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New research says a university degree adds 25% to earnings

Originally Published 04 March 2003

New research by Professor Ian Walker and Dr Yu Zhu, economists at the University of Warwick, says that completing an undergraduate degree adds an average of around 25% to one's earnings compared to those who choose to leave education at 18. But the research also shows that this boost in earnings varies considerably depending on degree subject.

Professor Walker's research is published in Labour Market Trends Volume 111 No3 March 2003. In a paper entitled "Education, Earnings and Productivity: Recent UK Evidence" he examined the Labour Force Survey data and found that completing an undergraduate degree adds, on average, 25% to one's earnings compared to those who choose to leave education at 18. This equates to an average of around £220,000 over a full working life (this result is not incomparable with the often quoted £400,000 figure that measures a slightly different thing).

But Professor Walker also found that there is considerable variation in this affect on earnings across individuals - not least because of degree subject. Unsurprisingly Law, Medicine and related subjects, and Economics/Business are the degree choices that are associated with the most financial gain, while Arts (and education) degrees are associated with small effects on earnings. While there are lots of differences between students on different courses, Professor Walker states that "Its hard to resist the conclusion that what students learn does matter a lot; and some subject areas give more modest financial returns than others".

The research goes on to address the further question of whether recent graduates are getting the same large average returns that graduates in the 80's and earlier received when they were young. The data suggests that, while students in the post-Robbins expansion in the mid to late 60's did not see their graduate labour market premium diminish, the students of the 90's expansion do seem to be enjoying more modest early career returns.

Finally the research goes on to throw light, for the first time ever, on whether it is the education that causes people to become more productive or if it is more the productive people who become educated. This question is crucial to whether the country should be engaging in expansion of the university sector - only if education causes productivity would expansion be justified. The research distinguishes between the two theories by looking at how the 1974 increase in the minimum school leaving age from 15 to 16 - if raising the bottom of the school-leaving age distribution affected those who wanted to leave after 15 this would be evidence against the idea that education causes productivity. The research finds absolutely no effect of raising the minimum on those above the minimum and so concludes that education does indeed make us more productive.

For further details please contact:

Professor Ian Walker, Department of Economics

University of Warwick: Tel: 024 7652 3054

Mob: 077855 38218

i.walker@warwick.ac.uk

The full ONS press release for the Labour Market Trends Volume 111 publication can be found on a link from this page:

ONS web page