Returns to a degree

This House of Commons library briefing looks at the returns of participation in higher education and the benefits of higher education for individuals and society in the context of the rise in participation in higher education, changes in demand for graduates and graduate employment prospects.

In 2012 tuition fees for undergraduates taking higher education courses in publicly funded institutions in England rose to £9,000. Since then fees have risen further and many institutions now charge fees of £9,250 per year for most of their courses. The increased cost of studying has led many commentators to question the value of a degree and to ask whether taking a degree is still worth it.

Research has shown that graduates tend to earn more than non-graduates – this is the so called ‘graduate premium’. Estimates of the size of the graduate premium vary, but are typically above £100,000 across a graduate’s working life. This is net of tax and after inflation is accounted for. Graduates are also more likely to be working and less likely to be unemployed than non-graduates. There is some evidence that more new graduates are employed in ‘non-graduate’ type roles.

There is an ongoing debate about the actual size of the graduate premium and whether it has gone up or down over time. Whatever the precise level of the premium (on average) there is clearly strong evidence that there are substantial positive financial returns to a degree. This does not mean everyone will benefit to the same extent or even that every graduate will benefit.

There are large variations in graduate earnings by subject with graduates of medicine, economics and many sciences earning substantially more than those who studied art & design, agriculture, English and mass communications. There are also strong links between prior attainment and graduate earnings. Graduate earnings are higher for men and the gender gap increases over time. While there is a link between different measures of disadvantage and graduate earnings and variations between some different ethnic groups, these are less strong than the link with prior attainment

The OECD has found similar evidence across most of the developed world and concluded that, after taking all associated costs into account, that higher education is a good ‘investment’ both for the private individual and for Governments.

It has also been shown that graduates experience various non-economic benefits from a degree and research has shown that graduates tend to have better health than non-graduates and are more likely to take an active part in society.