A Napoleonic lesson in job creation

When Napoleon Bonaparte called Britain “a nation of shopkeepers” it was intended as a withering put-down – and so it was in an era when ‘boutiquiers’ were still sneered at, despite having been one of the disaffected groups responsible for the French revolution that gave Bonaparte his big chance.

Fast forward two centuries, and Britain’s conservative government thinks a nation of shopkeepers is a wonderful thing to be.

Following Prime Minister Cameron’s recent cabinet reshuffle, incoming employment minister Esther McVey has told the Telegraph newspaper that her government should be championing entrepreneurs and small-business owners, to help the nation get past a myopic assumption that school-leavers should either study a trade, get a job, or go to university.

She told the paper: “I believe in choice. If that is your route, to go to university and get a job that way, that is fantastic. If your route is that you are practically minded and that is what presses your button and you do an apprenticeship and you get a job that way, that is fantastic.

“But if you have this seed, this idea, this creativity, you want to set up a business, then that is what you should do and we as a Conservative Party should be able to support those people. That is what we should be doing, liberating everyone’s potential, whether it’s a self-made individual, whether it’s someone taking the university route, whether it’s the apprenticeship route. They are all equal and good and worthwhile.”

But are they? Questions are starting to be asked across the developed world about one of those options – specifically, whether the expansion of universities in past decades has exceeded an optimal level.

And that question does not need to imply an unworthy anti-intellectualism, a disrespect of ‘book learnin’, or an elitist notion that higher education should be the preserve of only certain types.

What it does imply is that many people who grow up with the unexamined assumption that if you can ‘get in’, you should go to university, might be better off doing other things.

The question facing Australia, as much as Britain or any other prosperous nation, is what balance should be struck between university graduates, those trained in a trade or technical skill, those entering employment directly, and those who become self-starting entrepreneurs.

The Abbott government has given two answers to this question that many did not expect.

First, it adopted Labor’s aim of increasing participation in higher education -- the ‘demand-driven’ model that has seen enrolments soar as part of Labor’s stated goal of having 40 per cent of young people with at least a bachelor's degree by 2025.

This is curious, as Labor itself was starting to question that goal just before the 2013 election.

Second, the Coalition surprised voters by telling them before the election that there would be no changes to higher education funding, only to say after the election that it would remove promised funding increases and allow universities to compete on price ­– meaning the better institutions will hike fees, and the bad ones will be forced to lower fees and become even worse.

As elsewhere in the developed world, the dilemma facing the Coalition is highly political.

If one suggests, as Esther McVey has bravely done, that university isn’t the pinnacle of social achievement, voters who have long had only a vague idea of what a degree will mean for their children, will think something is being stolen from the next generation.

Furthermore, if funding caps are put in place ­– the opposite of the demand-driven model – one of two undesirable outcomes will occur.

The first, trialled during the Howard years, was to refuse to increase funding, but encourage universities to increase enrolments. As historians Alison Mackinnon and Helen Proctor have written, “Australia is the only OECD country where public contributions to higher education remained at the same level in 2005 as in 1995. Yet enrolments continued to grow.”

Maintaining teaching quality in such a scenario is almost impossible, and to make that era worse, reforms brought in during the Hawke years left universities with a funding shortfall per student that could only be made up by swelling the numbers of foreign, full-fee-paying students.

Developing ‘education exports’ is a good idea, but watering down assessment tasks or language entry requirements in order to balance the books is not – and both happened during those years.

One academic told me in 2005: “Too often the comments came back to us that 'if we can make any sense of what they write, we push them through.’”

The second undesirable outcome is that the jobs market will struggle to mop up all those moppy-haired youngsters. The changing nature of the workplace – especially growing capital intensity and automation – mean many low-skill jobs have vanished. Youth unemployment is a significant problem already, and junking the demand-driven system would add thousands of young Australians to the jobless queues.

The numbers are striking. At the end of WWII, less than 0.5 per cent of the population were enrolled in higher education.

That rose steadily, with some acceleration during the Whitlam years, to be about 1.3 per cent in 1989 when Labor education minister John Dawkins brought in the Higher Education Contribution Scheme.

The HECS-underwritten university expansion then took off, resulting in a full 5 per cent of the population being enrolled in higher education today – ten times the post-war level.

The ABS records that between 2001 and 2013, the proportion of Australians with bachelor’s degrees or higher qualifications increased from 17 per cent to 25 per cent.

The great majority of those degrees are good for the individuals, good for their employers, and good for productivity and the economy – which is why populist politics favours an uncapped demand-driven system.

But the ‘great majority’ does not mean all. The issue McVey has raised in the UK is whether the individuals, productivity and the economy would be better if some of the youngsters shepherded into higher education were encouraged to expand the jobs market a different way – by starting a business and giving themselves a job.

Given the tightness of the federal budget, the bias towards seeing any ‘degree’ as inherently valuable must be examined in the near future – the question being, for each individual, is there something more valuable that you’ve never been encouraged to see?

If we don’t have that debate, we risk be sneered at by some jumped-up foreigner as nothing more than ‘a nation of graduates’.

Footnote: The author has studied at three universities and taught well over a thousand students at one university over seven years.