13/03/20

A recent study has revealed that the gap in earnings between uni graduates and their peers who did not go to university is lower than it was 20 years ago.

The study, conducted by Warwick University and the Higher Education Statistical Agency (Hesa), found that graduates earn as little as 3% more than school leavers, with the gap between earnings having almost halved in a generation.

Researchers analysed how the financial return to a degree had changed over the last 20 years. They found that graduates born in 1970 earned 19% more than non-graduates by age 26.

In contrast, those born in 1990 earned just 11% more than their school leaver peers by the same age.

The study also found that salaries across degree classes have also changed over time. People born in 1970 who gained a first class degree or upper second (2:1) went in to earn 20% more than non-graduates at age 26. Those who earned a lower second class degree (2:2) or lower went on to earn 14% more than their peers.

Meanwhile, those born in 1990 who graduated with a 2:1 or above earned just 14% more than their peers, while those with a 2:2 degree or below earned only 3% more.

The results suggest that a university degree is not worth as much as it was 20 years ago, with the financial return on a degree having shrunk considerably.

Nick Hillman, director of the Higher Education Policy Institute, said: “People used to boast about getting a ‘Desmond’ [Tutu, the anti-apartheid activist] 2:2 or a ‘Thora’ [Hird, the English actress] third.

“No on wise would wear that on their sleeve now if they want a professional-level job.”

He said that the study shows how important the boundary between an upper second and lower second degree now is.

Growth in graduates achieving higher degrees

Hesa researchers said that they wanted to look for changes in the financial returns to a first or upper second class degree compared with lower grades – particularly since there is a larger proportion of graduates achieving these classes in recent years.

According to the latest official statistics, almost four in five students now achieve a first class or upper second university degree. Last year, 48% were awarded a 2:1 whilst 28% achieved a first – double the percentage that gained a first a decade ago.

While degrees may not work out as well, on average, as they did in the past, they do continue to work out for most people.

Nick HillmanDirector of the Higher Education Policy Institute

Researchers said that the narrowing of the gap in salaries between graduates and non-graduates could partly be explained by stronger pay growth in non-professional occupations than in professional jobs.

They also said that graduates with a 2:2 or below earning just 3% more than non-graduate peers could partly be down to employers filtering out candidates with these degree classes  during their recruitment, prioritising those with a 2:1 or above.

Mr. Hillman said that while degrees may not work out as well, on average, as they did in the past”, they “do continue to work out for most people”.

The study, which used data from the Labour Force Survey, the British Cohort Study or the 1970 Cohort and the Next Steps dataset for those born in 1989/90.

It data comes with some limitations, however. For example, researchers say they were not able to capture the incline of growth in earnings over time, which for graduates tends to be much steeper.

Mr. Hillman also noted that people who were born in 1990 graduated in the austerity years, which could have also affected their earnings at age 26.