What is university for? I ask this old question because the utilitarian answer which was especially popular in the New Labour years - that the economy needs more graduates - might be becoming less plausible. A new paper by Paul Beaudry and colleagues says (pdf) there has been a "great reversal" in the demand for high cognitive skills in the US since around 2000, and the BLS forecasts that the fastest-growing occupations between now and 2020 will be mostly traditionally non-graduate ones, such as care assistants, fast food workers and truck drivers; Allister Heath thinks a similar thing might be true for the UK.

There are signs of this happening already. ONS data show that employment in professional occupations, having grown 3.1% a year between 2001 and 2007, has grown just 1.2% per year since, whilst overall employment growth hasn't changed much.

And we can tell a futurological story in which high-end work declines: IT could replace accountants and lawyers, not just routine clerical workers; MOOCs could render some college lecturers redundant; a smaller financial and public sector will limit demand for graduates; and the increased supply of graduates from India and China might bid down the wages of their western counterparts.

Now, none of this is at all certain. In 1975 Gary Becker, the founder of human capital theory wrote: "Perhaps the current weak demand for highly skilled manpower is the beginning of a resumption of the earlier [1900-40] decline." (Human Capital, 3rd ed, p9) That was just before a two-decade long increase in demand for graduates.Which tells us that forecasting demand for skills is a mug's game.

Nevertheless,we should ask: what function would universities serve in an economy where demand for higher cognitive skills is declining? There are many possibilities:

- A signaling device. A degree tells prospective employers that its holder is intelligent, hard-working and moderately conventional - all attractive qualities.

- Network effects. University teaches you to associate with the sort of people who might have good jobs in future, and might give you the contacts to get such jobs later.

- A lottery ticket.A degree doesn't guarantee getting a good job. But without one, you have no chance.

- Flexibility. A graduate can stack shelves, and might be more attractive as a shelf-stacker than a non-graduate. Beaudry and colleagues decribe how the falling demand for graduates has caused graduates to displace non-graduates in less skilled jobs.

- Maturation & hidden unemployment. 21-year-olds are more employable than 18-year-olds, simply because they are three years less foolish. In this sense, university lets people pass time without showing up in the unemployment data.

- Consumption benefits. University is a less unpleasant way of spending three years than work. And it can provide a stock of consumption capital which improves the quality of our future leisure. By far the most important thing I learnt at Oxford was a love of Hank Williams and Leonard Cohen.

But are these benefits really worth £27,000. I fear that, in an economy with declining demand for graduates, many will think not. If so, rather than supply much-needed educated workers, universities might merely create a (larger!) mass of disaffected 20-somethings. In this sense, the technical-economic matter of relative demand for skills could have interesting social consequences.