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Study shows substantial economic return from state investment in A-levels and degrees

9 June 2012

A new study has today revealed that putting an individual through A-levels and university generates a £227,000 net gain for the economy.

A new study has today revealed that putting an individual through A-levels and university generates a £227,000 net gain for the economy (see table in press summary).

The report shows that for an investment of £5,000 the net return to the exchequer from someone who gains A-Levels is £47,000, with a degree worth an additional £180,000 from a £19,000 state investment.

The report - Further Higher? Tertiary education and growth in the UK's new economy, commissioned by UCU and carried out by the Institute for Public Policy Research (IPPR) - also warns that unless the UK produces more highly-skilled workers it risks haemorrhaging jobs abroad and losing the chance to build a competitive advantage in new low carbon industries.

The full report will be launched at UCU's annual congress in Manchester this afternoon by the union's general secretary, Sally Hunt. She will tell the 550 delegates that:

"With 80% of new jobs by 2020 likely to be professional or technical, the UK must invest now in the next generation or risk losing out in the race for economic growth. This research highlights the folly of reducing public investment in our colleges and universities.

"Instead of cutting places and making it more expensive to study, ministers need a strategy which harnesses further and higher education to provide a window of opportunity for the next generation."

Nissan vice-president for Europe, Jerry Hardcastle, warns in the report of the importance of investing in UK graduates. He says: "In India they are churning out hundreds of thousands of graduates and we are churning out a small number and that will restrict our ability to expand. If they're not available here, the jobs will move to India, Brazil and China."

A full embargoed copy of the report and Sally Hunt's speech are available from the press office and a press summary is produced in the notes of this release.

PRESS SUMMARY

Level 3/A-Level (£)Degree (£)Level3/A-Level and Degree (£)
Total teaching cost to state per student*5,00019,00024,000
Net return to wider economy47,000180,000

227,000

Source: Further Higher? Tertiary education and growth in the UK's new economy, IPPR 2012 ^

Further Higher? Tertiary education and growth in the UK's new economy reveals the huge net benefits to the exchequer through tax revenues from people who obtain A-levels and degrees and warns that if the UK fails to invest in a better-qualified workforce it may lose thousands of jobs abroad.

The research, commissioned by UCU and carried out by IPPR, shows that a lack of qualified workers is already acting as a barrier to the growth in new areas of the economy, such as the UK's wind sector and has the potential to hit high-performing sectors such as low carbon vehicles.

Nissan vice-president, Jerry Hardcastle, warns in the report that: "In India they are churning out hundreds of thousands of graduates and we are churning out a small number and that will restrict our ability to expand. If they're not available here, the jobs will move to India, Brazil and China."

This would seriously threaten the UK's position as Europe's leading manufacturer and developer of low carbon vehicles, which generates £1.5billion in research and development each year alone.

The trend towards increased demand for higher qualifications is prevalent across the economy with over 80% of new jobs created by 2020 likely to be professional posts requiring at least A-level or equivalent qualifications.

Yet, as the report shows, the UK currently invests just 1.7% of public expenditure on tertiary education, compared to 2.3% in France, 2.8% in Germany, 3.2% in the USA and the OECD average of 3.0%.

This study is released at a time when applications for college and university courses are falling, and youth unemployment rising.

As a recent report by the National Institute of Economic and Social Research (NIESR) highlighted, the cost of youth joblessness in forgone tax revenues and unemployment benefit is estimated at £4.5bn a year - a cost which is itself more than the entire further education budget for 16-19 year olds.

Further Higher? Tertiary education and growth in the UK's new economy makes the following key recommendations:

1) The government must recognise the economic return of investing in A-level and degree courses.

2) The government and employers must urgently invest in equipping the UK workforce with the higher skills needed in key growth sectors or there is a risk that companies will move their production bases abroad, resulting in the loss of jobs and research and development investment.

3) As the proportion of jobs requiring higher level skills increases, maintaining and even expanding the number of graduates entering the workforce should be a priority across all subject areas, including the arts, social sciences and humanities.

4) In order to improve levels of innovation in the UK economy the government must look at providing greater support for research and development including university start-ups which can be successful in attracting investment and leading innovation.

Launching the report at UCU congress, the union's general secretary, Sally Hunt, will say: "This report is a timely reminder why investing in education should be at the centre of the government's strategy for growth. Unless we produce more highly-skilled workers quickly we will haemorrhage jobs abroad and lose any chance of building a competitive advantage in new low carbon industries.

"This research shows the huge contribution A-level and degree holders make to our economy and instead of cutting places at college and university ministers should be looking to fast-track learners into the industries of the future."

*Please see the technical note in the appendix of the report for a methodological explanation of how estimates for teaching costs were arrived at.

^This table is a partial account of the total costs and benefits: other costs associated with obtaining an A-level or undergraduate degree include students' foregone gross earnings over the years they choose to remain in education rather than enter the labour market. For a full account of costs and benefits please refer to the technical note in the appendix of the report.

Last updated: 11 December 2015

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