How Does the Return to a Degree Vary by Class of Degree Awarded?
How Does the Return to a Degree Vary by Class of Degree Awarded?Tuesday 10 Mar 2020
Researchers from the Department of Economics at the University of Warwick and the Higher Education Statistics Agency (HESA) have examined the change in the return to a degree by classification of award.
The researchers have found that for those born in 1990, graduates with a first or upper second class awarded earned 14% more than non-graduates at age 26, while the return to a lower second degree or below was only 3%. For those born in 1970, graduates with a first or upper second class award earned 20% more than non-graduates at age 26, while the return to a lower second class or lower was 14%.
Hence, the evidence shows that while the financial return to a first or upper second, relative to not obtaining a degree, has fallen across the two cohorts, the return to a lower second or below has fallen much more – to be very low indeed – the gap between the returns to higher (first or upper second) and lower (lower second or below) degree classifications has risen from 6 percentage points to 11 percentage points. The authors of the study suggest that the increase in this gap may be related to workplace recruitment increasingly focussing on graduates with at least an upper second class degree.
The study also found that focussing only on graduates and analysing returns by each separate class of degree, there is tentative evidence of a fall across the two cohorts of up to 3 percentage points in the return to a first class degree relative to an upper second class award. The return to an upper second class degree relative to a lower second class degree or below, has, however, increased by 3 to 8 percentage points.
This is a second report by the team of researchers who have been investigating the financial return associated with obtaining an undergraduate degree and had previously found that the average return to a degree has reduced across these cohorts. It now emerges that the decline is largely explained by a fall in the return to those with a lower second class or below.
The findings of this and previous reports are based on data from the British Cohort Study (which follows a sample of individuals born in 1970), Next Steps (surveying those born around 1990), the Labour Force Survey, and the Longitudinal Destinations of Leavers from Higher Education survey. The research looked at graduates (workers holding a first degree qualification) and non-graduates (holding at least GCSE or A level qualification) in full-time employment.
Professor Robin Naylor comments on the results:
“As mentioned at the time of publication of the first report in October 2019, we acknowledge that we are analysing the return by degree classification at an early stage in one’s career. Graduates tend to enjoy steeper earnings growth than non-graduates. We intend to conduct further studies to explore the return at a later age, once data from the age 31 Next Steps survey has been released.”
The full report is available to view here:
How Does the Return to a Degree Vary by Class of Award?
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.
Any press, media or public enquiries should be addressed to the Press Office at HESA:
T: 01242 211 120
Previous report of the research team published in October 2019:
The Return to a Degree - New Evidence Based on the Birth Cohort Studies and the Labour Force Survey