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SRHE Conference-7 December, 2011 Celtic Manor

Human Capital’s Currency Crisis ESRC Festival of Social Science SKOPE The Future of Higher Education 3.11.2014

 Young people have been protesting in many

locations across the world: the protests have been for various reasons but their future life chances in the labour market is clearly an element in these protests.

 That should be compared with the OECD view

as represented by Education at A Glance (2014) where, taking a Human Capital Theory view there is no cause for alarm.

• Here we see all the hard core assumptions of

HCT being peddled without reservation. The master narrative is that of human capital and its progeny, skill bias theory. Take the following for example:

The economies of OECD countries depend on a sufficient supply of high-skilled workers. Educational qualifications are frequently used to measure human capital and the level of an individual’s skills. In most OECD countries people with high qualifications have the highest employment rates. At the same time, people with the lowest educational qualifications are at greater risk of being unemployed. Given the technological advances that have been transforming the needs of the global labour market, people with higher or specific skills are in strong demand(102)

 This view is then translated to employment

prospects and to earnings:

• ver 80% of tertiary-educated people are

employed compared with over 70% of people with an upper secondary or post-secondary non-tertiary education and less than 60% of people with below upper secondary education (104),

This view is then translated to employment prospects and to earnings:

The potential to earn more and see those earnings increase over time, along with other social benefits, is an incentive for individuals to pursue education and training; this is true even though the economic rewards vary, according to the chosen field of education employment rates among tertiary educated (133)… the demand for higher-level and updated skills have grown, and that individuals with lower levels of skills are even more vulnerable today (133)

 If this is the central proposition of HCT,

then it is quickly followed by the Mincerian assumption that: The potential to earn more and see those earnings increase over time, along with

• ther social benefits, is an incentive for

individuals to pursue education and training; this is true even though the economic rewards vary, according to the chosen field of education employment rates among tertiary educated (133).

• Under

der Employment yment

• In the United States it is clear that many graduates are doing

sub-graduate work. While the figures vary depending on how underemployment is measured, the best estimates suggest that between 40-50 per cent of young graduates are

• underemployed. Richard Vedder and his associates reckon

that about 52 per cent of four year college graduates are in jobs that match their skills while 48 per cent are

• verqualified. They also report that over 5 million college

graduates are in jobs that require less than high school

• education. In Britain, the figures are remarkably similar. The

Office for National Statistics reports that underemployment amongst graduates has risen from 37 per cent in 2001 to 47 per cent in June 2013.

There are two processes which can lead to credential inflation. The first and most obvious is that there may be too many overqualified workers for the jobs available. Richard Vedder and his colleagues looked at six occupations that have not changed significantly between 1970 and 2010: these included taxi drivers, sales clerks in the retail trade, firefighters, taxi drivers and bank tellers. They found that in 1970, only 1per cent of taxi drivers were college graduates while in 2010 it was 15 per cent. For firefighters, .5 per cent were graduates in 1970, in 2010, 4.5 per cent. For sales people the figures were just under 5 per cent in 1970 and 25 per cent in 2010

• Many occupations have sought to raise their

wages and status by demanding degrees as a condition of entry. Nursing, golf course management skills and realty managers are

• examples. In such cases, it is more difficult to

determine how well their knowledge matches their work. What these cases point to is not the straightforward operation of demand and supply but of a society in which the conventions for access to an occupation have changed. In these cases disentangling technical skills from collective power ploys to raise status and wages is difficult

We have seen that at the other end of the

• ccupational structure many college graduates are

doing low waged work and this too raises a puzzle. Why would employers prefer graduates to high school educated workers? One argument is that employers are not so interested in productive potential but would rather workers who were punctual, motivated and articulate: in other words, that they were more easy for an employer to handle and a better bet that they will do the job asked of them.

 What is interesting about the use of

graduates in non-graduate occupations is that they tend to get paid more than their non graduate counterparts. This has been shown by Burning Glass in the USA and by Futuretrack in this country. These are ‘efficiency’ wages and there will be a variety

• f reasons for that (see Brynin, 2002).

 The upshot of this employer strategy is that the

least qualified are pushed out of the labour market while the overqualified undertake what is often insecure low paid work. It is for this reason that those who have a vested interest in claiming that higher education remains a worthwhile investment continue to claim that it pays to be a graduate because it is more likely to lead to a job. Many policy makers make precisely this claim as does the cheer leader for the knowledge economy, the OECD.



 We should also note that in the USA and UK the

cost of a university education has risen dramatically, which in the UK raises questions about the viability of university funding.

 One immediate repost to the points made about

costs and the dysfunctional nature of the graduate labour market is that these indicators are temporary: that once with are through the Great Recession all will return to normal. However, there are good structural reasons as to why this is unlikely.

 While the currency crisis has been triggered by fundamental

shifts in the labour market, we should start by seeing that the fit between education and work has never been as simple as that assumed by HCT. In taking the view that there is a strictly ‘economic’ approach to the relationship between education and the labour market by which the calculations by homo economicus could lead to sound decisions as to the best investments in education, it seemed as if the processes

• f supply and demand of educated labour could be reduced

to financial calculations alone.

 Universities were not originally created to serve the economy

and have gone through conceptual contortions by way of selling ‘general skills’, internships etc to make themselves relevant to the labour market.

 Liu and Grusky (2013) and the OECD (“)13) have

sought decompose ‘graduateness’ into specific skills which are more demanded and earn more in the labour market.

 The problem is that at the very time that

economists are moving in this direction MNCs are focussing their recruitment on a more holistic concept, ‘talent’.

 It will be clear that the notion of capital in human

capital is problematic for several reasons:

 Money capital is a cultural construct but it translates

into precise units of measurement, but human capital is a cultural construct of a looser kind as the difficulties in trying to pin down the links between HE and the labour market show.

 HE theorists, being empiricists, have simply defined it

in terms of its operationalization through RORs but have neglected to ask what the nature of this currency is.

 The gap between the theory and its

• perationalization can be seen clearly because we

can use ROR analyses without the framework of HCT.

 But in the process of operationalization their

accounting is seriously flawed. As Antonia Kupfer’s (2014) feminist analysis of HCT shows there is a breakdown in the link between productivity and income: the cultural values and power relations that are hidden by HCT are vital for understanding who gets what and why.

 Given these difficulties with the dominant theory of

HCT that has guided university expansion and funding we are now at a point when in some countries, the UK and USA amongst others, HCT doesn’t have the semblance of a fig leaf.

 In this sense advocates of the imaginary knowledge

economy that have relied on HCT, have embraced the wrong theory.

 In so doing they have destroyed the wider rationale

for a university education.