Some skills make more money than others
Bangladesh educates too many people to too high a standard. That might seem like an outrageous statement and it is indeed such, but it’s also true. We can tell this by the fact that, as this newspaper reports, 33% of graduates are unemployed.
The correct point to understand here being that markets and prices may tell us all sorts of things we don’t like, don’t want to hear, even that we’d like to change, but the things that markets and prices tell us are true all the same.
If we’ve an oversupply of something, so that either the price declines or some portion of that supply goes unused -- a glut in the economic jargon -- then we’ve an oversupply of that thing. Whether we like the message being passed on to us or not is irrelevant, it’s still true.
Our problem comes from a step further back, in the construction of the argument in favour of education. It’s entirely true that it is the human mind that makes us rich. It’s also true that trained minds make us richer than untrained.
At which point the usual logical follow on is great, we’ll educate more minds and we’ll get richer. And that’s where the flaw is. For it’s not so much education or training that increases the wealth of the nation, it’s education and training in what?
What skills that can be imparted are those which add to the wealth of the nation? Those are the ones that we desire people to be educated in, obviously enough.
We can also approach the point sideways. It is generally true that graduates earn more than non-graduates. But it isn’t true that all graduates make more than all non-graduates. This is something that is true right across the world as well, this is not specific to Bangladesh. So, as individuals seeking education we should pick and choose what to study.
For example, in Britain, it is generally true that a plumber will earn more than a university arts graduate. We could be unkind and posit that a decent plumber adds more to the nation than another arts graduate but the point is that people are willing to pay more for one. Consumers value plumbing more than they do arts, that’s why the producers of those services get paid more.
This is true to such an extent that we see a reversal in the usual lifetime incomes. For men, an arts degree these days leads to a lower lifetime income than not having a university degree at all. Especially when we add in the costs of not having an income for those years at university.
We see this mirrored in the Bangladeshi findings. The unemployment rate amongst arts graduates is higher than among those who did science and engineering.
It is possible for us to be educating too many people to too high a standard. We are creating economic waste by doing so as well. Partly, the funds devoted to universities would be better directed at providing an increased volume and quantity of primary and secondary education for all -- especially girls.
But also because, well, if those who have just spent all those years in the education system end up unemployed, that’s a waste of their lives and brains as well as our funds and taxation that have sent them through it.
It is entirely true that education is a good thing. But that does not then mean that more education is an ever more good thing, nor that we should be having ever more education. It is education in what, to which level, that matters. Of course, this should not be all that much of a surprise, there are diminishing marginal returns to everything.
The problem is that no one has ever really managed to work out how to deal with this problem properly. If an arts degree in rich countries lowers lifetime earnings, then why are so many rich world student studying for them? Sure, there’s a joy in intellectual achievement as we all know, but that’s not something that any individual should be asking the rest of society to pay for.
The best that can be done is to try to concentrate minds. Students should be asked to pay the costs of their educations, perhaps with loans provided to enable them to do so. Such a system should not be limited to purely academic subjects, they should also apply to the skilled trades and apprenticeships as well. Universities and colleges should be paid according to the student numbers they attract.
And then? Well, if it continues to be that we have too many graduates so that many are unemployed, well, that’s what people want to do. For we never will perfect any system, all we can do is try to set it up with the correct incentives.
But it is still true that if the unemployment rate among graduates is 33% then we’re educating too many people to too high a standard. Something we should certainly at least try to change.
Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.