Graduate premium slashed by DFES recount

October 10, 2003

A university degree may add less to a graduate's lifetime earnings than previously indicated by the government, according to its own figures.

Data from the Department for Education and Skills show that working graduates between the ages of 21 and 65 will, on average, earn less than £3,000 a year more than former school-mates who got the grades to go to university but decided to get a job instead.

The earnings premium works out at £120,000 over an average working lifetime. This is less than a third of the £400,000 premium that the government has used to justify introducing top-up fees.

Higher education minister Alan Johnson is understood to be uncomfortable with the £400,000 figure -which would have graduates earning about £10,000 a year more than non-graduates -because graduates in the public sector would see it as unrealistic.

DFES officials used data from the Labour Force Survey to refine the method used to calculate the graduate premium. The £400,000 figure was reached by comparing average graduate earnings with average earnings for the whole population. The new method compares average graduate earnings with those of people who gained two or more A levels, and so were qualified for higher education, but who chose not to go.

A DFES spokesman said: "The £400,000 figure is still valid and is based on comparing the earnings of graduates with non-graduates.

"However, another way of looking at the investment value of a degree is to compare the lifetime earnings of those with degrees with (earnings) of people who have the qualifications to get into higher education but choose not to go to university. Whichever way you look at it, the investment in gaining a degree is a good one."

Mandy Telford, president of the National Union of Students, said: "The main problem is that whatever graduates are predicted to earn will remain a pipe dream for the thousands of students who are currently priced out of higher education."

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