By Adam Walker, Economics Correspondent
In my last article I discussed the various indicators that show we were finally clearing the seven year-long recession in the UK. However, it is important to note that this was not the first economic depression and by no means the last.
Any long-term economist will tell you that the ebb and flow of an economy is as natural as the changing of seasons. Just as the summer booms, wintery busts can soon be felt. Most of these bust periods have often been triggered or characterised by a single “bubble-bursting” moment that sparks the ensuing flames; most recently it was debt trading within the financial sector, in 2001 it was the dot-com bubble. So the question now facing many economists is what will be the next big bubble to burst? Judging by previous trends and common behaviours there is some evidence that would indicate the higher education system could be the next match to light the economic powder-keg.
Each of the bubbles previously associated with economic collapses have shared common traits and characteristics in the run-up to their inevitable downfall. They are usually managed or controlled by large organisations key to national infrastructure; the associated products are priced considerably above traditional market expectations and are usually sold on fear/overconfidence.
Within the UK, a standard three year university degree costs approximately £9,000 a year in tuition fees alone with the market being predominantly structured and managed by a series of senior education ministers and top ranking universities. Moreover, the key selling point of a degree for most prospective undergraduates is the promise of increased potential earnings and improved job prospects through said qualification. However, with UK graduate unemployment at 10% in 2013 and more employers requiring professional experience from the graduates they seek to employ the entire quality and value of a degree in recent years has been questioned by many.
Displaying all the characteristics of the previous economic bubbles (expensive, controlled by a minority and sold on fear of restricted earnings/job prospects) many believe the bubble is already at breaking point and a single tipping of the scales in confidence within education could cause it to burst.
The Tipping Point
If this is the next problem to spark an economic downturn then we are potentially beyond the point of return. More prospective graduates in recent years have taken to apprenticeships and paid/unpaid internships due to high costs of entry to university degrees and a lack of return on their investment.
Students spend roughly 13-hours with professors per week* according to a study in 2012, which is no higher than six years ago before tuition fees began to escalate. Many young people, and their families, are beginning to question what they are paying for and what benefits they will see both in the long-term and short-term?
By many indicators it would appear that higher education, in its current structure, may have already seen its best days and has now entered a period of saturation and depression. The question is: When will the confidence bubble burst and will the financial fallout affect national income, jobs, taxes and overall confidence in our economy?