The MRPL of a graduate, and comparative advantage

If workers are needed for the output they are required to produce, then it follows that they could be paid up to the extra value of revenue that their output generates for the firm, and that wage differentials will reflect differences in labour productivity - in other words, I am talking about the marginal revenue product of labour. The University and College Union (UCU) have commissioned a report from the Institute of Public Policy Research (IPPR) called ‘Further Higher? Tertiary education and growth in the UK’s new economy’, looking for some evidence of the differences in the productivity of workers who have A levels and those with degrees - you can see the results in the table above.

Clearly, they have a point to make about the impact of spending cuts on university funding. There is concern about the importance of courses in key areas such as science, technology, engineering and mathematics. Their release about the report gives some data comparing the UK’s spending on tertiary education (1.7% of public expenditure) with that of France (2.3%), Germany (2.8%) and the US (3.2%) and warns of the UK losing its potential for comparative advantage in low carbon industries - quoting as follows:

“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. “