) to society of having a large group of well educated and 'civilised' people. The latter outcome is clearly impossible to

quantify sensibly, but there is also a real question as to whether alternative activities that young people might have engaged in would have brought such benefits which were just as great. Various economists have attempted to estimate the former outcome-Moretti (1998) and Acemoglu and Angrist (1999), for example, both with respect to the USA. Typically the effects are found to be positive, but small.

Thus a critical question is whether the money spent on an expanding HE sector

The move to mass higher education 75

could be better spent elsewhere in the education system. It is reasonable to assume

that, at any given time, total educational expenditure is effectively fixed. Therefore, one item of spending inevitably crowds out another. If it were possible to estimate true social returns on all possible items of educational expenditure, a 'merit order-

ing' of potential projects would emerge. Moving down this merit ordering, the total

expenditure allocation would be likely to be exhausted whilst there were still left unfunded projects whose social return still exceeded the relevant Treasury test discount rate (TDR). Thus, even if it were believed that the social return to HE exceeded the TDR, this does not necessarily imply that previous expansions or

proposed future ones are justified. How seriously such arguments are be taken depends in part on the extent to which

the HE system is enhancing human capital and on the extent to which this human

capital is subsequently being deployed in the labour market. As the above indicates, it is also important to consider alternative modes of educating and training people- econometricians have tended to ignore this when considering how to distinguish between the human capital and screening functions of higher education. Nor have

they constructed decisive tests (Chevalier et al., 2002). This is unfortunate and it has caused some researchers and policy makers to approach the issue by direct observa- tion of how graduates are being deployed. Impressions here are mixed. Mason's work, on steel, banking, retail, computer services, and transport and communi-

cation, starts from the observation that often graduates today are going into jobs that, at least by title, were formerly occupied by non-graduates. He asks whether in fact these jobs are being done any better. In some sectors, for example steel and

computer services, employers were making good use of the skills of graduates. This was the case whether they were employed in traditional graduate jobs or in tradition-

ally non-graduate ones. In other sectors graduates appeared to be trapped in jobs that did not need their skills and which could not easily be expanded. The research of Rodgers and Waters on associate professionals gives some further grounds for

scepticism. They write:

The growth in the number of graduates employed in associate professional (AP) occupations has been driven largely by the increase in supply of graduates, rather than being caused by an increase in demand from employers for graduate type skills ... Graduates often enter AP occupations as an interim measure whilst trying to secure 'graduate' employment. There is no direct evidence to suggest that graduates are getting work experience that then allows them to progress into traditional graduate roles either in the firm in which they are currently employed or elsewhere in the labour market. (2001, p. 7)

Rodgers and Waters and Mason make modest claims about the extent to which their

findings can be generalised, but their research should at least cause us to stop and consider more carefully just how the new generation of university graduates is being used in the labour market.

Against this background, it is hardly surprising that we have to be sceptical about the impact of higher education on the UK's macroeconomic performance in general and on its competitiveness and productivity in particular. It would clearly be absurd to believe that a country could be economically successful in the modern world

76 K. Mayhew et al.

without an educated, skilled workforce. However, this is a far cry from arguing that

any marginal expansion of any segment of the system will necessarily improve national economic performance. The precise extent and nature of the macroeco- nomic gains from the recent expansion of HE is far from clear. As Chevalier et al. put it: 'although ... there is good evidence of a positive relationship between human

capital and economic growth... serious methodological problems in this literature make it difficult to give credence to any precise numerical quantification of the effects' (2002, p. 82). It is important to recall that econometricians and statisticians have failed to find significant macro relationships between human capital variables and performance variables in cross-country studies.

We now turn to the consequences of the expansion for the sector itself. Critical here is the funding system. As already indicated in the previous section, the

expansion of HE has been accompanied by the development of funding mechanisms that have become more transparent and formulaic. In the most general terms, each

university obtains government funding in two parcels. The first is basically the tuition fee. For Home/EU students this has been fixed according to subject (arts, science, medicine) and according to whether an undergraduate or graduate is involved. The second parcel is allocated according to a complex, but common

formula, based on several criteria. A vitally important element in this formula is a

university's performance in the periodic Research Assessment Exercises. Whilst a

typical ex-polytechnic is different from a Russell Group university in, inter alia, the

average academic attainment of the students it admits and in the mix of subjects and courses offered, a commonly applied funding mechanism is likely to make the two more alike in courses offered, internal objectives set and incentives employed and in staff requirements than they otherwise would have been. Thus an important, but

unresolved, question is the extent to which official funding mechanisms have increased tendencies to convergence or homogeneity that were noted by Lowe, for

example, as early as 1988 and by Silver (1990). The issue of the optimal degree of heterogeneity assumes a particular importance

when it is remembered that the historical mass HE system, that of the USA, is (and always was) an extremely diverse one (The Carnegie Foundation for the Advance- ment of Learning, 2001). At one extreme are the Harvards and the Princetons of this world, at the other local community colleges. As the UK achieves the sort of

participation levels it has today, the needs of students are bound to be extremely various-both in terms of the cognitive abilities they possess and in terms of the labour market challenges and opportunities they face. It is far from clear that, in the

past, officialdom fully faced up to this in its thinking on incentive structures (Trow, 1996). Possible future changes in this area are discussed in Section 5.

An even more vexed financial question concerns the quantum of resource. In Section 2 we described how heavily this had been reduced per student since the early 1980s. The key question is how much it matters. There is no easy answer. However, some facts are clear. First, we are meaner to our HE system than most other countries are, but not all. Perhaps some other governments are unnecessarily indulgent, but perhaps UK governments have expected too much for their money. Second, though some universities have done better than others in funding alloca-

The move to mass higher education 77

tions, even these persistently declare themselves to be financially constrained. Their accounts support this contention. Third, the mix of this constrained university spending has changed considerably over the years. Of particular importance, in the context of this article, is the increased spending on what Greenaway termed

'compliance costs' (Bargh et al., 1996). Finally, and more speculatively, it is possible that the homogeneity of incentive structures described above may have made for inefficient distribution of the money available.

The relationship between the government and HE in the early 1960s was one of

high trust. By modern standards, there were relatively few systematic checks on how universities spent their money, and even fewer on how they conducted their internal affairs. It was inevitable that, as the sector grew, this relationship would change. However, it bears asking whether the extent of audits and checks today is necessary and whether the relationship has not become too low trust. Additional compliance costs are not the only consequence. It has been argued powerfully by some educa-

tionalists, for example Halsey (1995) and Henkel (2000), that it is one of the forces

causing a significant degree of deprofessionalisation of academic staff. Their discre- tion at work along a number of dimensions has been significantly reduced (Felstead et al., 2002). At the same time there has been a major reduction in the relative salaries of university teachers. Average earnings for pre-1992 university academic staff have increased since 1981 by 30% less than the average non-manual employees throughout the UK economy and 18% less than the average for public sector non-manual staff (Bett Report, 2000; IRS, 2001).

Have these developments harmed standards and quality? This is an unresolved

question. However, it is true to say that in general terms de-professionalisation and

diminishing relative salaries often end up reducing the quality of the employees concerned. Because of the very expansion we have described there has been a major increase in the number of university staff. Therefore it would not be surprising if, quite independently of any pay reduction, the average quality of academics had fallen. Given our earlier comments on the need for heterogeneity in the system, this might not matter that much. But a key question is whether quality is sufficient. As far as the so-called elite universities are concerned, this is particularly pertinent at a time when the government is so anxious that we should compete more effectively with the best US universities. A worrying aspect of this is the apparent belief of some

university pressure groups that the situation can be rapidly improved if more money can be set aside for salaries. This may not be true, because of a hysteresis effect.

Though it varies from subject to subject, reaction to relative pay is probably very slow in academia. It will always be felt most strongly at the margin of potential new entrants. The quality of these will decline faster than the quality of older incumbents who are relatively immobile out of the sector. By definition, therefore, there is a generational effect. But the longer relative pay has been inadequate, the more generations will be affected. Put crudely, today's professors may not be very good, and increasing their pay will not make them better. Of course, one can always try to recruit from two separate constituencies: foreign academics or locals who have pursued other occupations. The latter is an unlikely option since, like so many other professions, academe has delimited late entry by its insistence on long apprentice-

78 K. Mayhew et al.

ships, otherwise called PhDs. Clearly there is something that can be done to attract

foreigners, but if this means Americans, the salary hikes may have to be massive. In

brief, if quality improvement is needed, it might take a long time.

Tightness of resource may also impact on effectiveness of delivery of courses to students. Again, just what has happened here is uncertain and the heterogeneity/ho- mogeneity issue is highly relevant (Silver & Silver, 1997). Some courses can be delivered effectively with much less resource than others. This is why indicators such as average teaching group size (which has increased) are not particularly useful if used to describe the sector as a whole. However, there is some suggestion that things may have worsened at the top end of the system. For example, all the Russell Group universities report an increase in teaching group size. Either they were doing things right with smaller groups in years gone by, or they are doing things less right now.

5. Implications and conclusions

We have argued that, in economic terms, it is far from clear what the true private and social returns to the expansion of higher education have been. We have also raised a number of questions. Is the incentive structure applied to universities

leading to insufficient diversity? Has quality and delivery been damaged by inad-

equate financing and by the specific forms of incentive structure applied? In the light of these issues, what are we to make of the government's intent to expand still further to reach a 50% participation rate?

Our analysis of social rates of return suggests that the justification for this further

expansion is far weaker than the government seems to think. There is already some evidence of under-utilisation of graduates. If the graduate population is to rise still

further, what sort of jobs are they going to obtain? Most professions are already 100% graduate entry. The knowledge-intensive sectors are not growing fast enough to absorb more than a proportion of the new graduates. Charles Clarke wrote, 'the demand for graduates is very strong, and research shows that 80% of the 1.7 million new jobs which are expected to be created by the end of the decade will be in

occupations which normally recruit those with higher education qualifications' (DfES, 2003, para 1.22). But this is misleading. The research to which Clarke was

referring was Skills in England (DfES, 2001). This refers to '4 in 5 of the new jobs being at least at NVQ level 3, or equivalent, by the end of the decade'. There is a

huge difference between level 3 (A level equivalent) and level 4 (degree equivalent). Also his comments apply only to new jobs. As the DfES notes, 'the volume of

replacement demand that is likely to be required, and thus the relevant skills that go with them, may well be around 5 times as great as the volume of new jobs and skills which go with them' (DfES, 2001, p. 9).

Therefore it is perhaps slightly reassuring that most of the further expansion could be achieved by increasing the number of people doing two-year foundation degrees rather than full three- or four-year undergraduate courses. Nevertheless there is still a danger of a significant waste of resources in training up 'graduates' to be able to do jobs that will not be on offer. Another danger is that new graduates will be trained for jobs that are on offer, but by unnecessarily expensive and time-consuming

The move to mass higher education 79

means. After all, foundation degrees will be a way of providing level 3 skills. Should this not be done by FE rather than by HE establishments, especially since we know that some of the early HE-based foundation degrees appear to be regarded as only qualified successes by the DfES itself (DfES, 2000)?

Recent moves by officialdom to increase heterogeneity via the incentive system are to be welcomed. These include differential fees and the proposals concerning the RAE (and therefore funding) in the Roberts Report. As Barr (2002) has argued, differential fees need not damage access, particularly if the student loan system can be reformed to cover both fees and maintenance, and if the present over-generous interest subsidy can be removed. As he has also argued, access to the top end of the

system will only be improved by actions much earlier in a youngster's education. However, though the consequences of the current financial shortfall in HE may be

mitigated by more heterogeneity in the funding system, present proposals would mean only puny progress towards competing (in research terms), at the top end, with the best US universities.

The desire to improve access does not necessarily strengthen the argument for

expansion. As things stand, those from the lower socio-economic groups are as likely as not to be sorted into the lower reaches of the student population, obtaining the lower end 'graduate jobs'. In other words, they are the likely entrants into the

two-year foundation degree courses. It may well make personal sense for them to try to obtain places on such courses because otherwise they will be excluded even from these jobs. But do they really need these courses to do these jobs effectively? Will their lifetime labour market prospects be better than in the present situation? In other words, will access, in any meaningful sense, really be improved?

If the government is intent on expanding participation to 50%, then it is probably better that they do it via foundation degrees rather than via conventional three-year courses. But the returns are likely to be much smaller than current estimated rates of return to higher education. Arguably the individuals concerned could acquire the relevant skills by more cost-effective means. Most worryingly, there is a danger that social and economic divides could be made even stronger and more immutable. Put in a nutshell, what is going to happen to the 50% who do not go into higher education?

Notes on contributors

Ken Mayhew is Director of SKOPE, an ESRC-designated research centre on Skills, Knowledge and Organisational Performance. He is also Fellow and Tutor in Economics at Pembroke College, Oxford.

C~cile Deer is a Research Fellow at SKOPE.

Mehak Dua is a Rhodes Scholar, studying at Merton College, Oxford.

Notes

1. In this article we follow the UK Office of National Statistics in defining higher education as consisting of courses that are of a standard that is higher than A level or its equivalent.

80 K. Mayhew et al.

There are three main levels of HE courses: (i) postgraduate courses leading to higher degrees, diplomas and certificates (including postgraduate certificates of education and professional qualifications) which usually require a first degree as entry qualification; (ii) first degrees; (iii) other undergraduate courses which include, for example, HNDs, Diplo- mas in HE and, increasingly, foundation degrees.

2. This and subsequent numbers are based on a consistent definition of a university as given by the National Statistics Office. They do not include general colleges and specialist institutions.

3. Between 1990-1991 and 1995-1996 the number of universities increased from 48 to 89. 4. Education Guardian, 19 May 2003, 'Clarke dismisses medieval historians'.

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