A New Research Study on the Return to a DegreeTuesday 22 Oct 2019
This report represents the first output from a new joint research venture between the Higher Education Statistics Agency (HESA) and the Department of Economics at the University of Warwick. The report presents the results of analysis using data from the Labour Force Survey, the British Cohort Study for the 1970 birth cohort and the Next Steps dataset for the 1989/90 birth cohort to investigate the financial return associated with obtaining an undergraduate degree.
The key finding of the study is based on the Next Steps dataset and shows that graduates who were born in 1989/90 earn on average approximately 11 per cent more than non-graduates at age 26. Thus, the evidence indicates that there continues to be a strong earnings return associated with graduating from university.
The empirical literature to date has tended to find that despite an increasing proportion of young people going to university, the financial return to a degree has remained constant. In order to address this issue, the current paper compares results for the Next Steps birth cohort with evidence from the British Cohort Study for the 1970 birth cohort. We find tentative evidence of a decline to a degree across these two cohorts born two decades apart.
Researchers have also used the Labour Force Survey to estimate the financial return to a degree for individuals born around each of the two birth cohorts and find corroborating evidence of a decline in the return to a degree.
One limitation of our current analysis is that the data on earnings are taken at ages 25/26. The authors hope to replicate the analysis once Next Steps data become available when the cohort reach the age of 30 and above, as earnings data at that age will be more informative of life-time prospects.
Professor Robin Naylor emphasises that:
“It is important to recognise that the rewards from higher education are not solely monetary in nature. In future research, it will be interesting to consider non-financial benefits using data sources such as the Graduate Outcomes survey, in which respondents are asked questions of a subjective nature, such as the extent to which a graduate believes their current employment is meaningful and fits with their future plans.”
The full report is available to view here:
by Gianna Boero, Dan Cook, Tej Nathwani, Robin Naylor and Jeremy Smith.
About the Authors
Gianna Boero, Robin Naylor and Jeremy Smith are Professors in the Department of Economics at Warwick with research interests in the field of Economics of Education.
Tej Nathwani is an Econometrician at HESA, who specialises in the quantitative analysis of higher education data.
Dan Cook is the Head of Policy and Research at HESA. He holds responsibility for overseeing the research activity that takes place within the organisation.
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