1. The Changing Pattern of Graduate Earnings ‘It is sensible to ask whether this massive investment in higher education is economically justifiable’ (Walker and Zhu, 2003) ‘A degree of over-education exists, and the pay penalty associated with it is likely to wipe out any gains made from being a graduate, specially in the first few years.’ (Connor, 2001)

2. What kind of predictions are being made about graduate earnings? As the number of graduates in the labour market increases, ceteris paribus the earnings premium will fall Some degree subjects could attract higher earning premia, others will decline The distribution of graduate earnings may widen as the range of ability of graduates widens If this happens, the 50% target (persons aged 19-30 years to have experienced HE) may not be achievable

3. Researching graduate earnings – the sources of information Birth cohort studies (1958 and 1970 cohorts, graduated in 1979/80 and 1992, surveyed in 1991 and 1999/2000) Labour Force Survey (1993 – present, cross- section of the UK population each quarter) Graduate cohort studies (1980 graduates and 1995 graduates)

4. What does the labour force survey tell us about graduate earnings?

6. What do the birth cohort studies tell us about graduate earnings? Degree premium (males) Degree premium (females) 26 year olds in 1981 (adj.) 25%*36%* 26 year olds in 1996 29%33% 33 year olds in 1991 40%45% 33 year olds in 1999 (adj.) 32%*31%* * Indicates that an adjustment has been made for age

7. What do the graduate cohort studies tell us about trends in graduate earnings? Contrast the survey of 1980 graduates six and a half years on with 1995 graduates seven and a half years on Adjust for inflation, slightly different time periods Match subject classifications

8. What is the average real rate of growth of earnings for young degree- holders and non degree holders Use Labour Force Survey (1993-2000) to determine the average annual rate of growth of real earnings between ages 22 and 29 (full-time gross weekly earnings) DegreeNo degree Men9.7% p.a.5.3% p.a. Women7.9% p.a.4.9% p.a.

15. Graduate earnings – interpreting the evidence The ‘graduate premium’ is declining, but only slightly A degree is a passport to growth in earnings There is no evidence of a widening dispersion of earnings among graduates Women are doing better than they did 20 years ago, but still not catching up with men