Expensive and stupid: why Western universities are losing students
For many decades, higher education has provided significantly higher incomes for graduates, which is why university enrollment has grown rapidly. This global trend reached its peak relatively recently, but recently the reverse process has begun. It is especially pronounced in countries with expensive paid education, primarily in the UK and the USA. Is it possible to say that higher education is in crisis, why the number of students and graduate jobs has stopped growing, and whether there are similar trends in the Russian economy, Izvestia investigated.
With or without a crust
Half a century ago, even in developed countries, where a "welfare society" was generally built, higher education was the lot of a few. In 1970, only 8% of the United Kingdom's population studied at universities. Gradually, the HSE became less and less elitist. By the mid-2000s, the proportion of students had grown to 24% among the youth age cohorts, and by 2021 it had reached 38% for 18-year-old school graduates.
Several reasons have caused such a massive fascination with universities. First, rapid deindustrialization is associated with both labor automation and the withdrawal of production abroad. Common to many developed countries, it was particularly pronounced in the UK. Secondly, the state itself has stimulated the development of higher education by providing numerous benefits and subsidies for both students and universities. Thirdly, the development of financial services and other post-industrial industries increased the demand for employees equipped with "crusts". At one point, the government even talked about the prospect of universal higher education.
The trend has already been broken before our eyes. According to Bloomberg data, in England, the advantage in university graduates' salaries compared to the minimum wage has been halved since 2007. Adjusted for the rising cost of living, the salary of a typical single graduate of working age is now 30%, or 8 thousand pounds ($10.5 thousand) lower than it was then.
In 2007, the average graduate between the ages of 21 and 30 in England and Wales earned twice as much as the typical minimum-wage worker with a 40-hour work week. Today, the salary advantage has become much less noticeable, despite the prestige of the country's universities (four of the world's top 10). In 2024, young graduates earned only 1.43 pounds for every pound of employee at the minimum wage. The gap becomes even smaller if we consider after-tax income and take into account student loan payments, which are necessary for most to graduate. In this expression, graduates earn only 32 pence more.
The employment rate for graduates is still much higher, by 20 percentage points. However, this is a comparison with all representatives of the same age cohort, including those who did not receive a vocational education. At the same time, graduates are more likely to live in London or big cities, where rents have doubled since 2008. The demand for the services of former students has also dropped. In 2024, there were 140 applications from graduates per vacancy. For specialties that do not require higher education, the corresponding ratio was 89:1.
On both sides of the ocean
As a result, the proportion of British people attending universities began to decline. In 2024, less than 35% of 18-year-olds in the United Kingdom have already enrolled in universities, meaning a drop of three percentage points in just a few years.
There are also many reasons for the negative effects associated with higher education in recent years. The national economy has been growing weakly since 2008, and Britain's exit from the EU has exacerbated the problem. Covid happened in 2020, and the energy crisis and inflation occurred in 2022. London, one of the largest centers of highly paid "white-collar" professions in the world, began to lose its appeal. In addition, it turned out that it is possible to successfully outsource not only industry, but also the service sector (for example, to fast-growing Poland or even India). And the labor market has yet to recalibrate due to the introduction of AI — this process is still in its initial state.
British universities are not alone in their problems. To some extent, the situation concerns many developed countries, and often it began even earlier there. In the United States, university enrollment dropped by 15% between 2010 and 2021. The doubling of the cost of the tower played a key role here, as a result of which millions of young Americans decided that it was not worth it.
In contrast, low-cost vocational colleges experienced double-digit enrollment growth in 2023-2024. This is quite an expected phenomenon, given that, for example, a qualified builder can now earn about $100,000 per year, which is significantly higher than the median income of American households.
Knowledge, not documents
The situation is familiar for Russia, given the rapid growth in demand for working specialties in recent years. However, a significant part of higher education in our country is budgetary, and the paid sector is relatively inexpensive, not only relative to foreign examples, but also the incomes of Russian residents. Is the problem of the current or impending higher education crisis relevant to us?
According to Boris Ilyukhin, a senior researcher at the Center for Economics of Continuing Education at the Presidential Academy, we often confuse the concepts of "a document of education" and "professional knowledge/skills."
— It seems to young people that they will receive a diploma and will be in demand. Alas. Knowledge and skills are in demand (and not only professional, but also universal skills: to think critically, highlight the main thing, solve the task, etc.), and a diploma often speaks only about knowledge. It also happens that it is only by the end of the training that a person realizes that this is "not his", which leads to an inability or unwillingness to work in his specialty. And there is nothing new in this: let me remind you, even in Soviet times, only about half of the students reached the diploma. So there are jobs, but there are often not enough specialists (not by diploma, but in fact)," the expert admits.
According to him, the second problem is much deeper — the country does not have the income to provide higher salaries in the social sphere, where many graduates go.
— I hope that in the future this bias will be corrected, and people with education will receive much higher salaries, — said the expert.
Transformation of the labor market
Olga Magomedova, a researcher at the Gaidar Institute's Laboratory for the Analysis of Best International Practices, believes that the higher education system is indeed going through a period of crisis and transformation to better meet the needs of the market.
— Against the background of the trend towards increased specialization of labor (when the division of labor deepens and the path to mastering certain skills becomes more difficult), companies are certainly increasing the demand for ready-made professional skills. Hence, there is a natural decrease in interest in the availability of confirmation of higher education, which provides students with fundamental knowledge of the subjects they are learning," she states.
However, the Izvestia interlocutor believes, it is important to understand that the demand for applied skills does not reduce the socio-economic importance of higher education: the search for practical solutions is impossible without a systematic understanding of the field in which they are being developed. This is especially sensitive for the exact and natural sciences.
— For example, the development of the digital economy is unthinkable without specialists in engineering, technology and technical sciences — from 2020 to 2025, the number of graduates in these specialties increased by 15.6% (in computer science, even by 17.9%). The number of graduates in the healthcare sector has also increased by 15.8%," Magomedova said.
According to her, the widespread observation that the very fact of obtaining higher education has ceased to provide the previously expected socio-economic advantages is just evidence of a qualitative transformation in the relationship between the educational services market and the labor market.
— This, in turn, is combined with the trend towards a more informed approach to choosing a person's professional track at earlier stages of education — at the school level. The demand for intermediate professional skills increases the demand for vocational training programs — from 2021 to 2024, the number of graduates in working professions increased by 27.7%. But this situation does not worsen the state of the higher education system, but rather stimulates its structural and substantive changes," the expert concludes.
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