Higher Education Provides Substantial Financial Returns

How much do people benefit financially from their higher education? According to new research by a team at the Institute for Fiscal Studies, published in the latest issue of the Economic Journal, graduates earn substantially more than non-graduates with similar backgrounds, intelligence and so on.

The study is based on a group of people who would passed through university in the late 1970s. It examines how their fortunes compare to those of their peers who obtained A levels but no higher education qualifications. The researchers find that:

  • On average, men with first degrees have wages around 15% higher than male nongraduates, even when a range of other differences between graduates and non-graduates that affect their wages (such as differing ability and family background) are taken into account.
  • Women graduates do even better relative to women without degrees – the wages they receive from graduating are around 35% higher. This still leaves them with earnings 23% lower than those of men with degrees, but this compares with a gap of 43% between men and women without degrees. Graduating from higher education appears to help women close part of the gender earnings gap.
  • Men and women who entered higher education but failed to obtain any qualification (through failure or dropping out) have lower wages than those who did not enter higher education at all.
  • Although they are difficult to compare with other graduates, it is clear that mature students do considerably better than those who never graduated.
  • Women graduates are significantly more likely to be in paid employment at age 33 than non-graduates; for men, this is not the case.

”This report shows evidence of reasonably large private financial returns to higher education qualifications for a cohort of individuals now in their early forties. This is important evidence in the debate about tuition fees and the degree to which graduates should bear the costs of their own education” said Howard Reed, one of the authors of the report. The research makes use of the National Child Development Survey, a continuing study that follows the changing circumstances of a sample of men and women born in March 1958 at frequent intervals.

”The Returns to Higher Education in Britain: Evidence from a British Cohort” by Richard Blundell, Lorraine Dearden, Alissa Goodman and Howard Reed is published in the February 2000 issue of the Economic Journal. The authors are at the Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE (http://www.ifs.org.uk/).

Lorraine Dearden

0171-636-3784 | ldearden@ifs.org.uk

Howard Reed

0171-636-3784 | hreed@ifs.org.uk