Is it worth going to university? In purely financial terms, the answer is yes, according to a report released today by the Institute for Fiscal Studies.
The study is a worthwhile bit of work to help unpick some of the debates about higher education, which often boil down to platitudinous arguments about “too many people going to university” — an assertion every bit as debatable as saying a certain percentage should go to university.
What matters more than deciding whether we should have an arbitrary number of undergraduates is that those who do choose to do a degree know what they’re getting themselves in for.
That calculation is even more acute now that the average graduate will leave university with £50,000 or so of debt — albeit a debt that only requires repayment once a graduate is earning above £25,000 a year.
To help clarify things, the Department of Education got the IFS to estimate the differences in earnings between English university graduates and their peers at the age of 29 to determine the so-called “graduate premium”.
The headline findings are interesting, not least in showing a very large premium for female graduates, who earn 50 per cent more than non-graduates, whereas men earn a more modest 25 per cent more. The big gap is not the result of a dramatic difference between male and female graduates, but reflects the fact that non-graduate women tend to do lower paid work than non-graduate men. Remember, too, that male graduates tend to earn more as they get older, relative to both women but also to other men who didn’t go to university.
Does that mean university is a sound financial decision? Well, once we take into account what the IFS calls “pre-university characteristics”, including family background, the graduate premium shrinks to 26 per cent for women and just 6 per cent for men. Simply put, many graduates would have ended up with above average earnings even if they hadn’t gone to university.
There are plenty of other reasons one might continue in formal education, but this suggests that, for a lot of people, money will not turn out be one of them.
Needless to say, not all degrees are created equal. Which course a student gets into is crucial in determining future earnings.
As the report notes:
For men, studying creative arts, English or philosophy actually result in lower earnings on average at age 29 than people with similar background characteristics who did not go to HE at all. By contrast, studying medicine or economics appears to increase earnings by more than 20 per cent. For women, there are no subjects that have negative average returns, and studying economics or medicine increases their age 29 earnings by around 60 per cent.
As for institutions, at one end going to Cambridge has an estimated premium of some 30 per cent, at the other male graduates of some universities ended up earning less than they would have done had they not bothered going at all. That’s no great surprise, especially given the (sometimes unwarranted) prestige still attached by many employers to certain universities.
Does all this mean fewer people should be going to university? It strikes me that there would be less of an issue over the high number of graduates if standards were higher in the school system. After all, if every English pupil were getting excellent GCSEs and A-Levels, the conversation would not be about whether too many went to university, but about whether there were enough institutions to accommodate them.
And for each student who might be better off going down a different route, there are surely many, many others who do not end up going to university whose academic potential is left untapped.
That is not to suggest that university is for everyone – far from it. Rather, the debate about education should not be about arbitrary targets, but about giving people the options to make the right choices for them, whether that be an apprenticeship, a vocational course, a degree or going straight into the world of work.