The changing context for higher education

4.1 In this chapter we explore some of the most significant changes outside higher education since the Robbins report, which help to explain how and why higher education has developed as it has. We then explore the implications of potential changes over the 20 year timescale of our terms of reference for the future development of higher education. We look at the impact of:

  • increasing economic integration across the world;
  • changes in the labour market;
  • the changing structure of the United Kingdom (UK) economy;
  • public finances;
  • family finances;
  • new communications and information technology;
  • social and cultural changes;
  • demographic patterns;
  • environmental changes;
  • school and further education;
  • developments in higher education elsewhere in the world.

4.2 In doing so, we do not accept a purely instrumental approach to higher education. Its distinctive character must lie in the independent pursuit of knowledge and understanding. But higher education has become central to the economic wellbeing of nations and individuals. The qualities of mind that it develops will be the qualities that society increasingly needs to function effectively. Knowledge is advancing so rapidly that a modern competitive economy depends on its ability to generate that knowledge, engage with it and use it to effect. Above all the country must enable people, in large numbers and throughout life, to equip themselves for a world of work which is characterised by change. Our examination of the future of higher education must therefore cover the changing context in which it will be operating.

4.3 Many of those who enter higher education towards the end of our twenty year time horizon will still be active workers and citizens well into the second half of the next century. We recognise the hazards of attempting to foresee what the world will be like over this timescale. We have taken account of the advice offered to us by government departments in our terms of reference and in their evidence, we have consulted extensively about the developments which others foresee and we have looked at international evidence. This chapter summarises our views on the aspects which we believe are most significant.

4.4 We start with a review of the changing economic context and, in particular, three features of it:

  • increasing international economic integration;
  • the changing nature of the labour market in the United Kingdom;
  • the pace, nature and unpredictability of change in the nature of the UK economy.

Increasing economic integration across the world

4.5 Looking back, while the UK has doubled its national income since the time of Robbins, other advanced economies have grown more quickly. We have become relatively poorer.

4.6 This leads to something of a paradox for higher education: on the one hand, the nation feels itself to be poorer and therefore less able to afford to fund higher education; on the other, as the economic necessity for high level education and skills increases, so does the need to maximise the proportion of the population with such education and skills.

4.7 Looking ahead, it seems reasonable to expect increasing integration of the world economy. The economic emergence of less developed countries and the strong commitment they often have to education will have major implications for countries like the UK.

4.8 Table 4.2 shows the scale of the recent economic growth of some developing countries.

4.9 In analysing economic integration, the Organisation for Economic Co-operation and Development (OECD) Industry Committee has identified three major elements: the organisation of production on a global scale; the acquisition of inputs and services from around the world which reduces costs; and the formation of cross-border alliances and ventures, enabling companies to combine assets, share their costs and penetrate new markets. We have noted a number of additional factors: capital markets have been integrated; the information which allows benchmarking of commercial performance on an international basis is widely available through international travel and better communications; many consumers have the knowledge, information and spending power to make discriminating choices; and more countries have now developed the infrastructure and technological capability to compete against the established industrial centres. The causes of increasing integration are predominantly technological: changes in telecommunications, information technology and transport. Integration has also been fostered by political changes, specifically the promotion of free trade and the reduction in trade protection.

4.10 This is not to deny that nations have always interacted. Trade has increased steadily over many centuries, as shown in Table 4.3, although the position of individual countries varies.

4.11 But the consequence of increasing integration and the emergence of developing economies is that corporations are increasingly free to locate their operations, research and administration wherever in the world suits them best. While a corporation’s headquarters may well remain in its country of origin, it will design, build and market products and services on a global basis. This has changed the relationships between corporations and their suppliers and between corporations and the communities in which they are located; and the balance of available skills and labour cost in any given country that will attract and retain a global corporation.

4.12 As a result, in the UK, as elsewhere, there has been social change, growing income and labour market inequality. Some of the consequences are that:

  • there has been downward pressure on pay, particularly for unskilled labour, because corporations can shift their production to the area of cheapest labour;
  • there has been upward pressure on the quality of labour input; and on the service provided by employees, and by corporations to their customers;
  • competition is increasingly based on quality rather than price;
  • people and ideas assume greater significance in economic success because they are less mobile than other investments such as capital, information and technology;
  • unemployment rates of unskilled workers relative to skilled workers have increased across the countries of the Organisation for Economic Co-operation and Development, including Britain;
  • more, probably smaller, companies whose business is knowledge and ways of handling knowledge and information are needed.

Implications for higher education
4.13 These changes are not transient nor are they applicable only to a small proportion of the modern economy. They are pervasive and persistent. The implications for higher education students, their employers, those who provide higher education, and those who fund it are great.

4.14 In our view, these economic changes have the following main implications for higher education:

  • high quality, relevant higher education provision will be a key factor in attracting and anchoring the operations of global corporations because of the research capability of its institutions, and the skills and knowledge it can develop in the local workforce;
  • institutions will need to be at the forefront in offering opportunities for learning throughout life, to individuals and their corporations, so that they can have access to the most up-to-date processes and creative strategies;
  • institutions will need to meet the aspirations of individuals to re-equip themselves for a succession of jobs over a working lifetime and to manage the corresponding uncertainty with confidence;
  • higher education must continue to provide a steady stream of people with high level technical skills and creativity, to meet the premium put on innovation, product and service development by the developing relationship between global corporations and their suppliers;
  • higher education itself will become more strongly an international service, with students and employers choosing, on a global basis, the programmes they require, delivered in ways and at times that suit them, making use of new communications and information technologies;
  • higher education institutions may need to learn from the changes in organisational structure, decision-making and the approach to lifelong learning made by other organisations in order to flourish in a fast-changing global economy;
  • above all, this new economic order will place a premium on knowledge. Institutions are well-placed to capitalise on higher education’s long-standing purpose of developing knowledge and understanding. But to do so, they need to recognise more consistently that individuals need to be equipped in their initial higher education with the knowledge, skills and understanding which they can use as a basis to secure further knowledge and skills;
  • in addition to a well-educated, highly skilled workforce, the other prerequisite for a knowledge-based economy is a research base to provide new knowledge, understanding and ideas. High technology companies will choose to locate in those countries which have a good supply of trained researchers; which can apply the fruits of research; and which offer opportunities to companies for communication and collaboration with those involved in basic research.

4.15 The relevance of education to economic survival has been recognised by successive governments over the last century and has been a major influence on their education and training policies. With the global approach to production and service provision, the factors which will determine the economic future of the UK will be the quality, relevance, scale, and cost-effectiveness of its education and training, and the commitment of its population to lifelong education and training. It will increasingly be this element in national life which determines a nation’s relative prosperity and its ability to offer a high level of employment.

A transformed labour market

4.16 Increasing international economic competition, the emergence of once poor countries as major international competitors, new technology and social, cultural, political and legislative changes have all contributed to major changes in the UK labour market. Significant features include:

  • a large rise in the proportion of women who are economically active;1
  • an increase in the proportion of the labour force who work part-time;2
  • a shift towards employment in small and medium sized enterprises and self-employment;3
  • increases in the proportion of professional and skilled jobs and a decrease in the proportion of unskilled jobs;
  • decreases in primary and manufacturing employment and an increase in employment in the service sector.

4.17 Other significant changes include, for example, an increase in the number of qualifications and of their use in employment selection. Teaching and chartered accountancy, for example, are now largely graduate entry occupations and it seems likely that other occupations, such as nursing, will move in this direction. This may be seen as an indicator of the need for higher skill levels, although to some extent it is a consequence of the expansion of higher education, and employers and professions seeking to attract their share of talent.

4.18 Looking to the short term future, employment growth is projected to be 0.8 to 0.9% a year over the next few years and all the labour market trends of the last few years are expected to continue.4 Within jobs there may be a shift away from routine processes within narrowly defined functions and towards teamwork which crosses functional boundaries. If organisations continue to remove layers of management, there will be an increasing range of responsibilities within jobs.

4.19 We recognise the fragility of attempts to forecast the demand for specific skills in the longer term. Recent history is littered with failures to forecast needs successfully, and as the pace of change in industry quickens, the task of forecasting is becoming still more difficult. But, even with the lessons of history to caution us, we believe that the broad direction of change for the long term can be described.

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