OECD: Degree dividends biggest in Britain

November 1, 2002

David Jobbins looks at the UK's rise to the top of the OECD degree league

Getting a degree pays dividends for UK graduates, even when tuition fee repayments and higher tax liabilities are taken into account, according to calculations by the OECD.

Higher pay and reduced risk of unemployment place the UK in a class of its own compared with secondary-school graduates in other OECD countries. Analysts calculate a rate of return of more than 17 per cent, compared with 15.1 per cent for school-leavers without a degree. The UK's nearest rivals, with 10 to 15 per cent, are Denmark, France, the Netherlands, Sweden and the US.

Even in Italy and Japan - the countries with the lowest rates of return, below 10 per cent - the private rate of return exceeds market interest rates.

Britain's three-year first degree was a considerable influence: the rate of return for male graduates in the UK was 17.3 per cent, against an OECD average of 11.8 per cent, said Andreas Schleicher, main author of the report. In Germany, where low rates of return are influenced by the long study periods, the figure is 9 per cent.

The report says: "If the average length of tertiary studies were shortened by a year without compromising quality, the internal rate of return for males would increase by 1 to 5 percentage points if all other factors were held constant."

The OECD also suggests a UK social rate of return - the costs and benefits to society of investing in education - of 12.9 per cent for males, almost as high as in the US (13.2 per cent) and ahead of Germany (10.2 per cent), France (9.6 per cent) and Denmark (9.3 per cent). The social costs include removing young people from the workplace while they study and the full cost to the state and to the individual. The benefits include increased productivity from a better-educated workforce, lower crime levels, improved health, stronger social cohesion and better-informed and effective citizens.

One reason offered for the high rate is a shortage of highly educated workers, leading to a market-driven increase in earnings. Although this could be transitory, the period during which the supply of graduates sates demand could be protracted, says the OECD.

HOW GRADUATES BENEFIT

Source: OECD

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