The rain-drenched start outside number 10 Downing Street as Rishi Sunak announced a general election in the UK on July 4th seemed to fittingly parallel the dull prospects for Sunak as he seeks re-election. His Conservative Party is trailing the opposition Labour Party by a gapping 22% according to a voting intention poll conducted by You Gov, the first since the general election announcement on May 22nd.
In the midst of the election-campaign flurry, Mr. Sunak issued a policy promise to create 100,000 new apprenticeships. The move would be funded by the closure of underperforming university degree courses. At an initial glance, this statement could be ignored as yet another soundbite to capture some media attention to help his campaign. On further examination, however, whether intentionally or not, Mr. Sunak proposal to defund universities is perhaps the most radical shift in education policy in generations and potentially the harbinger of a future revolution.
This Goes Far Beyond the UK
A recent Pew Research Center study found that only 22% of US adults think the cost of obtaining a college degree is worth it, if it requires student debt.1 To put this in context, according to the Federal Reserve, 85% of US adults with a college degree took on some form of debt to go to college. This is interesting given that there has been a very long-standing belief in the value—literally the economic value—of education, as illustrated for example in the wage gap between the degree holders and their peers. Now it appears that for many Americans that wage gap, while still present, no longer holds the allure it once did.
To date, much of the focus on the declining attraction of higher education has revolved around the disruption caused by the Covid-19 lockdowns, which clearly had an effect on college enrollment. The discussion, however, has not paid as much attention to a deeper issue. Have we overvalued knowledge and by extension education?
The dawn of easy-to-use AI is threatening to a significant tier of middle-level clerical activities. These are the very jobs that have been the end destination of the university degree factories. There is a simple reason for this. AI cheapens the value of knowledge, something which we discussed in our AI Insights commentary “Hype and Reality” in February 2023. An additional fear for graduate job seekers is the awareness of the potential fragility of jobs previously assumed to be stable. This is best illustrated by the ongoing job-purge among tech companies, traditionally the home of quality graduate jobs (over a quarter of a million tech jobs were shed in the US in 2023).
Positioning for the Future
These issues pose some interesting questions for investors navigating an AI boom. Growth from AI looks set to expand beyond just the direct technology companies and into the broader economy. As this is happening, it is important to simultaneously watch for growth in the non-technology domain. This brings us back to Rishi Sunak. His idea of reallocating resources from education to skilled labor is actually well aligned with the broader trends of an AI-era job market.
A consequence of the growth of technology has been the algorithmizing of everything. Higher education has fallen into an easy formulaic method and has become a production line for jobs that are now vulnerable, as in many cases they would be better, faster and safer done by a machine. The AI efficiency play is centered on technology-oriented tasks, everything from things as simple as scheduling to the most complex analysis. Ironically, the sectors of the jobs market that are most insulated from this change are those which are more dependent on manual and/or personal skills.
If we look at robotic technology company Boston Dynamics, for example, it produces many catchy videos of their Atlas humanoid robot, to illustrate how they are developing a highly impressive technology. It is easy to imagine how at some point in the future there will be roles for this style of agile, humanoid robotic assistance. That said, it also shows that we are quite some distance away from an Atlas-like bot crawling through a dingy attic space to repair some faulty wiring or fix a leaking pipe. In that context, Rishi Sunak’s policy proposal could be resonating with a seismic shift due to the overvaluation of knowledge. It is unlikely, though, that red and black posters of Comandante Rishi will be adorning the walls of apprentice dorms in years to come as the poster boy of the skills revolution. ■
1 Fry, R., Braga, D., Parker, K. (2024) Is College Worth It? Pew Research Center.
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