Economic Determinants of Higher Education Demand in the UK - Assignment Example

Economic Determinants of Higher Education Demand in the UK Introduction The primary role of education is identified as providing the needs of economy. With the recent developments in new technologies and rapidly changing demands in labor market, the significance of education has become more prominent (Ozturk, 2008). The World Bank states that the quality of education is an important determinant of country’s economic growth (Hanushek & Wößmann, 2007). University of Wolverhampton states that graduates are increasingly working in jobs which were not earlier recognized as graduate level jobs example, solicitors, research scientists and medical practitioners. Advancement of new technologies and globalization has created complex high competitive environments in businesses. Thus, contemporary graduates commonly find occupations as programmers, journalists, primary school teachers, marketers, and retail managers. Higher education sector not only contributes to the development of country’s human resource, but also it provides a profitable business venture and a prominent source of export income to the UK (Universities UK, 2011). Therefore investigating the determinants of the demand in this sector can be beneficial to country’s economic growth. This study is focused on identifying the impact of students’ demographic characteristics on demand for higher education. It also examines the types of occupations in which graduates are significantly employed. 2. Background The higher education sector in the UK comprises of universities, university colleges, specialist higher education institutions, and other higher education colleges. According to the statistics, there are 115 universities and 50 other higher education institutions in the UK. The demand for higher education derives from labor markets in UK, EU countries, and non-EU countries. The United Kingdom has a competitive advantage in providing higher education to the world due to its global reputation, elite higher education brands, historical trade and political links, the popularity of the English language and culture, and post-study employment prospects (Universities UK, 2012). These can be considered as “pull” factors (Mazzarol & Soutar, 2002). There are also “push” factors contributing to the growth of this sector. The push factors are largely generated based on the socio-political environments in the home countries of international students (Mazzarol & Soutar, 2002). Thus, changes occurring in those countries can affect the growth of higher education sector in the UK. Speculators advocate that there is a substantial degree of uncertainty created in the demand for higher education due to such changes occurring overseas (Brown & Ramsden, 2008). The growth of higher education sector is visible in its increasing income contribution to the country’s GDP and the size of student population. A substantial growth had been observed in transitional education (TNE) during the past few years. This means that international students are reading for UK based degree programs while living in their home countries than coming to the UK for learning (Universities UK, 2011a). The international demand for higher education in the UK also depends on the country’s population growth and proportion of population above 18. Due to the significant demand exerting from other EU and non-EU countries, the population growth indicators in overseas also affect the higher education demand in the UK. The major competitors for UK in this field are China and India. It has been observed that the growth of the sector in these countries is substantially higher compared to the UK during recent years (Universities UK, 2011a). Although the primary objective of higher education sector is identified as developing the human resource, such institutes also add to the pool of knowledge and technologies via research. Conducting research and transferring knowledge to the benefit of society is a fundamental expectation of the higher education institutions. Thus, the role of government is identified not only in terms of formulating the effective policies, but also supporting researches. Student loan facilities, cumbersome processes in student visa processing and availability of funding for research can thus affect the demand for higher education in the UK (Universities UK, 2011). Moreover, higher education is believed to have social benefits, such as contributing to arts and culture, improving the quality of human life, health, and decreasing the unemployment and antisocial behaviors (Universities UK, 2011a). Such expectations should be considered in formulating the curriculums. 3. Previous studies The derived demand for higher education by students is determined by the demand for graduates from the employees (HIM, 2006). There are political, cultural, economic, and technological factors determining the demand of labor markets (NCIHE, 1997). Decisions made by policy makers, university councils, business community, students, parents, and major competitors, such as China and India, can affect the demand for higher education in the UK (Universities UK, 2012). Further, the demand for the UK higher education sector derives from both national and international labor markets. In fact, the percentage increase of non-EU international students recorded 121.6% proportion from 2000/01 to 2009/11 time period (Universities UK, 2011). Thus, the decisions made in the overseas economies and student visa policies towards non-EU member countries can also affect the demand for higher education. The differences between wages of graduate employees and those who immediately joined the work force (despite having qualified for university enrollment) influence the demand of future students (Brown & Ramsden, 2008). In addition, students’ gender, aptitude, high school curriculum, family background characteristics can also influence their enrollment decision (Altonji, 1993). 4. Method In the current study following hypothesis will be tested; (1) male students significantly enroll in higher education compared to female students; (2) students whose parents have had higher education tend to enroll in universities highly compared to others; (3) new and niche occupations absorb more graduates compared to the traditional graduate level jobs. To test the above hypotheses an empirical model will be estimated. Data and variables The sample of this study consists of students who are qualified for obtaining higher education. To estimate the demand function, series data of their demographic characteristics, such as gender, family income, parents’ education and their employment after graduating are required. This data can be obtained from enrollment records of higher education institutes in the UK. Model The dependent variable (y) is a dummy one: it equals to 1 if a student obtained higher education and 0 if the situation is the opposite. The explanatory variables include annual income of the family and the following dummy variables. The dummy variable for gender, D1=1 if a particular student is male and 0 if female; the dummy variable for parents’ education, D2= 1 if student’s parents have had higher education and 0 if they haven’t any accordingly. Another set of variables is defined for the nature of occupation the particular student obtained after graduating. If a certain graduate is employed in Traditional graduate occupations, such as solicitors, research scientists, medical practitioners, etc., the dummy variable D3 =1 and 0 accordingly; if s/he employed in modern graduate occupations, such as programmers, journalists, primary school teachers the dummy variable is D4=1 and 0 accordingly; if s/he employed in new graduate occupations (marketing, management accountants, therapists) the dummy variable is D5= 1 and 0 accordingly; if s/he employed in niche graduate occupations, including nursing, retail managers, graphic designers - D6=1 and 0 accordingly (University of Wolverhampton). By estimating the empirical model, significance of each variable can be determined using p statistics. References Altonji, J.G. (1993). The demand for and return to education when education outcomes are uncertain. Journal of Labor Economics. 11(1) p. 48-83. Brown, N. & Ramsden, B. (2008). The future size and shape of the higher education sector in the UK: demographic projections. Universities UK [Online]. Available form: http://www.universitiesuk.ac.uk/Publications/Documents/size_and_shape.pdf [Accessed 27/10/2012]. Great Britain. National Committee of Inquiry into Higher Education (1997). Report of the National Committee. [Online]. Available from http://www.leeds.ac.uk/educol/ncihe/natrep.htm [Accessed 27/10/2012]. Hanushek, E.A. & Wößmann, L. (2007). The Role of Education Quality in Economic Growth. [Online]. World Bank Policy Research Working Paper 4122. Available from https://openknowledge.worldbank.org/bitstream/handle/10986/7154/wps4122.pdf?sequence=1 [Accessed 27/10/2012]. HM Treasury (2006). Prosperity for all in the global economy – world class skills. [Online]. Available from www.hm-treasury.gov.uk/independent_reviews/leitch_review [Accessed 27/10/2012]. Ozturk, I. (2008). The Role of Education in Economic Development: A Theoretical Perspective. [Online]. Available from http://dx.doi.org/10.2139/ssrn.1137541 [Accessed 27/10/2012]. Mazzarol, T. & Soutar and GNS. (2002). “Push-pull” factors influencing international student destination choice. International Journal of Educational Management, 16 (2) p. 82 – 90. University of Wolverhampton. (2010). Graduate Labour Market. [Online]. Available from https://www.wlv.ac.uk/default.aspx?page=24671 [Accessed 27/10/2012]. Universities UK. (2012). Futures for Higher Education. Analysing Trends. [Online]. Available from http://www.universitiesuk.ac.uk/Publications/Documents/FuturesForHigherEducation.pdf [Accessed 27/10/2012]. Universities UK. (2011). Patterns and Trends in UK Higher Education. [Online]. Available from http://www.universitiesuk.ac.uk/Publications/Documents/PatternsAndTrendsinUKHigherEducation.pdf [Accessed 27/10/2012]. Universities UK. (2011a). An Overview of the Higher Education Sector. [Online]. Available from http://www.universitiesuk.ac.uk/UKHESector/Pages/OverviewSector.aspx [Accessed 27/10/2012]. Read More