Promotion of graduate premium is tantamount to 'mis-selling'

Elusive notion will mislead students and foul loan forecasts, experts hear. John Morgan writes

June 28, 2012

The idea that a university degree gives all students a graduate premium on their lifetime earnings is misleading and the government is "mis-selling" by making such claims, an expert seminar has heard.

At the seminar, Returns to Higher Education, organised by the Higher Education Policy Institute at Barclays in Canary Wharf, London, on 20 June, Hugh Lauder, professor of education and political economy at the University of Bath, cited data from the US and the UK showing that although graduate earnings continue to rise for the top earners, those for middle and lower earners have stalled.

Bahram Bekhradnia, Hepi's director, said that this had worrying implications for the coalition government and its new student loans system, which uses forecasts of mean graduate earnings to calculate graduate repayments.

"It means that the government's predictions are not just unlikely, but - because they assume that all graduate salaries will increase at the same rate - they are wrong," he said.

Professor Lauder, using research conducted with colleagues Phillip Brown and Sin Yi Cheung, argued against the prevalent view that the West would retain its pre-eminence in high-skills, value-added jobs while outsourcing lower-skilled work to developing nations.

Even "high-end graduate work is moving very quickly up the value chain in terms of the routinisation of work", he said, with people in nations such as India able to perform such work more cheaply.

Thus, the returns for different types of knowledge work are being stratified, Professor Lauder said.

He cited data from the US Economic Policy Institute showing that for the 90th percentile of male graduate earners, hourly wages rose from $41 in 1973 to $52 in 2007 - the period over which IT revolutionised work and working practices.

But for median and low-earning college graduates (and for high-school graduates), earnings had been "flatlining" since 1973, Professor Lauder said.

He also cited data from the 2010 UK Labour Force Survey, which showed that earnings for the upper-end 90th percentile of men without degrees in "routine work" outstripped graduate median earnings for those in "intermediate" jobs.

"We should never be looking at the graduate premium," Professor Lauder said. "It is just a way of masking a whole range of trends that we should not be masking."

Hepi's John Thompson said that any calculation of a graduate premium had to compare university entrants with non-entrants - but the two groups were "not comparable" in terms of achievements at A level.

Government policy is based on the idea that "prospective students can be provided with reliable information" that identifies the most "valuable" courses, he said. "In fact, what is provided looks like mis-selling."

Mr Thompson warned that the government's estimates on graduate earnings "have to be right far into the future" for the loans system to operate.

Although the event was held under the Chatham House Rule, those cited gave permission to Times Higher Education to be quoted.

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