6.1 Our terms of reference asked us to have regard, within the constraints of the Governments other spending priorities and affordability, to the principle that:
6.2 In this chapter, we consider the future demand for higher education from the economy and from individuals over the next 20 years, in response to the social and economic influences outlined in Chapter 4. We turn in the next chapter, Chapter 7, to consider the pattern of participation between those from different social groups and the steps that need to be taken to tackle under-representation by some of these groups. In Chapter 17 we consider the financial implications of future demand for higher education.
6.3 In considering the future demand for higher education we looked at a range of evidence which enabled us to address:
Economic factors affecting demand for those with higher education qualifications
6.4 The future demand for those with higher education qualifications will be shaped by the changing structure of the national economy and the labour market, which in turn will be responding to changes in the world economy and the associated competitive challenges. These forces will find their response in the choices made by individuals about participation in higher education and in employer demand for lifelong learning opportunities on behalf of their employees.
The changing structure of
the national economy
6.6 Powerful world economic forces inescapably tie the United Kingdom (UK) more fully into the world economy. As we show in Chapter 4, one phenomenon is the emergence of the global corporation locating and relocating its operations to wherever there is greatest relative advantage, whether in accessing markets or in accessing the factors affecting production, including in particular the quality of the labour force.
6.7 The UK, in seeking to provide its people with a high and improving standard of living, will be able to do so and remain a major economy only if its people are highly educated and well trained. It must match proportionately the investments made in their people by other nations, and the volume and the quality of their outputs from such education and training. A decade ago we had fallen well behind many other countries of Western Europe in the provision of higher education. Even now, after participation rates by young people have doubled, and the target set by the last Government for a third of young people to participate in full-time higher education by the year 2000 has been largely met, our levels of participation remain behind the United States and Japan. However the stock of graduates in the labour market compares well with many European countries in part because of high graduation rates.2 There is a long term expectation of growth in higher education in many countries, especially those of the Pacific Rim. Our degree programmes, whilst of high quality and comparable standards, are in the main shorter (other than in Scotland) than those of almost all other nations, largely because of the very specialised nature of the A level examination system.
6.8 There is international consensus that higher level skills are crucial to future economic competitiveness:
6.9 Our visits overseas suggest that, in the long term, other nations will increase their investment in higher education to sustain their economies. There is some emerging economic evidence to support such an approach. First, that countries which are the first to develop new research and technology capabilities gain a long term advantage over their competitors. Secondly, that the weight of evidence is increasingly that education is positively associated with income growth and higher education seems to be the most relevant educational variable in more developed countries. As a matter of economic strategy, we must match international levels of investment to anticipate and respond to the changing structure of the international and national economy.
The changing requirements of
the labour market
6.11 There is room for debate as to whether, following the major expansion in higher education that has taken place over recent years, there is need in the immediate future for further expansion and whether the labour market could absorb further increases in the numbers of conventional graduates. A study of the likely future labour market needs for highly skilled workers by the Institute for Employment Research (IER) at the University of Warwick looks ahead to the year 2000.5 It considers in some detail the likely changes to occupational structures, based on changes in the recent past. The IER research concludes that, up to the year 2000, labour market requirements will largely be met by the current level of higher education participation.
6.12 Another view put to us is that the UKs chief economic need is not for more people with graduate qualifications but rather for more people with lower level post-school qualifications. This view draws on evidence that graduates are now being employed in jobs which were traditionally done by non-graduates, raising the possibility of their under-utilisation, and on the longstanding perception that the UKs comparative international weakness lies at the technician rather than degree level.
6.13 It would indeed be surprising if the labour market did not need time to respond fully to the increased supply of those with higher level qualifications. We are persuaded that jobs are being progressively redefined to utilise graduate skills:
6.14 As to the demand for more people with advanced technical training, we agree that this is an area of national need. We believe that much of the further growth of higher education, at least in the short term, should be in the Higher National Certificate, the Higher National Diploma and other analogous awards. We reflect this in our proposals for the structure of qualifications in Chapter 10 and for the pattern of institutions in Chapter 16. It is expansion at this level that has particularly characterised recent Scottish experience, where participation by young people has reached almost 45 per cent, significantly ahead of England and Wales.
6.15 Chapter 9 also explores in more detail the views of employers about the range of skills and attributes which they require from graduates; and how those views can better be reflected in higher education, based in part on the questionnaire which we sent to a sample of employers.13 We emphasise in Chapter 12 the importance of higher education institutions ensuring that they are well-informed about local and regional employers requirements.
Economic benefits to
individuals from participating in higher education
6.18 These three studies show evidence of strong and persistent economic benefits to those with higher education qualifications. First, the Analytical Services research shows that employment rates are higher for those with such qualifications than for those without, particularly for women (Chart 6.1). Employment benefits are apparent for men with higher education qualifications in their mid-30s onwards, and rather earlier for women. The IFS and PSI reports broadly support these findings for the particular ages they study.