IFS: Graduate ‘premium’ benefits women, as men continue to top graduate earnings league table

29 September 2015

New findings published by the Institute for Fiscal Studies (IFS) have revealed the ‘graduate premium’ – the difference between the earnings of graduates and non-graduates in England.

The study used a big data approach, by using the administrative student loan details for over 260,000 graduates in order to provide a picture of earnings. This method has given a fare more accurate view of earnings than previous studies, which are usually based on much smaller, self-reported surveys and hence are open to error.

Key findings from the report, which was financed by the Nuffield trust, include:
• 10 years after graduation, 10% of male graduates were earning more than £55,000 per annum, 5% were earning more than £73,000 and 1% were earning more than £148,000.

• Ten years after graduation, 10% of female graduates were earning more than £43,000 per annum, 5% were earning more than £54,000 and 1% were earning more than £89,000.

• Women benefit more from a degree than their male counterparts. Median earnings of English women around 10 years after graduation were just over three times those of non-graduates, compared to the median earnings of male graduates, which were around twice those of men without a degree.

• The administrative data suggests that the annual earnings of the highest earning graduates are greater than appears in other data.

• Using this “big data” also suggests there is less gender inequality among graduates than other data sources imply. The study puts the male–female annual earnings gap 10 years after graduation at around 23%, whereas the Labour Force Survey suggests it is around 33%.

• Graduates suffered proportionately less during the recession than non-graduates in terms of their earnings, implying that having a degree provides some protection from bad labour market outcomes.

• Over the recession period females fared proportionately worse than males in terms of annual earnings. For example, female graduates in their late 20s saw their real earnings decline just as, in normal times, they would have expected rapid earnings growth as they gained experience.

Jack Britton, research economist at the IFS and an author of the working paper, commented: “This study shows the value of a degree, in terms of providing protection from low income and shielding graduates from some of the negative impact of the recent recession on their wages. We find this to be particularly true for women.”

Anna Vignoles of the University of Cambridge and the IFS, and another author of the report, said: “This study illustrates the power of using big data to better understand the graduate labour market and shows that previously we have underestimated the earnings of top graduates.”