All profits go to rent, part the manieth

From the BBC:

Politicians should stop using a "carrot of higher graduate earnings" to justify raising student fees or freezing repayment thresholds, say campaigners.

Those who do "should be charged with gross mis-selling", says Angus Hanton, co-founder of the Intergenerational Foundation (IF) lobby group. Having to pay back student debts will wipe out any graduate premium for most professions, claims the IF in a report...

The report focuses on tuition fee rises in England - currently capped at £9,000 a year - pointing out how successive governments have used the graduate "pay premium" to justify them. The premium is the amount of extra money it is estimated a degree can help graduates to earn over the course of a lifetime. The report says that in 2002, ministers put it at £400,000, but recent estimates have been more modest at about £100,000.

"The increasing number of graduates... is further undermining the value of a degree," it adds, with some previously low-to-median paid posts now requiring degrees. "Our research proves that the current £100,000 graduate earnings premium so often touted equates to an 'annual bonus' of just £2,222 over 45 years of work and is wiped out once National Insurance and income tax [and student loan repayments] are taken into account."

"The current system is fuelling a self-perpetuating debt-generating machine which short-changes young people," argues Mr Hanton.

We've done this topic often enough, there's a supply-demand erosion of the 'premium' and it is difficult to compare like-with-like. The premium for people who end up in protected professions - medicine law, accountancy, civil service - and/or who can piggy back their peer network - Oxbridge students - is as robust as ever; but the overall average premium is diluted down by people doing irrelevant degrees.

But the point stands; if having a degree at a cost of £x makes you £y better, more people will study until either £y is eroded down to £x or the universities increase their fees/rent £x up to whatever £y happens to perceived to be, until ultimately, half of people who did a degree end up worse off than if they hadn't.

The producer surplus remains intact, but the consumer surplus is eroded to zero. It is quite unlike normal goods and services where there is a producer surplus and a consumer surplus.