UK graduates reap salary rewards

University graduates are in demand among employers in the UK and are likely to command better pay directly as a result of completing higher education.

Officials at the Organisation for Economic Co-operation and Development see no evidence of demand being satisfied and are surprised that participation rates have not grown as quickly as in other countries that offer fewer rewards.

At 16.8 per cent for men and 19.6 per cent for women, the private rate of return for graduates in the UK is significantly higher than real interest rates.

The graduate premium - the salary differential for university graduates over secondary school-leavers - is 58 per cent, compared with 53 per cent in 1997.

Spain is the only OECD country that showed a significant decline in the graduate premium associated with a rapid expansion of higher education.

The OECD predicts that enrolments in the UK are likely to be less seriously affected by the declining birthrate than in Japan and southern and eastern Europe. In common with the US, Sweden and Norway, the population of 20 to 29-year-olds is expected to grow over the period to 2015.

The UK was one of the few OECD countries to increase the proportion of gross domestic product it devotes to education. Between 1995 and 2003, public and private spending on schools jumped 49 per cent in absolute terms. But spending on higher education rose 20 per cent, less than half as fast as the OECD average.