A Waste of Resources? Social Rates of Return to Higher Education in the 1990s

There has been considerable debate concerning the benefits or otherwise of the 1990s' expansion of higher education in the UK yet there has been no attempt to examine the human capital underpinnings of continued expansion from the perspective of society. This paper demonstrates that the popular assertions regarding the benefits to society of additional higher education are now very dubious. Four factors are shown to be decisive: (Presumed) economic growth; changes in the relative earnings of graduates and non-graduates; the difference between the average and the marginal student; the belief in scale economies and therefore the costs of higher education. Of these the most important is the presumption made about growth and the distribution of the rewards from growth. The paper shows that, unless the growth is such that it favours graduates, society's reward is so low that further expansion is difficult to justify on economic growth terms. There would appear to be no substantive rationale for a further increase in student numbers until there is some evidence of a social return on the initial investment.