Although it has had many casualties, last night I realised at a comedy gig that the recession has been great for comedians, providing a rich vein of material. One comedian joked that in the present crisis, the British Prime Minister, Gordon Brown, looks a bit like the weedy kid at school who wants to be on the cricket team. He is finally handed the bat, whilst every other player scarpers, knowing that the window behind him has just been broken.

I could laugh last night. This time last week, however, was one of the most stressful periods I have been through since I finished my PhD. As I blogged about recently, I've been waiting on the (forever delayed) outcome of a job interview for an academic post. Meanwhile, my partner was about to learn whether she would be made redundant. On Friday, I finally learned I had landed the position, whilst my partner was kept on in her employment. Hence the comedy, when it could so easily have been tears.

For myself and my partner, things have worked out well, but that jest about the kid left holding the cricket bat is one that reaches towards a truth for my generation in general. Whilst people in their 40s and 50s may have made money and good homes on the rising housing ladder and stock markets, the younger generation have been left at the bottom, struggling to climb on the rungs of safe jobs and safe houses. And yet, with the windows now broken in credit crunch, with the world warming and non-renewable resources depleting, it is the young who are expected to fix the broken environmental and financial systems that the baby boomer generation have created.

Perhaps it was with a slight sense of guilt about this that in the United Kingdom New Labour, led by its middle aged, middle England, average Joe (nee Tony), came to power in 1997. New Labour pledged to address the social, income and environmental inequalities that had been generated by Thatcherism. The engineer for this change was an echo: "Education, education, education." Labour promised to get half of school leavers into Higher Education, the reasoning being that better education leads to better paid jobs which in turn leads to a more equable society. Although I was convinced that student loans - which Labour introduced in order to fund the expansion of higher education - would be counter-productive and put the poorest students off from applying to university, and although I worried that with so many gaining degrees employers would be unable to discriminate between good and weaker graduates, at the time I agreed with the principle that university education should not be the privilege of a select few but be open to all.

However, as a recent PhD graduate emerging from my study into the present world crunched by credit and a decade from environmental disaster, I cannot help but wonder whether my generation has not been sold a bit of a pipe dream by its middle-aged leaders. Though I have enjoyed every minute of my university life, is education really going to be the panacea it was promised to be? Are degrees really the best medicine that the young can take to heal the problems created by the older generation? A report from the Higher Education Statistics Agency last week showed that a quarter of graduates are not in full-time employment three years after graduating, whilst one fifth of graduates are in jobs that do not require a degree. As the recession bites, one-in-ten graduates from the class of 2009 will still be jobseeking in six months time. This will be the first group to have paid the full £3000 tuition fees for their education. They will be the most indebted, least employed - but best educated - generation ever.

Last week, my partner and myself got lucky, though we were told that luck should not come into it: get a degree, and that safe job with good income is guaranteed. However, the statistics cited above - one in ten, one in five - tell the story that the lottery is in play for many other, less lucky but talented, graduates.

Yet what has struck me during the stress of my personal life and of the national news is how student life is very isolated from the bigger picture of economics and politics. Like, I suspect, many of the class of 2009 feel, I feel like I have been asleep for the last seven years of academic work, and now the "real world" is a nightmare from which I am trying to awake.

As a dormant PhD student, although I regularly shouted at the radio news, I always felt somewhat detached from the world of economics and housing markets, which were theoretical spheres in which I did not move. After all, as a graduate researcher I lived off a small income, and was going to have to do so throughout my PhD. It was good to discuss in the pub whether nurses were underpaid or whether inflation was too high; but with a disposable income and overdraft stuck at zero, such discussions were purely abstract, irrelevant to my own life. So long as I could buy bread and milk, and heat my house, I was going to be just fine. The smug chatter about skyrocketing house prices and loft extensions discussed over bottles of Merlot across middle England passed me by. I had no chance of getting a mortgage, so house prices were irrelevant. The pensions time bomb was a bit of a damp squib; I did not even have an income, let alone the ability to divert some of it into a pot for retirement. As a left-winger, I saw income tax as unqualifiedly the best way of redistributing wealth to the poorest in society.

Now, though, as the highlight of my life is to receive a pay slip every month, the world seems a little different, and economic issues start to matter greatly. As a taxpayer, especially one whose partner works with the long-term unemployed, suddenly income tax does not seem quite so perfect an instrument of social change. As I now own a car, inflation hits me every time I pass a petrol pump. Whilst I agreed with the expansion of higher education as a student, as a graduate who chose to continue in education rather than enter work the interest on my student loan has increased by £1500 over the last few years. Last year, I managed to pay off a healthy £6 of interest, let alone any of the capital. Diversifying higher education is a great idea - but do I have to be the one to pay for it?

The economic world matters - and unlike when I was a student, this time it's personal. The comic I saw last night really did sum up the sense of bewilderment I feel. I did not make the world in which mortgages are impossible to obtain. I did not burn the carbon now clotting the atmosphere. And yet I find myself left standing in this sort of world, whilst my parent's generation looks on from behind net curtains in unmortgaged houses, hoping I am going to be able to put their mistakes right.

But my first person "I" may be a false one. I am not alone. I am one of a generation of young, talented graduates who may be in debt and out of work, but which does have an education and skills behind them. I originally wrote this blog post for a website which hosts several thousand committed early-career researchers, studying climate change and stock market behaviour and social justice. So please, fellow graduates of 2009, tell me to stop being so pessimistic. Tell me I'm wrong to feel resentful about the older generation. Tell me we can set things straight. Tell me I'm not holding the cricket bat alone.

[This is a modified cross-post from the Graduate Junction blog.]

Labels: credit crunch, Politics, University Life

In the credit crunch era, the financial plans of everyone - from large corporations to public amenities to individuals - have to be reassessed. But there seems to have been relatively little in the press about how the recession will impact upon students or recent graduates, other than the obvious issue that jobs will be hard to come by when students leave university. Partly, perhaps, this is due to the fact that the recent Research Assessment Exercise has captured the attention of universities wondering how much they will receive for research, and so universities and press have been less focused on the other side of the research-teaching coin.

So, with the substantial disclaimer that I am by no means an expert on this subject, here are some of my own thoughts on how the recession might affect higher education. Most of these points are particular for England or the United Kingdom, but may apply elsewhere also.

• The first, and most empirically certain thing to note, is that student loans have their interest rates for each year tied to the Retail Price Index as it stands in March. Over recent years, this has hovered around 3 percent. However, as of December 2008, this fell below 1 percent, with the downward trend set to continue. It is likely that come March, interest rates on student loans will be minimal, allowing those students who are in well-paid jobs to repay their loans at a faster rate. However, if RPI falls below zero, so that we have deflation in March, does this mean that the Student Loans Company will start actually paying students loans off? The terms and conditions of the loans state only that "the Government has to keep the value of what is owed in line with the general rate of inflation. They do this by working out the rate of inflation each year as defined by the Retail Prices Index (RPI) and fixing the interest charged to that rate...The new interest rate is based on the Retail Price Index for the previous March." There is no indication of what happens when the RPI falls below zero - something probably not imagined in the heady days of the economic boom when loans were introduced - and there are probably some worried faces running around the Department for Innovation, Universities and Skills trying to find a loophole to ensure students repay loans at some positive rate of interest.


• In a recession, one might expect students to hold off from incurring large debts, and favour finding immediate jobs ahead of further study. However, the reverse appears to be the case. With lower-skilled jobs on the decline in a recession (jobs in manufacturing or retail, for example), it is best for students leaving school to head to university in the hopes that economic prospects will have improved in three years, and knowing that at least the student loans offer a guaranteed (if minimal!) level of financial support. The Times Higher Education reports today that the government's restriction on university numbers is limiting the number of places available for increasing numbers of applicants.


• The flip side to this is fewer foreign students will apply to universities abroad. The Higher Education Policy Institute recently warned that if China were to fall into recession, the effect on this vital funding stream would be "cataclysmic." Though the drying up of foreign students will affect universities globally, Britain may oddly see the recession work in its favour to offset the losses, because of the plummet in the value of the pound. However, HEPI suggested that this might mean students opt for one year courses and choose to pay up front, rather than facing the the full three years at uncertain exchange rates.


• More difficult to predict is the effect the recession will have on any plans to lift the cap on top-up fees (set at £3000 plus inflation), and move to a system of full fees. The review on lifting the tution fee cap was due in 2009, but this has now been put off until 2010, after a likely general election. Universities would like the bar to be set at between £6000 to £7000. MP Ian Gibson, former chair of the Commons Science and Technology Select Committee, has argued against lifting the cap, saying that this would be incompatible with the Prime Minister's plan to ride out the recession by investing in green science research and skills. It would also surely be contradictory for the government to condemn excessive borrowing whilst allowing a new generation of students to start life owing £20 000 for tuition, plus any additional loans they need to support themselves. Furthermore, assuming the system stays the same with the government paying for students up-front, with students then repaying the loans once in work, the government would be required to put a large amount of capital into higher education, without guarantees that it would be paid back quickly, if the economy continues to run slowly. The stalling of tuition fee rises by the recession is, however, only a short term effect; longer term it is quite clear that UK higher education is moving towards the privatised, full-fee model of the United States, and will eventually do so under a Labour or Conservative government.

So there we have it. The layman's thoughts on how the credit crunch will affect current and future students. Clearly, the sector - like all others - faces a rocky and uncertain time, though if the government does see investment in research and technology as the light at the end of the tunnel of recession, universities might ultimately come out well on the research side of things. The people one has to be most worried about are new graduates. Vacancies for graduates have dropped 17 percent in the six months since summer 2008, particularly (and not surprisingly) in the financial sector. As if it were not already competitive as a result of the expansion of higher education, new graduates can expect to struggle for survival in the harshest economic environment in two decades.


Update 13th February 2008

Following the above post, The Guardian Education has just reported a big rise in undergraduate applications. Applications are up 7.8%, with

signs that the recession is affecting people's choice of degree, breeding a new generation of economists and mathematicians. The number of applications for economics degrees increased by 15.7% to a total of 44,750. Applications for maths rose 10.4% and for politics 16.7%.

There has also been an increase in public sector training degrees, hardly surprising since the public sector offers greater job security and, given the present need for investment from the public purse, probably increasing numbers of jobs also:

Applications for nursing rose by 16.7%, education degrees by 10.7% and teacher training by 3.7%. It is thought that people are opting for "safer" jobs outside business and commerce.

Not surprisingly:

There was a 7.6% decline in applications for building degrees as the construction industry slows, though there were modest rises in business degree applicants.

Labels: credit crunch, higher education, Politics, student loans

Question: Which literary character is a Collatorised Debt Obligation (CDO)? Obvious answer: Faustus. Listening to a recent Radio 4 documentary on the crisis in the international banking markets, the Mephistopheles of the recent Credit Crunch is the financier who has concocted clever ways of wrapping up essentially bad or high risk debts into attractive packages, and selling them to a banking system lusting not for anything so beautiful as Helen of Troy, more that end of year bonus and swanky basement conversion to their house in the suburbs. Whispering in the ear of bankers in the bars of the city, the economist has proposed:

But now thou must bequeath it solemnly,
And write a deed of gift with thine own blood;
For that security craves Lucifer.

Unfortunately, that "security," or CDO seems to have been not so safe after all. As several bankers in the programme rued, we have been here several times before since the 1930s, and failed to learn from each crash, always believing "this time, we're cleverer than the previous lot. Except, of course, we're not." The burning of books (or the run on the bank) ensues.

Our Chorus for the complexities of the money market is John Lanchester, who in a brilliant explanation of "Cityphilia" in the London Review of Books allows us "to wonder at unlawful" (well, almost) "things":

A well run bank is a machine for making money...Imagine, for the purpose of keeping things simple, a country with only one bank. A customer goes into the bank and deposits £200. Now the bank has £200 to invest, so it goes out and buys some shares with the money: not the full £200, but the amount minus the percentage which it deems prudent to keep in cash, just in case any depositors come and make a withdrawal. That amount, called the ‘cash ratio’, is set by government: in this example let’s say it’s 20 per cent. So our bank goes out and buys £160 of shares from, say, LRB Ltd. Then LRB goes and deposits its £160 in the bank; the bank now has £360 of deposits, of which it needs to keep only 20 per cent – £72 – in cash. So now it can go out and buy another £128 of shares in LRB, raising its total holding in LRB Ltd to £288. Once again, LRB Ltd goes and deposits the money in the bank, which goes out again and buys more shares, and so on the process goes. The only thing imposing a limit is the need to keep 20 per cent in cash, so the depositing-and-buying cycle ends when the bank has £200 in cash – all the cash there is – and £800 in LRB shares; it also has £1000 of customer deposits, the initial £200 plus all the money from the share transactions. The initial £200 has generated a balance sheet of £1000 in assets and £1000 in liabilities. Magic! In real life, it’s even better: the UK cash ratio is 0.15 per cent, so that initial £200 would generate £133,333 on both sides of the balance sheet.

I though I had a handle on the way the stock markets work, but it appears not. Enter, yours truly, the clown. Having recently acquired some inheritance, I decide to invest rather than paying off my student loan, and trot into the Co-Operative bank, they being the most ethical of a pretty bad bunch. The happy consultant grasps my hand, and thrusts in my face a series of graphs and charts that flow inevitably upwards towards monetary heaven, promising a 10 - nay 20 percent - return on my investment, staggered to receive greatest tax benefits, risk spread - like a low fat version - across different environmental and ethical funds. I turn to leave with a guide tucked under my arm, and swear as I do that the consultant is secretly congratulating himself on another sale:

when thou took'st the book
To view the Scriptures, then I turn'd the leaves,
And led thine eye.

Luckily, I am not so blind as to fail to read the small print. Wherein I discover how banks, even the nicer ones like the Co-Operative, make so much money. Thank you for your deposit, Mr. Faustus. Now, we'd just like to chip off 1.5% here (a management fee, you understand); oh, and we'll take 3% of whatever you gain; and how about 0.1% (just for the hell of it). So if I invest £3000, by the end of the first year I will have lost about £285, and over five years for every pound of my money I risk, and assuming I do gain with an upturn in the markets, the bank will get themselves the same amount again.

Count me out of this opportunity (yes, that's right, the markets being so low and volatile at the moment, this is a great time to invest, Sir!). This scholar wags his philosophical finger, and heads over to National Savings and Investments.

Labels: collatorised debt obligation, credit crunch, Politics, stock market