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Why earnings are not the be-all and end-all

  • 27 November 2018
  • By Rachel Hewitt

This blog is our first from HEPI’s new Director of Policy and Advocacy, Rachel Hewitt.

Today’s report from the Institute for Fiscal Studies on The impact of undergraduate degrees on early career earnings in the UK has some interesting new perspectives on graduate earnings.

It uses the Longitudinal Educational Outcomes (LEO) data and looks particularly at gender differences in the longer-term earnings of former students as well as the impact of prior attainment on earnings.

It paints a particularly strong picture for women. On average, female graduates aged 29 earn 26% more than those with similar prior attainment who did not attend higher education. Nearly all female graduates (99%) attended an institution that on average increases women’s earnings at the same age. While there is a big drop in the comparable figures for graduate men, it is still a positive picture. One of the key strengths for the report is that its reporting accounts for prior attainment, allowing more like-for-like comparisons.

Today’s publication is the second in the IFS series using the LEO data since the passing of the Small Business Enterprise and Employment (SBEE) Act in 2015, which allows for the linking of tax records with student records. This is a positive step – the availability of the data means we no longer have to gather self-reported data for salary information. Moreover, we know that future earnings potential is one of the factors that prospective students are interested in.

However, as the IFS accepts, we need to be mindful of the limitations of using salary data to draw conclusions about the value of higher education. Salary is not the only way to judge graduate success; people’s careers are not defined only by their earnings potential. The link to employment is important but also imperfect, given graduates have been found to have higher levels of life satisfaction, health and civic engagement.

The dataset itself is also not without flaws. One of the problems of looking at long-term earning trajectories is that we have to look back a fair way to establish what people were doing. The data are for people who attended higher education in the mid to late 2000s. It was a different time, with a Labour Government, no impending Brexit and much lower student fees.

Therefore, while this report provides an interesting reflection on what was, caution needs to be exercised in using it to draw conclusions about the labour market graduates will be entering today or the quality of institutions now. So we need to be careful when using it to inform prospective students about their likely future earning potential.

But, having said that, today’s report is a very welcome addition to the evidence base on the outcomes of higher education – even if a higher salary is just one of many possible positive outcomes.

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