The Department of Education have released analysis of the value of degrees, comparing higher education students and graduates’ earnings with similar individuals at age 29.
The research looks at over 1,200 courses offered across UK universities. It uses the Longitudinal Education Outcomes dataset to consider background characteristics including class, ethnicity and GCSE results.
You can find the full release here.
The report estimates the overall average impact of attending HE on earnings at age 29, and shows how this varies for individuals studying different degree subjects or at different Higher Education Institutions (HEIs), based on those who went to HE in the mid- to late-2000s. It also investigates how these returns might differ for students with different prior attainment, based on their GCSE results and whether or not they studied a maths or science (‘STEM’) A-level. The report looks at those who start HE, rather than just on HE graduates, as this is the relevant decision facing prospective students.
Key Findings:
- Those who attend HE earn a lot more on average than those who do not. At age 29 the average man who attended HE earns around 25% more than the average man (with five A*-C GCSEs) who did not. For women the gap is more than 50%.
- A large portion of this difference can be explained by differences in pre-university characteristics: a typical HE student has higher prior attainment and is more likely to have come from a richer family than someone who does not attend. They would therefore be expected to earn more, even had they not gone to university.
- Once we account for differences in pre-university characteristics, we estimate the average impact of attending HE on earnings at age 29 to be 26% for women and 6% for men. If we focus on the impact of graduating, these returns rise to 28% and 8% respectively.
- The higher returns for women may be driven by the fact that women who attend HE typically work longer hours than those who do not. This impact on working hours may well be causal, but it may also be larger at age 29 than at later ages if graduates delay having children.
- Importantly, age 29 is relatively early in an individuals’ career. There is strong evidence that the earnings of men who attend HE continue to grow faster than their non-HE counterparts after age 30. This is likely to result in the returns to HE for men being larger at later ages than we are able to estimate here. For women, the divergent trends in earnings by education type after age 30 are less clear.
- Not all degrees are the same, and subject choice appears to be a very important determinant of returns. For men, studying creative arts, English or philosophy actually result in lower earnings on average at age 29 than people with similar background characteristics who did not go to HE at all. By contrast, studying medicine or economics appears to increase earnings by more than 20%. For women, there are no subjects that have negative average returns, and studying economics or medicine increases their age 29 earnings by around 60%.
- Institution choice also appears to be highly important, as there is considerable variation in returns. For men, there are 12 institutions (accounting for 4% of male students) for which we estimate statistically significantly negative returns at age 29 on average, while there are 18 universities with average returns of more than 20%. For women, despite high returns on average, there are still two institutions (0.4% of female students) which have statistically significantly negative returns at age 29, while there are 66 institutions with returns of more than 20%.
- We estimate that 67% of men and 99% of women (and hence 85% of students) attended universities that have significantly positive returns on average by age 29.
- For both men and women, there is wide variation in returns within every subject and every institution. For example, studying at Cambridge yields positive returns of around 30% on average for both men and women, but some subject choices – for example creative arts – actually appear to result in lower earnings at age 29 than not going to university at all.
- The returns to HE also differ considerably for different types of students (see table). Attending HE only increases the age 29 earnings of lower prior attainment men (based on GCSE grades) without a STEM A-level by 4%. This compares to 20% for their peers who also do not have a STEM A-level but have high GCSE grades. The return is low because students with lower prior attainment are more likely to take low-returning subjects like creative arts, communications and sport science, and are more likely to attend lower-returning universities. However, this is not the only explanation: even when they study the same subject or at the same type of university as their peers who have higher prior attainment, they experience lower returns.
- This is a particularly important when considering the impacts of expansion in the HE system: in our period of study, 70% of all students with five A*-C GCSEs that did not attend university fell within this lower prior attainment, without STEM A-level group.
- Men with higher prior attainment and a STEM A-level have an estimated return of 5%, which might be lower than expected. This is hugely varied: studying law, medicine or economics increases their earnings by around 20%, and the return to attending a Russell Group for this group is around 10%. On the other hand, studying arts English, communications, psychology, languages and history, or attending Post-1992 or Other universities actually appears to result in lower earnings for this group than they would have achieved had they not gone to university (of course, these individuals may be making these choices for reasons other than to try to maximise their earnings). These particular estimates should be treated with caution, as overall only 5% of individuals in this group do not go to HE, and they are likely to be quite unusual – indeed, they have very high average earnings of around £40,000 per year by age 29.
- Among women, the overall returns to HE are high for all groups, though some similar patterns emerge. Higher prior attainment women without a STEM A-level have higher returns than their lower attainment peers. Unlike for men, there is little evidence of lower prior attainment women without a STEM A-level experiencing lower returns when studying the same subject as their higher attaining peers. Instead, the lower returns for this group appear to be driven by a higher propensity to study lower (although still significantly positive) returning subjects such as social care, sociology or education, and because they are more likely to attend lower-returning universities.
Conclusions
Once differences in characteristics are accounted for the report estimates that the average impact of attending HE on earnings at age 29 to be 6% for men and 26% for women, lower than previous literature might suggest. When the data considers those that graduate from higher education the difference is 8% for men and 28% for women. The report highlights that the difference is being measured at what they perceive to be a relatively young age and that the long time and lifetime earning potential of those going to university might be higher.
For the first time the report is able to explore some key differences and what makes a difference. Simply choosing the right subject or the right university is not enough to guarantee a high average return to HE, prior attainment and having a STEM A level play an important part in your earning potential too.
What does this mean for young people?
Having data at this level can be incredible valuable to help influence and highlight where policy might need to be updated, there are issues we must address or risk further compounding issues of parity, social mobility and self esteem in our young people. The top Universities in the country still have some work to do in increasing a more diverse range of students.
Our Youth Voice Census found that young people (particularly young women) were not given support to explore all of their options with a high percentage of young people not receiving careers support and advice to support them through these decisions. This data, whilst valuable needs to be made accessible to those making the decisions – young people.
For a long time young people that it doesn’t matter what or where they study as they will gain transferable skills by going to university, this data (even with it’s limitations) highlights how dangerous that insight can be. Young people need good quality, personalised careers advice.
It is also important to remember that earning potential is one measure of choosing a career and certainly not the only factor that needs to be considered.
