UK graduate premium ‘falling faster for those with 2:2 and below’

Analysis from Hesa and Warwick that looked at two age cohorts could raise further concerns about grade inflation 

March 10, 2020

The relative wage premium that UK graduates can expect to get compared with non-graduates has dropped sharply for those who do not leave higher education with a first or 2:1, a new study suggests.

According to an analysis that compared the pay of graduates and non-graduates in two different cohorts, those born in 1990 who left university with a 2:2 or lower earned just 3 per cent more at age 26 than people who did not go to university.

The study, by researchers from the Higher Education Statistics Agency and the University of Warwick, found that this was an 11 percentage point drop in the graduate premium for a lower-class degree compared with those born in 1970.

However, the wage premium has not declined as steeply for graduates with a first or 2:1, the research suggests, with those born in 1990 still earning 14 per cent more than non-graduates at 26, down from 20 per cent for the older cohort.

The report notes that the results – which controlled for other factors that could affect earnings such as household background and health – could be important in terms of the social mobility debate given that “previous evidence has noted that those from disadvantaged backgrounds are less likely to attain a first or upper second class award”.

“Large differences in the return to a degree by classification awarded could therefore inhibit the extent to which higher education can improve social mobility,” it says.

The same researchers have previously found evidence that the graduate premium overall has been falling over time when the two different cohorts of graduates and non-graduates were compared.

But the fact that these latest findings suggest the premium has been falling faster for those without “good” degrees may fuel concerns that it could be connected to the increased share of graduates with a first or 2:1.

The new analysis did also look at the relative earnings between graduates with different degree classifications.

That suggested the earnings return for a 2:1 relative to a 2:2 or below has increased by up to 8 percentage points, while there was also “tentative evidence” that the relative benefit of having a first over having a 2:1 had fallen by up to 3 percentage points.

It says that this latter finding “could be the result of a growing proportion of graduates being awarded a first-class degree”: between 1996-97 and 2017-18, the share of graduates achieving a first increased from 8 per cent to 28 per cent.

A possible explanation for graduates with 2:1s increasing their relative benefits over lower-class degrees could be down to “the rising tendency over the period for employers to use an upper second class degree as the minimum requirement”, it adds.

The research used data from the British Cohort Study – a longitudinal research project that follows a sample of individuals born in 1970, Next Steps (which is surveying those born around 1990), the UK’s Labour Force Survey and Hesa’s Longitudinal Destinations of Leavers from Higher Education survey.

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