Degree boosts earning power

February 6, 1998

Graduates earn significantly more than their peers who left education after A levels, according to a survey conducted by the Institute of Fiscal Studies.

Based on data from the National Child Development Survey, which is following all individuals born between March 3-9, 1958, the study concludes that in 1991 male graduates in their early thirties earned 15-20 per cent more than similarly aged men who completed A levels but did not undertake higher education. For women, the average gain due to a degree was even higher, about 35 per cent.

The IFS study, Higher Education, Employment and Earnings in Britain, focused on a sub-sample of the NCDS - those with at least one A level who could have gone on to higher education. It examined the earning power of 2,500 individuals.

Much has changed on the higher education landscape since members of the survey group emerged from universities in the early 1980s. But Howard Reed, economics researcher at the IFS and co-author of the report, said: "The results are relevant to the government's higher education reforms. If the payoff for today's graduates is comparable to the payoff for graduates of the early 1980s studied, it may be feasible to expect graduates to pay more of their own higher education costs."

Mr Howard said it will not be possible to see whether government proposals to replace maintenance grants with loans repayable on an income-contingent basis can be handled by graduates until those studied are well into their careers. He said: "It is quite possible that with the expansion of higher education, average returns might be lower in future compared with those for previous generations of students. But at the same time, there is greater demand for graduates - the effect on returns could end up being neutral."

The impact of higher education on women's wages was found to be considerably larger than on men's. Mr Howard said the IFS is studying the data for an explanation of the difference. The survey found that women with non-degree higher education qualifications had hourly wages 26 per cent higher on average than those with just A levels.

Women with first degrees had hourly wages on average 39 per cent higher, while women with higher degrees had hourly wages on average 43 per cent higher than those with A levels.

Men with first degrees had wages on average 23 per cent higher than women with first degrees. The gender gap, however, was found to be considerably lower among graduates than those who were less qualified. Taking into account differences in ability and background, men with only A levels received hourly wages on average 43 per cent higher than similarly qualified women.

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