Attending university increases women’s earnings at age 29 by 26% and men’s by 6%: but this varies hugely by degree choice and prior attainment of students.
While men who went to university earn 25% more at age 29 than those who did not (but who had at least five good GCSEs), most of that difference can be attributed to the fact that they have better GCSE and A-level results and came from better-off families on average. Going to university in itself increased earnings at age 29 by more like 6%. For women, the effect of attending university is much greater.
By age 29, women who went to university earn 50% more than those (with at least five good GCSEs) who did not, and half of that difference can be attributed to the fact that they attended university.
Overall, 85% of students - 67% of men and 99% of women - attend an institution that on average increases earnings at age 29 compared with not going to university. But there is a huge variation in returns depending on prior qualifications, course studied and institution attended.
Studying economics, medicine and several other STEM subjects is associated with high returns, while studying many arts subjects – particularly for men – is not: in many cases men on these courses earn less than individuals with similar background characteristics who did not attend university at age 29.
These are among the findings of new work at the Institute for Fiscal Studies (IFS) ‘The impact of undergraduate degrees on early career earnings in the UK’ by Chris Belfield, Jack Britton, Franz Buscha, Lorraine Dearden, Matt Dickson, Laura van der Erve, Luke Sibieta, Anna Vignoles, Ian Walker and Yu Zhu.
Using an exciting new data source, created in collaboration with the Department for Education, that links school, university and tax records for everyone who took their GCSEs in England from 2002 to 2007, we estimate overall returns to attending university, how they vary by subject and institution, and how they vary by students’ prior attainment. The results focus on a snapshot in graduates’ early careers by looking at returns at age 29.
Graduates typically experience faster wage growth than non-graduates through the beginning and middle of their careers, particularly if they are men. Consequently, these results are likely to understate the full impact of HE on male lifetime earnings.
The key findings are all based on comparing HE attenders with non-attenders with similar prior attainment and other characteristics. They include:
- On average, attending HE increases the age 29 earnings of men by 6% and women by 26%. If we focus on the impact of graduating from HE, these returns rise to 8% and 28%. It is likely that these returns will be larger at older ages, particularly for men.
- Studying creative arts, English or philosophy degrees actually appears to result in lower earnings at age 29 for men, on average, than they might have got had they not attended university. There are no subjects that have negative average returns for women. On the other hand, studying medicine or economics increases male earnings by more than 20% and female earnings by more than 60%.
- Overall, 85% of students – 67% of men and 99% of women – attend an institution that on average increases earnings at age 29 compared with not going to university. This means one in three men attend a university that has a negligible or negative impact on their age 29 earnings. Indeed, there are 12 institutions – accounting for 4% of all male students – that have a negative effect on male earnings at age 29. These are typically newer universities and specialist arts and drama colleges – which people might well be choosing for reasons other than to increase their earnings. There are only two institutions associated with negative returns for women on average.
- Prior attainment matters. Attending university boosts the age 29 earnings of men with relatively low GCSE grades who do not have a maths or science A-level by about 4%. Such students are more likely to take low-return subjects such as creative arts, communications and sport science; they are more likely to attend universities that have lower returns; and, even when they study the same subject or at the same university as their peers with better GCSEs, they experience lower returns.
- However, there are options for men with relatively low GCSE results that do boost earnings. Computing and business degrees, for example, both increase the earnings of men with low GCSEs and without a STEM A-level by around 10% at age 29. This suggests that those studying subjects with low or negative returns potentially had the option of choosing a course with positive early-career returns.
- The small group of men with the highest GCSE grades and a maths or science A-level who do not go to university do very well in the labour market. They earn about £40,000 on average by age 29 – this is higher than the average earnings of similar men who graduate from a number of degree subjects (including English, philosophy and sociology). Only 5% of men with these sorts of qualifications choose not to go to university, but given their good labour market outcomes, understanding more about the training and career paths they follow is likely to be important.
- Attending HE has a significant positive impact on the early-career earnings of women with all types of prior attainment. These returns may result partly from female graduates working more hours and, at age 29, being less likely to have children than non-graduates.
Jack Britton, co-author of the report and a Senior Research Economist at IFS, said:
“This analysis represents a step-change in the quality of evidence on the returns to higher education in the UK. Going to university in the mid-to-late 2000s increased the age 29 earnings of women by around 26%, suggesting that in terms of their early-career earnings, university is an excellent investment for women.
"For men, the earnings premium is estimated to be around 6% at age 29, and around one-third of all men who went to university studied at institutions that averaged negligible or even negative early-career returns. While this might look disappointing, it is important to bear in mind that returns are likely to grow quickly later in life since graduates tend to see faster pay growth than non-graduates.”
Chris Belfield, co-author of the report and a Research Economist at IFS, said:
“The share of young people going to university has increased rapidly in recent years, leading to more people with lower prior attainment and without science or maths A-levels attending higher education. This has led to particular interest in the returns for this group of students. We find that going to HE has only a small impact on the early-career earnings of men in this group.
"This is because they are more likely to take lower-return subjects and attend less prestigious institutions, and even when they study the same subject or attend the same institution, they appear to benefit less than their higher prior attainment peers. However, there are options for these students that do yield good positive returns: computer science and business degrees, for example, accept large numbers of lower prior attainment students, and have a big positive impact on their early-career earnings.”
The Department for Education (DfE) provided funding for this report, which was independently produced by the authors. Co-funding from the ESRC-funded Centre for the Microeconomic Analysis of Public Policy at IFS is also gratefully acknowledged.
About The Institute for Fiscal Studies (IFS): Britain’s leading independent microeconomic research institute, our goal is to promote effective economic and social policy-making by better understanding how policies affect individuals, families, businesses and the government's finances. Our findings are based on rigorous academic analysis, detailed empirical evidence and in-depth institutional knowledge.