Is studying for a degree a good business decision?

Introduction

The decision to undertake a degree is always one that is backed up by an internal cost benefit analysis of the individuals facing a strategic choice in life. The decision is one that is personal to many different students and some may argue that going to university is, or has been, a good business decision, whilst other may argue it is not.The relationship between work and higher education is complex and is constantly changing as a consequence of changing assumptions, values and expectations of students, graduates, employers, academics, politicians and civil servants. As a result of recent changes the growing acceptance of the concept of a learning society; the pervasive idea that learning in the classroom is of greater value than learning in the workplace is now being challenged.

Employers seek flexible, fast, learning adaptive workers and reward education because such traits are associated with higher education levels. But many graduates are realising that their B.A. and B.Sc. degrees qualify them for no particular profession-unless of course they drift into teaching- prefer to stay on for further degrees in the hope of becoming research assistant’s and eventually being appointed academic staff which is a long process. Some graduates have realised that they have to settle for humbler jobs than they have been led to expect- the kind of jobs, moreover, for which the higher education they have received must seem to have been largely irrelevant, if not a waste of time, this has put the question forward: is pursuing a degree a good business decision

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It is easy to forget that until quite recent times training for some professions- law, accountancy, as well as engineering- was undertaken almost entirely on practical work based lines without a formal degree qualification being necessary.Learning on the job had the advantage of being founded on first-hand experience, an advantage that is retained in the polytechnics’ sandwich courses; the disadvantage was that it was slow.

As the necessity for a through grounding in theoretical principles increased, however membership of professional institutes could only be gained by passing a written examination and, before long a three-four year university course provided the most suitable short cut for students exempting them from the hard graft of a long-drawn-out article apprenticeship.As late as 1970, however, individuals wishing to become solicitors were advised that while a degree was an asset it could not be accepted as total exemption from apprenticeship as an article clerk, and in the immediate post-war years that a BSc. (engineering) was no substitute.

But the advance of the credentials system was implacable. The world over, universities took over the responsibility for professional training and in so doing became the main agencies for professional job allocation. Everywhere the belief that people who credited with having received more’ education’ usually earned higher incomes and higher status than those who had less, provided the mainspring for expansionist policies. In the U.K these policies were a less explosive than in a country on rapid modernization like Japan, which had one university in 1890, forty-seven in 1918, 379 in 1969 and 685 in 1976.

From an early age children have been conditioned to believe that their entire future depends upon paper qualifications that they can only obtain through formal schooling, ‘Everyone must go to College’ ‘Education pays- stay in School’-[1] these are the kinds of slogans constantly publicised in the U.S.A where currently more than half the pupils completing high school go on to some kind of full-time course of higher education, but recently more plainly, the promise of social justice, supposedly inherent in the concept of ‘constant mobility’, has proven to be delusive, by encouraging the youth to climb higher and higher up the educational ladder of prospects it has lulled them into imagining not only that there is room at the top but room for nearly everyone.Times have changed as one “In 1944 the problem was to convince more pupils that they were capable of getting a degree- and more parents that they could afford to let their children go to university- the problem now it can be said is to ‘cool out’ the masses who take it as a matter of course that a higher education owes them a living”.

A new national survey of young adults ages 18 to 25 finds that the vast majority of today’s young adults — be they African American, Hipic or Latino, Asian American or White -strongly believe in the value of higher education. The survey, “High School: young people talk about their hopes and prospects was conducted by the non-profit, non-partisan opinio2n research organization public agenda – the majority of the young adults surveyed said that their parents inspired the goal of going to college and most had a teacher in high school who took a strong personal interest in them and encouraged them to go on to college. Money plays a big role in decisions about where — or whether — to go to college or university.

Nearly half of young people who do not continue their education after high school cite lack of money, the wish to earn money or having other responsibilities as reasons why they don’t go. “Life after High School” also shows that while money is not a factor in college selection for most young White Americans (60 percent), it is for most young African Americans and Hipics. Sixty percent of both groups say that they would have attended a different college if money were not an issue. About half (51 percent) of young Asian Americans say this as well. The survey raises troubling concerns about the prospects for young workers without university degrees. Compared to those who have a two- or four-year degree, these less-educated workers fell into their jobs more by chance than by choice and far fewer think of their job as a career. Young people with no degree are substantially less likely than those who have a degree to say their parents urged them to go to college.

There has been much discussion, now with increasing support from government, employers and academia for the idea that learning does, and should, continue after formal education stops. One of the many important changes in the size and shape of higher education during the last few years that have taken place are for example, the number of degrees awarded over the years has steadily increased, twenty years ago just one young person in eight entered higher education today more than one in three do so, over the same period the number of undergraduate degrees awarded in Britain has risen. In 2009/10 there were 350,860 first degree graduates compared to 333,720 in 2008/09, showing an increase of 5%.

This does not mean that the quality of a degree is necessarily any the less but it does signify a university degree is no longer as distinguishing a qualification as it once was.Nevertheless, the economy has in addition moved on and the demand for graduates has grown at the same time as the supply has increased.

Although graduates are still in demand, especially in certain sectors, their employment prospects are being affected by the recession – two fifths (38%) of employers have frozen graduate recruitment and additional 10% are recruiting fewer graduates than last year. So it is not surprising that in the UK the unemployment rate of university graduates has been gradually increasing each year. In the US, two in five students who start don’t get a bachelor’s degree within six years, according to the U.S. Department of Education. The ones who finish confront the same weak job market that everyone does. In the US there are approximately 2.3 million holders of bachelor’s degrees looking for work. All too often college graduates incur crippling debt and don’t improve their job prospects’ [1] The average starting salary offer to 2010 graduates was $48,700, down 1.3% from the year before, according to the National Association of Colleges & Employers.[2]

John McGurk, CIPD adviser, learning and talent development states “A feature of the boom years was that graduates more or less expected to walk into a top job of some kind with a reasonable 2:2, and to get into a big accountancy firm or the City with a 2:1,”.”[3]Today this is not the case. The recession and the poor economy have impacted recruitment, major recruiters like BT, have even dropped graduate schemes altogether,

setting a precedent for others to follow and other smaller recruiters, meanwhile, are reassessing their relationships with graduates. “The recession has had a massive impact on the way we’re looking at recruiting graduates this year,” says Stephanie Oerton, head of talent and development at National Express’. Worry over labour market trends for university graduates was expressed strongly in the USA, for example by Hecker (1992) and Shelley (1994).

President Obama has set a goal to increase the percentage of Americans with two- or four-year college degrees from 40% now to 60% in 2020. But the job market still very quite some may argue this not a good decision and a wasted effort. Bureau of Labor Statistics analysis of data related to the employment of college graduates indicates that there are more jobseekers with college degrees than there are openings in jobs requiring a degree

In Europe the question has been examined in the wider framework of trends in over education or bumping down, i.e. to which point workers with high schooling levels are accepting jobs requiring lower skills and consequently forcing low skilled workers into unemployment.Rising returns to university education cast uncertainty on the idea that graduate workers are increasingly taking jobs for which they are overqualified. Since the early 1970’s, the data suggests a growing proportion of college graduates are in jobs that usually do not require at least a bachelor’s degree. But it can be argued that‘ It is not possible to precisely identify and measure the number of jobs that require a college degree’ . It can be argued that generally new jobs just don’t require college graduates.

It has been stated that In USA of the 30 professions with the highest likely growth from 2008 to 2018, merely 8 require a bachelor’s degree or higher. “The fastest-growing occupation in the country, registered nurse, requires only an associate’s degree, of the top ten together with home health aides, customer service legislative body, retail salespersons and office clerks require only short-term on-the-job training”.For students pursuing a degree there will be the consideration is it really worth it. The gains of a degree can be measured in a variety of ways; these may include elements such as increased knowledge, the development of transferable skills, increased potential earning power and even the social aspects of higher education, cost may include but not be limited to the direct financial costs, such as tuition and living costs, which will usually result in high student loans and overdrafts which from studies and statistics show are progressively increasing and are having a direct impact on students.

Education at a Glance

On the other hand before the financial downturn, UK graduates profited more than anyone else from degrees. A global comparison proves that graduates in the UK obtain an elevated rate of return from higher education, in terms of improved employment prospects and income. The rate of 17% positions in the UK in a group of its own compared with 10% to 15% in Denmark, Netherlands, France, US and Sweden and 7% Japan and Italy, reported by the organisation for Economic Co-operation Development. The OECD’s recent yearly education at glance indicators emerges to support the UK government’s case for studying for a degree to be a worthwhile investment. The College Board, GE Foundation, The George Gund Foundation, the W. K. Kellogg Foundation and Knowledge Works Foundation funded the study.

The ultimate decision to carry out a degree is constantly one that is backed up by an interior cost benefit analysis of the persons facing a strategic alternative in life. The decision is one that is delicate to many different students and some may disagree that going to university is, or has been, a good business decision, whilst others may dispute it is not.In regards to student fees “The Global Higher Education Rankings” report found that British graduates aged between 30 and 44 earn 76% more than non-graduates in the UK.Students pay an average of almost ?7,000 a year for their education and as fees are to rise again making Britain one of the most expensive country in the world for study. The universities will now be able to charge home and EU students ?6,000 a year, and up to ?9,000 in special circumstances.

The new tuition fee system will make UK higher education even more expensive and its affordability ranking will fall, the cheapest place to study is Finland, where one year of education costs an average of ?1,820, followed by Holland at ?1,826 and Sweden, which comes in at ?2,186. The rest of Europe clusters into a band with costs ranging between ?2,914 and ?4,030. In Finland, higher education costs students the equivalent of ?590 a year, in Japan; students pay ?9,974, while in the US students pay around ?8,400.British students receive an average grant of ?597, compared with ?275 in Finland. American students receive around ?2,120. OECD figures also suggest that the earning premium of British graduates, relative to non-graduates, is amongst the highest in the world.

Despite the costs, Britain has the third-highest participation rate of the 15 countries, behind the Netherlands and Finland. The result is that most of today’s students receive no grants to cover living costs, about half must pay something towards their tuition costs, and all face more crowded lecture theatres and less individual time with staff. However, one effect of the mounting cost of getting a degree has been to increase the popularity of vocational degree courses. The top five courses (graded by undergraduates entering in 2003) are: Business and Management Studies, Computer Science, Law, Psychology, and Primary Education.

Change in spending on education, enrolment and expenditure

It can be understood that there is one important way in which universities have not changed as much as many expected: they remain largely the preserve the students of middle-classes. Over 70% of the children of professional classes now attend university compared to just 13% of children of unskilled workers. Amongst the protests concerning tuition fees, students will continue to speculate whether they are getting a good deal, but future employment patterns suggest they are almost certainly better off investing their money in a degree. Full time education prepares hardly anyone for anything specific, nearly every person is still dependant on the charity of employers for training and experience in the job carried out, most of the education it can be argued is often completely irrelevant. And it has been questioned is a degree really worth having. It can be alleged a university degree does help a person to discipline himself. But it is not the sole factor for him to accomplish a professional future. To accomplish a bright career, the person must have both discipline and practical knowledge. It is up to an individual to build up the practicality of his job.

It is true university education is viewed as a prestigious achievement. It may not guarantee a job immediately, but someone who has it, has a better way of approaching life than one who does not have it or an equivalent. It can be simply said, “A university degree does not guarantee one future success but it helps to broaden the horizon of the individual”. It is in recent times, that Government has come to realize that university education is central to the development of a country as a prosperous knowledge based economy and as an inclusive society they are central to any countries competitiveness and graduates provide a pool of talented persons who are capable of promoting the exploitation of knowledge.A study led by Professor Phil Brown, of Cardiff University, and Dr Anthony Hesketh, of Lancaster University Management School, found young people having to go to great lengths to stand out in an increasingly crowded marketplace. Being good is no longer good enough, it says. Analysing work trends in the UK and the United States, the report confronts current assumptions about the growth in demand for graduates in a knowledge-driven economy.

While there is a commonly held belief that the UK’s economic competitiveness will be shaped by the quality of potential employees, the vision of a good salary doing appealing work in a big organisation is still available only to the lucky few.Study says that broadening access to higher education has done little to boost the chances of working class graduates joining these professional elite. Professor Brown alleged: “The evolving system of mass higher education in the UK has intensified the mismatch between the skills needed to get a job and those required to do it well.

“Given a chance, many graduates may prove excellent when it comes to doing the job itself but fail to find employment because of the ‘over supply’ of suitably qualified candidates.”The study points out that a huge proportion of working class graduates attend new universities. Given this, it notes that one organisation received 14,000 applications for 428 vacancies. Graduates from Oxford University had a one in eight chance of success whilst the ratio for those applying from new universities was one in 235.Professor Brown said: “Our analysis suggests it is inevitable that with so many similarly qualified candidates applying for too few places, individuals will try to stand out in the crowd in any way they know how. Cost benefit analysis is used to determine, first the individual rate of return to educational expenditures.

This relates expenditure on higher education including the ‘opportunity costs’ of income forgone during the period of time spent in education to subsequent income derived in the post-qualification period. People decide to go into further education because they feel that by completing their education and getting a degree they will have a higher chance of getting a job quickly. As when you apply for a job the competition is usually high as there will be many other candidates that will be applying for the same job.However, some individual’s feel that they should have went into employment and gained some experience, as that is what employers look for. For example, if there are two people applying for the same job and one of them had a degree and the other candidate had a high level of experience it is not necessary that the person with degree is likely to get the job as the employer may give the job to the person with the experience.

A degree is not always useful to a person when applying for jobs but an awful lot is dependent on the nature of the job, for instance, if you are applying for a admin job and a applicant has got a degree in business administration, the employer may feel that this person is over qualified for the job and may give it to the person with a high level of experience. Therefore, sometimes getting a degree does not always help in the long run. Higher education trends statistics have shown rise in higher education despite the factor of fees and high living costs in some regions, more women are pursuing university education and of older age in Great Britain.

Age participation

Other statistics shows hundreds of thousands of would-be students have already applied to university in an attempt to secure a place before the increase in tuition fees. Data published recently shows 344,064 people had submitted their applications to start courses this year. This is a 2.5 per cent increase on the same period the earlier year, so an extra 8,000 people applying as last year. The figures from UCAS, the university admissions service, imply that plans to triple tuition fees at English universities from next year are the reason for the rush. From the study it may possibly be established that as applicants race to beat the top-up fee heat university education is a popular step to pursue but the financial costs are one of the many obstacles stopping perspective students to follow it. So on the whole universally degrees are a popular option to take.

If we look at a university degree as a business decision we need to consider this as an objective decision rather than a subjective personal preference. For this we need to consider the evidence. If we look at the evidence, this is not clear-cut, just as there are many self made business people who have never seen a collage and many graduates who are out of work and broke. On this basis the obtaining of a degree itself cannot be seen as an immediate route to success, and may even hold some individuals back, preventing them from working in the commercial world, making contacts, developing ideas and gaining experience as well as being able to put money in the bank. If we look for evidence to back this up we can look at the measure of success, for example, the Business Week UK Property Rich list the majority of names on here did not have a university education. For some there may not have been the need.

For example, at the top of the list is the Duke of Westminster, and in second place were David and Frederick Barclay who also did not have a university education. These individual inherited the property and as such they did not feel there was any need to take their education further. There are also individuals who have not inherited, but seen their property empire grow through their own good business judgment; for example John Whittaker (Urquart, 2000). However, the majority on the list inherited their wealth. It is remarkable how much or how little great inventors and scientists learned at university. Thomas Edison never attended one, discovering his genius instead while working as a teenage telegraph operator. Charles Darwin went to Cambridge to study for the church but derived the most benefit to his career during long rambles with J.S. Henslow, a professor of botany. Darwin was known in his student days as “the man who walks with Henslow.” What Cambridge did give Darwin was the opportunity to reinforce his capacity to work hard and systematically and to expand the range of his enquiring mind.

“ If we look at the evidence for a university education we can cite the value of learning as well as the financial advantage. It is often cited that those who have attended university and gained a degree will have enhanced social skills due to the way in which education impacts on personal interaction and communication skills” (Hill, 2000). The same exposure to the social aspect of university and the cross over between learning and transferable skills may also give a greater ability to appreciate real differences, and appreciate diversity as well as divergent views” (Hill,2000). Whilst a university education is not needed, a side effect of the education process is to open the mind and increased the ability to assimilate information from different sources.

The skills are not only of benefit in social life but are also the skills that employer’s value. Often with a university degree it is not the topic of the degree that is important, but the skills, such as research and communication skills that were gained in obtaining the degree, which are important (Hill, 2000). This makes an individual more employable and also more likely to get on in their employment much more easily and has an upper hand then a person with no university education. For example In the Times Top 100 Graduate Employers. (The edition was based on the largest ever survey of university students.) In this study there are well over 1000 major employees who actively recruit graduates from UK universities and countless small and medium size businesses that employ predominantly recent graduates within their workforce.

The top 100 that emerges from the research is a bold league table of the UK’s most dynamic and sought after graduate employees. Examples of some of the well known companies in the UK putting their trusts in graduates include for the fourth year running it is headed by Accenture (formerly Anderson Consulting), Three other recruiters-Anderson, one of the ‘Big Five’ accountancy and professional services firms; PriewaterhouseCoopers, the UK’s largest graduate recruiter; Procter & Gamble, the international fast-moving consumer goods company-and Goldman Sachs which are ranked in fifth place who are the first investment bank to reach the top ten are all examples of well established companies recruiters of graduates.

Across the whole Top 100 there are nineteen new organisations. Two of the highest-ranked of these new entries are Marconi who has entered the table in 36th place and Cisco Systems who are just outside the top fifty. Across the full league table, there appears to be little correlation between the numbers of graduates and employer recruits and where they appear in the top 100.The majority of organisations listed in the table recruit 50 graduates each year, but there are at least twenty employers who recruit in excess of 200 graduates annually. The UKs largest employer of graduates is currently PricewaterCoopers who recruited over 1200 gradates, there are further three organisations who take on up to 1000 recruits, the figures and company names could be shown as evidence that a university education is taken in elevated esteem with top employers.

There are long-term financial benefits in pursuing university education. A study in the US demonstrated the way in which those with a degree are likely to earn more on the long run.The graduates may start off behind non-graduates and take a while to catch up, but if we look at the average earnings of graduates between the ages of 30 – 30 years of age there has been the opportunity for all to settle into their careers.For males the average earning were 69% higher for the graduates, equating at this time to $21,500 a year more than those who did not graduate. By the time they get to the 40 – 44 age group the difference has increased to 82% (Hall, 2000).

The same effect is seen in the female population, but not to the same level. Between ages 30 – 34 years the average graduate will have a salary 63% greater than a non-graduate, which increased to 74% for age group 40 – 44 (Hall, 2000). There is also a trend to see this gap increasing ever since the 1970’statistics.

There are also increasing number of drop outs from universities maybe from students who have realised it is not worth the time and effort to study and they may as well go straight to the job market and the recognition that university graduates require long period of training in their first job before they are of any use to the company that employs them, they might as well skip university.It can be argued that education is the means by which some people kid themselves they are entitled to a better life than the rest of society.

Conclusion

Overall most of society may feel that studying for a degree is a good business; however, a number of individuals may want to go into higher education and study for a degree but may not get the chance to, as there are many factors such as cost that will affect the individual. Nevertheless the government in the UK are offering students with loans and grants that will help them with their education. Conversely some students feel that they do not want to end up in a long debt to pay after they have finished their education and therefore do not go into further education.Although the government in the UK does its best to provide help to students so that they can afford to study. Therefore cost is one of the major factors why some individual’s feel they do not want to go into higher education and study for a degree although they may be aware of it is a good business decision in the long run.

A learning society means lifelong learning for everyone. It is recognised that the nature of jobs will continue to change, and that job mobility will increase. It is therefore suggested by the proponents of the learning society that only by continuous learning throughout their working life will individuals remain employable and societies remain competitive. As Stephen Uden, head of skills and economic affairs at Microsoft, said in a recent BBC Radio 4 debate: “The UK’s only going to succeed as an economy if it’s a high-skills economy. So we need to widen participation in higher education.” If this means that high-level skills and education will touch a wider range of professions and employers than ever before, then it must be a good thing. However, the place of universities in a learning society is as yet unresolved. If all organisations became “learning organisations” it might become more difficult to claim a special role for universities.

Studying for a degree does not promise students that they will obtain their dream occupation, but maybe it does assist in getting them ready for searching for a career. Furthermore, the aim of career preparation is at least part of the motive that more than 1 million students received the bachelor’s degrees in 2000. Encompassing a degree is believed to be one of the greater methods to achieve a competitive edge, typically graduates studying for a degree may benefit by having more job prospects to improved earnings when compared to people that have never studied for degree.

A degree may indicate that for many people there will be a cost benefit analysis that indicates to get a degree is a good long term business decision for most, but not for all, after all, the aims and personal circumstances and even individual personality need to be considered.

References

1. Urquart Conal (2000, Dec 14), The rich can look down on learning, The Times.
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3. Branson Richard, (2002), 20/20 Hindsight: From Starting Up to Successful Entrepreneur, by Those Who’ve Been There, London, Virgin Books
4. Acker, S. (1981) No-Woman’s-Land: the British Sociology of Education 1960-1979, Sociological Review, 29, (1), 77-104.
5. Acker, S. (1992a) New Perspectives on an Old Problem: the position of women academics in British higher education, Higher Education, 24, 57-75.
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17. http://www.thes.co.uk/statistics

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