Value of degree is on the way up

September 19, 2003

The financial benefits of being a graduate have grown with the expansion of higher education, an ongoing study has shown.

Earnings are increasing more rapidly for recent graduates - particularly women - than for those who graduated in 1980, despite the proportion of people entering higher education having more than doubled, according to initial findings.

The study is being conducted by Peter Elias of the Institute for Employment Research at the University of Warwick and Kate Purcell of the Employment Studies Research Unit at the University of the West of England.

A separate report issued to MPs by the Council for Industry and Higher Education says that in recent years the average graduate has earned about 17 per cent more than someone with two or more A levels. This average earnings premium conceals wide variations that depend on the institution attended.

Professor Elias and Professor Purcell are examining the career paths of two national samples of graduates, one of which entered university in 1992 and one in 1977. They compare growth in earnings of the 1995 graduates over the past seven years with that of the 1980 graduates over the seven years post-graduation.

Their early results were presented to a Higher Education Policy Institute seminar this week.

Professor Elias said: "The graduate premium is something that develops over the first ten years.

"What is interesting is to contrast the two distributions of growth rates: there is no evidence of a widening of this distribution. For men the average rate of growth of earnings is the same as it was 15 years earlier.

For women the situation has improved on that which prevailed in the early 1980s.

"This is despite an increase of two and a half times in the participation rate. Why? Because graduates are in demand."

Professor Elias added that the economic slump of the early 1980s would not have affected the findings because he was studying graduates earnings relative to the average earnings index.

The modal growth of earnings rate for female 1980 graduates over seven years was between 1 and 3 per cent, while the figure for males was between 5 and 7 per cent. For 1995 graduates, the modal growth of earnings rate over seven years was between 5 and 7 per cent for female graduates and between 9 and 11 per cent for male graduates.

Business leaders said this week that graduates should pay different levels of university fees depending on the institution they attended and the subject studied.

According to the CIHE, graduates who attended old universities earned more than those who opted for a more modern university or a college of higher education.

Subject choice also had an impact on graduate pay. Men who studied medicine, maths, engineering, economics and law earned 20 per cent more than those with A levels in those subjects who went straight into employment. There were similar differentials for women.

The CIHE said graduates who subsequently benefited substantially from higher education should make a contribution that reflected those benefits.

Bursaries should be available upfront to encourage and support students from poor backgrounds.

The report says institutions should be free to charge their own levels of fees subject - at least in the short term - to a ceiling. "They can already charge different fees for those students (generally from lower social groups) who are studying part time or are postgraduates (studying perhaps for MBAs or doctorates) or are from overseas."

"Our universities and colleges are independent and responsible institutions. They need the funding and freedom to be innovative and exciting centres of world-class learning. To achieve this they need to be less dependent on the state and uncertain state funding. The current funding gap cannot be met entirely by taxpayers."

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