07 November 2012

Graduate wage 'premium' cut by a fifth in just 10 years

Graduate wage “premiums” have slumped over the last decade because of a lack of jobs, pay freezes and rising levels of student debt, a major report has found.

By Graeme Paton | Telegraph

The earnings advantage gained by university leavers has been cut by more than a fifth overall since 2003 as a result of the economic crisis, it was claimed.

Researchers warned that the value of a degree had steadily declined each year, with students taking arts and humanities courses being hardest hit.

Ministers have repeatedly claimed that an undergraduate degree can add more than £200,000 to graduates’ average earnings over their lifetime compared with adults who shunned university altogether.

But the report commissioned by the Higher Education Careers Services Unit warned that the “relative earnings advantage associated with a degree appears to have been declining slowly over the past decade, possibly by as much as two per cent per annum relative to average earnings in the economy”.

It is feared that wage premiums will decline further still in coming years after a sharp rise in tuition fees.

Students starting courses this autumn will be expected to pay up to £9,000 a year almost three times the previous maximum.

The study warned that the employment market for existing graduates was in “sharp contrast” to that witnessed a decade ago, with university leavers more likely to face unemployment or jobs in low-skilled industries.

“Unemployment is no longer insignificant, affecting more than one-in-10 of graduates with many experiencing difficulty in findings jobs.

“For those that do find jobs, there is a much greater likelihood that the job will not be a graduate job. The relative earnings of graduates continue to decline, although compared to suitably qualified non-graduates, a degree still confers an earnings premium.

“Student debt, incurred through tuition fees and maintenance expenses, has been rising, an ominous sign given that [current] graduates do not form part of the high fee regime introduced in England in 2012.”

The “Futuretrack” report analysed students who started university in autumn 2006, the year “top-up” fees of up to £3,000 were introduced by Labour.

The study, based on surveys of more than 17,000 students conducted between November and February, examined how they had fared in the labour market after graduating in 2009 or 2010.

The findings show that four-in-10 were in “non-graduate jobs” roles which fail to utilise their degree 18- to 30 months after graduation. A fifth of students with a first-class degree failed to gain skilled employment, rising to half of students with thirds.

By comparison, just 26 per cent of students were in non-skilled jobs after leaving university when a similar study was last carried out a decade ago.

It also found that students who graduated in 2009 faced higher debts, with average university leavers being required to repay £16,000. By comparison, students who left university in 1999 had average debts of £7,960 equivalent to £10,300 when adjusted for inflation.

In a further disclosure, one-in-10 new graduates had experienced "significant" periods of unemployment and those from black or Asian backgrounds or with a lower degree classification were more likely to be affected.

These factors combined to bring down the average wage “premium” for graduates relative to average earnings, the study found.

Overall, the premium had dropped by 21.7 per cent between May 2003 and November 2011. But graduates with an arts degree saw their relative earnings fall by 33 per cent, while humanities students witnessed a slump of almost a quarter.

By comparison, the wages of law graduates were down by just nine per cent.

Men were also more likely to be hit than women, seeing earnings slump by 23.8 per cent, compared with 20.7 per cent among women.

Source: The Telegraph UK

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