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Convincing proof that getting a degree gets you a higher salary

….. and the better the degree the higher the salary!

 

graduates celebrating getting a degree gets a higher salary

Researchers at the Centre for Economic Performance at the London School of Economics (LSE) have found that the degree you achieve does affect the salary you subsequently earn. They have published a Discussion Paper titled Graduate Returns, Degree Class Premia and Higher Education Expansion in the UK.

They studied students who were born around 1970, graduated in 1991 and are now aged between 30 and 40. Their conclusions are that not only does getting a degree mean getting a higher salary, a point that has been proven on several occasions previously, but the higher the class of degree the higher the salary differential. Moreover the premium for a higher class continued over time.

It is academically robust research which allows for factors such as relative employment rates for graduates, comparability of degrees between universities, skill-based technological change, the participation rate of young people going to university, and grade inflation in that the proportion of good degrees has increased over time. You would expect more people going to university and achieving higher degrees would lead to a decline in the premium for a good degree but this does not seem to be the case.

Degrees have four pass grades or classes as they are called. The highest class is a First, followed by an Upper Second or 2:1, then a Lower Second or 2:2 and finally a Third. A good degree would be either a First or an Upper Second. Many jobs these days ask for a 2:1 as a minimum entry requirement.

The different data sources produce similar results. In one data set (the 1970 Birth Cohort Study data) there is a premium of 7-8% for a good degree relative to a lower degree at both age 30 and at age 38. This is in addition to the premium of 11% for a lower class degree to ‘A’ levels at age 30. Another data set (Labour Force Survey) the premium for a good degree is 9-11%. A third dataset (Universities Student Records/First Destination Study) shows an estimate of 4.5% for the good degree premium, with the 1990 Graduate Cohort Surveys data showing premium of 5% one year after graduation and 8% six years after. The Universities Student Records – Higher Education Statistics Agency/First Destination Study data shows less than 3% premium until more people started to go to university between 1991 and 1998 when the premium then began to rise up to more than 6%.

The Paper can be downloaded at http://cep.lse.ac.uk/pubs/download/dp1392.pdf