University graduates 'earn £3,000 more each year' than those without a degree

29 February 2020, 00:13

People who earn a University degree earn around £3,000 more a year over the course of their career than those who do not, new research has found.

Analysis by the Institute of Fiscal Studies found men who go through higher education receive a net gain of an extra £130,000 before the future retirement age of 67, while women take home about £100,000 more.

But over the course of a 45-year career, the sum only means an extra £2,800 annually for men and £2,200 for women.

The research, commissioned by the Department for Education, also showed a big gender gap in earnings for these employees in their 30s.

Median earnings of men with a university education grow by about £15,000 between 30 and 40 compared to only £5,000 for women.

This could be due to women taking time out to start a family, the report's authors suggested.

It also showed that men who earn a place at a top-ranked university can expect much higher returns than those who attend a less-selective institution, but the same is not true for women.

There was no clear financial benefit for a woman in attending a prestigious university compared to one with lower entrance requirements.

The Government spends around £8 billion per year on undergraduate degrees, according to the DfE.

But the exchequer makes a loss on around 50% of female and 40% of male students due to the cost of the higher education budget and financing maintenance loans, the research found.

Overall, however, the UK's graduates still represented a net benefit on average to the taxpayer due to increased income from tax, national insurance receipts and student loan repayments.

Men with a university education pay an average of £110,000 in tax and national insurance over the course of their career.

Women pay an extra £30,000.

The research found economics and medicine represented the best returns for the treasury.

Women who studied these subjects earned the Government an extra £200,000 and men an extra £500,000 before retirement.

On the other hand, almost all creative arts students regardless of gender represented a net cost to the exchequer.

Careers such as nursing and social work also generated significantly lower returns.

Universities minister Michelle Donelan said: "This research underlines that our university sector is world leading by setting out the impact higher education can have on someone's life."

She added: "However, that prestige is built on quality and my role is to work with the regulator to safeguard that, while ensuring students and the taxpayer are getting the value they would expect for their investment."

Graduates in the top 10% of returns earn an average of £500,000 extra over the course of their working lives, with medicine and law offering the best salaries.

But it found one in five people, about 70,000 for each academic year, would have been better off financially had they not gone to university, with men studying creative arts the hardest hit.

The researched was based on the Longitudinal Educational Outcomes (LEO) data set produced by the Office for Students, the higher education regulator, comparing education records to tax and benefits data.

It counts all those who started a degree rather than everyone who graduated.

The figures have been adjusted using discounted present value terms - counting earnings later in life less than sums earned earlier on.

The report's authors said the figures could be interpreted as the equivalent of a cash lump sum at the point of entering university.

The model also does not take into consideration the value of lower-paid industries to the exchequer overall.

The creative arts industry in the UK was worth £1.1 billion in 2018, according to Government figures, while the hospitality industry generates around £130 billion, industry research has found.