The financial returns of a UK university degree today

Though salary benefits are undoubtedly one of the main draws of tertiary education, a comparison between cohorts of UK graduates born in 1990 and 1970 reveals that the financial returns to a university degree may be declining over time. 

The Higher Education Statistics Agency (HESA) and Warwick University studied this comparison using salary data of 25-26-year-old graduates in the workforce. The results illustrate the changing financial returns in a time where more UK students are attending university than ever before.

This study used “graduate premium” as the basis of comparison, which refers to how much more UK graduates are likely to earn compared to their peers without a degree. Graduates born in 1990 earned 11 percent more than non-graduates. This is eight percent less than the 19 percent graduate premium of the 1970 cohort.

Graduates who enter the job market during economic turmoil typically earn less than their seniors did when starting out.The numerous benefits of a university degree play out positively the world over, improving quality of life not only for individuals but their communities too. 

Firstly, researchers acknowledge that the 1990 cohort is early in their career and must spend more time in the workforce to unlock greater earning power. Secondly, economic factors such as recession also play a part in understanding this graduate premium decline. 

Chief executive of universities’ group MillionPlus Dr Greg Walker rationalised the dip in graduate premium with the fact that those born in 1990 joined the workforce after the Great Recession.

The economic slump of the late 2000s saw fewer employment opportunities not just in the US, but in major affected economies around the world. Its impact on the job market bled into the coming decade.

Research has proven that graduates who enter the job market during times of economic turmoil typically earn less money than those who graduated in more favourable circumstances, partly because they tend to work in lower-level occupations, have slightly higher tenure and higher educational attainment.

The research by Lisa B Kahn of the Yale School of Management summarised as such: “Taken as a whole, the results suggest that the labor market consequences of graduating from college in a bad economy are large, negative and persistent.”

The HESA report emphasised that its findings need to be corroborated with future research to find out whether the recent fall is a short-term dip or the beginning of a more general decline.

Higher education remains a “significant investment decision for young people,” Tej Nathwani, econometrician at HESA said.

“Changes in fees and funding have resulted in increased reliance on student loans, which are now treated differently in public sector finances. Consequently, graduate earnings continue to be an important area of research in higher education. This study adds to the available information about the financial benefits that individual students can expect from a degree.”

Liked this? Then you’ll love…

A record number of Chinese international students are now studying in the UK

Degrees that pay the highest graduate salaries in Singapore today