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

27 Nov 2018 08:42 AM

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:

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.”

Report: The impact of undergraduate degrees on early-career earnings