One in five graduates earns less than the average school leaver

News

New data released by the Office for National Statistics shows that the pay gap between graduates and non-graduates has narrowed, raising concerns about the value of university education in the job market.

20% of graduates now earn less than £10 an hour, the average pay for those educated to A-level standard. Of these, 75% earn less than those educated only to GCSE level. While the average graduate still earns 85% more than someone with GCSE or equivalent qualifications, there has been a marked narrowing of the gap since 1993, when the figure stood at 95%. The pay gap between GCSE holders and those with A-level or other higher education qualifications has also narrowed.

However, Frances Cairncross, Rector of Exeter College, said that “given the very large rise in student numbers, it seems to me more remarkable that the graduate premium has declined so little”.

According to a recent survey carried out by Santander, two thirds of the companies involved stated that they would rather employ a school leaver with two years’ employment experience than a new graduate.

Graduates are also more likely to work in less highly skilled jobs today. In 1993, over two thirds of those with degrees worked in jobs in the highest skill group, such as managerial positions, engineers and accountants. This figure had fallen significantly to 57% by 2010.

The same eighteen year period has seen the number of university graduates more than double.  One quarter of the UK workforce now holds a degree, compared with less than an eighth in 1993. The latest data are likely to increase worries that the degrees are viewed less highly by employers today.

Universities have promised to maintain or increase the standard of their courses as fees increase from next year. The National Student Survey, released earlier this month, revealed that almost one tenth of final year university students are not satisfied with their courses.

The head of Universities UK, Nicola Dandridge, said: “Degree holders continue to earn considerably more than non-graduates over a working lifetime, and are also more likely to be in employment.

“Despite the exponential growth in the number people gaining a degree since 1993, there still remains a considerable pay premium for graduates.”

Cairncross suggested that the gap has narrowed for two reasons. Traditionally, university has “sort[ed] young people by ability and thus signal[led] to employers that they are highly likely to be brighter than non-graduates”. However, with an ever-increasing number of graduates, employers do no longer see a degree as a mark of intelligence. Secondly, the rise in popularity of ‘soft degrees’ has meant that employers, who have previously thought that “people learn all kinds of things at university that make them more useful”, are less attracted to graduates.

With the growth of new universities over the period, it is unclear whether these data are an accurate reflection of the situation for graduates of older establishments like Oxford. Cairncross predicted that “the number of graduates Oxford produces, especially in the most employable subjects, has risen much more slowly than the demand for their services”.

Nevertheless, she believed there was reason for optimism as Oxford graduates have traditionally earned roughly double the average graduate, and suggested that this figure may even have risen in recent years.

Liked reading this article? Sign up to our weekly mailing list to receive a summary of our best articles each week – click here to register

Want to contribute? Join our contributors group here or email us – click here for contact details