IFS - Attending university increases women’s earnings at age 29 by 26% and men’s by 6%: but this varies hugely by degree choice and prior attainment of students
While men who went to university earn 25% more at age 29 than those who did not (but who had at least five good GCSEs), most of that difference can be attributed to the fact that they have better GCSE and A-level results and came from better-off families on average. Going to university in itself increased earnings at age 29 by more like 6%.
For women, the effect of attending university is much greater. By age 29, women who went to university earn 50% more than those (with at least five good GCSEs) who did not, and half of that difference can be attributed to the fact that they attended university.
Overall, 85% of students - 67% of men and 99% of women - attend an institution that on average increases earnings at age 29 compared with not going to university. But there is a huge variation in returns depending on prior qualifications, course studied and institution attended. Studying economics, medicine and several other STEM subjects is associated with high returns, while studying many arts subjects – particularly for men – is not: in many cases men on these courses earn less than individuals with similar background characteristics who did not attend university at age 29.
These are among the findings of new work at the Institute for Fiscal Studies (IFS) using an exciting new data source, created in collaboration with the Department for Education, that links school, university and tax records for everyone who took their GCSEs in England from 2002 to 2007. We estimate overall returns to attending university, how they vary by subject and institution, and how they vary by students’ prior attainment. The results focus on a snapshot in graduates’ early careers by looking at returns at age 29. Graduates typically experience faster wage growth than non-graduates through the beginning and middle of their careers, particularly if they are men. Consequently, these results are likely to understate the full impact of HE on male lifetime earnings.
The key findings are all based on comparing HE attenders with non-attenders with similar prior attainment and other characteristics. They include:
- On average, attending HE increases the age 29 earnings of men by 6% and women by 26%.If we focus on the impact of graduating from HE, these returns rise to 8% and 28%. It is likely that these returns will be larger at older ages, particularly for men.
- Studying creative arts, English or philosophy degrees actually appears to result in lower earnings at age 29 for men, on average, than they might have got had they not attended university. There are no subjects that have negative average returns for women. On the other hand, studying medicine or economics increases male earnings by more than 20% and female earnings by more than 60%.
- Overall, 85% of students – 67% of men and 99% of women – attend an institution that on average increases earnings at age 29 compared with not going to university. This means one in three men attend a university that has a negligible or negative impact on their age 29 earnings. Indeed, there are 12 institutions – accounting for 4% of all male students – that have a negative effect on male earnings at age 29. These are typically newer universities and specialist arts and drama colleges – which people might well be choosing for reasons other than to increase their earnings. There are only two institutions associated with negative returns for women on average.
- Prior attainment matters. Attending university boosts the age 29 earnings of men with relatively low GCSE grades who do not have a maths or science A-level by about 4%. Such students are more likely to take low-return subjects such as creative arts, communications and sport science; they are more likely to attend universities that have lower returns; and, even when they study the same subject or at the same university as their peers with better GCSEs, they experience lower returns.
- However, there are options for men with relatively low GCSE results that do boost earnings. Computing and business degrees, for example, both increase the earnings of men with low GCSEs and without a STEM A-level by around 10% at age 29. This suggests that those studying subjects with low or negative returns potentially had the option of choosing a course with positive early-career returns.
- The small group of men with the highest GCSE grades and a maths or science A-level who do not go to university do very well in the labour market. They earn about £40,000 on average by age 29 – this is higher than the average earnings of similar men who graduate from a number of degree subjects (including English, philosophy and sociology). Only 5% of men with these sorts of qualifications choose not to go to university, but given their good labour market outcomes, understanding more about the training and career paths they follow is likely to be important.
- Attending HE has a significant positive impact on the early-career earnings of women with all types of prior attainment. These returns may result partly from female graduates working more hours and, at age 29, being less likely to have children than non-graduates.
Jack Britton, co-author of the report and a Senior Research Economist at IFS, said:
“This analysis represents a step-change in the quality of evidence on the returns to higher education in the UK. Going to university in the mid-to-late 2000s increased the age 29 earnings of women by around 26%, suggesting that in terms of their early-career earnings, university is an excellent investment for women. For men, the earnings premium is estimated to be around 6% at age 29, and around one-third of all men who went to university studied at institutions that averaged negligible or even negative early-career returns. While this might look disappointing, it is important to bear in mind that returns are likely to grow quickly later in life since graduates tend to see faster pay growth than non-graduates.”
Chris Belfield, co-author of the report and a Research Economist at IFS, said:
“The share of young people going to university has increased rapidly in recent years, leading to more people with lower prior attainment and without science or maths A-levels attending higher education. This has led to particular interest in the returns for this group of students. We find that going to HE has only a small impact on the early-career earnings of men in this group. This is because they are more likely to take lower-return subjects and attend less prestigious institutions, and even when they study the same subject or attend the same institution, they appear to benefit less than their higher prior attainment peers. However, there are options for these students that do yield good positive returns: computer science and business degrees, for example, accept large numbers of lower prior attainment students, and have a big positive impact on their early-career earnings.”
Latest News from
IFG - One third of government's spending is with contractors13/12/2018 10:35:00
Government spends £284bn – almost one-third of its total expenditure – with external suppliers, finds a new report by the Institute for Government. Given its scale, government procurement could not easily be abandoned even if politicians wanted.
JRF - Scottish Budget: missed opportunity to get to grips with child poverty13/12/2018 09:35:00
Campbell Robb, Chief Executive of the independent Joseph Rowntree Foundation, responded to yesterday’s Scottish draft Budget
NIESR Monthly GDP Tracker – Latest data confirm slowdown in UK economic growth11/12/2018 16:25:00
Our monthly GDP Tracker suggests that UK economic growth is set to slow to a quarterly rate of 0.4% in the fourth quarter of 2018 from 0.6% in the third quarter.
King's Fund - Relentless staff shortage leaves home care sector struggling11/12/2018 09:35:00
Squeezed funding and staff shortages are severely affecting home care services in some areas, a new report from The King’s Fund and the University of York has found.
King's Fund - Volunteers reduce pressure on frontline NHS staff, report finds06/12/2018 09:35:00
Volunteers in hospitals play a vital role in improving the experience of patients and relieving pressure on frontline staff, according to a new report from The King’s Fund.
The King's Fund responds to ONS winter mortality statistics04/12/2018 10:35:00
Dr Veena Raleigh, Senior Fellow at The King’s Fund, commented on the latest Office for National Statistics (ONS) figures on excess winter mortality in England and Wales
JRF - Unacceptable rises in child poverty as more working parents left unable to make ends meet04/12/2018 09:35:00
Britain is going into Brexit with half a million more children trapped in poverty, following a relentless rise in the number of working families struggling to make ends meet over the last five years. It means in a typical classroom of 30 children, nine are now living in poverty.
NIESR: Latest immigration figures show UK is losing some of its charm to EU migrants03/12/2018 13:05:00
The National Institute’s Associate Research Director Dr Heather Rolfe recently commented on the latest immigration figures.
The King’s Fund response to Matt Hancock’s speech on leadership29/11/2018 09:35:00
In a speech to The King’s Fund annual conference, Matt Hancock MP announced a series of measures to improve leadership in the NHS. His speech coincided with the publication of the Sir Ron Kerr review into the key challenges faced by executive leaders across the NHS.