Pay boost from university degrees declined over 20 years, research shows

The boost to salaries that having a degree once gave employees has fallen over the last two decades, study finds.

University graduates born in 1970 enjoyed a much larger earnings boost than graduates born 20 years later, according to research by the Higher Education Statistics Agency (HESA) and Warwick University.

It found that graduates born in 1990 earned 11 per cent more than non-graduates at age 26. But graduates born in 1970 earned 19 per cent more than their peers who did not go to university.

The "graduate premium" - a term used to refer to how much more graduates are likely to earn on average compared with their peers without a degree - fell by eight percentage points during this period.

It comes after a major expansion in the numbers of people going on to higher education in recent years.

The figures take into account factors such as time spent in the workplace and non-cognitive skills.

Graduates tend to have steeper growth in their earnings over time than non-graduates and further research will look at this.

Tej Nathwani, econometrician at HESA said: "Whilst the benefits of a degree are not solely financial, higher education remains a significant investment decision for young people.

"Changes in fees and funding have resulted in increased reliance on student loans, which are now treated differently in public sector finances.

"Consequently, graduate earnings continue to be an important area of research in higher education. This study adds to the available information about the financial benefits that individual students can expect from a degree.

"We hope to explore this area further in forthcoming years, as new data is released into the public domain.”

Dr Greg Walker, chief executive of universities’ group MillionPlus, said it was not "surprising" there there was a dip in returns for those who were born in 1990 as they joined the workforce after the Great Recession.

He said: "There is a significant positive financial return to higher education study even very early in a graduate’s career, at age 26, in addition to the wider benefits higher education brings to former students and society."

Further research will look at graduates born after 1990 to determine whether the fall is a short-term dip or the beginning of a more general decline.

The findings come after an IFS study last year revealed that more than 130,000 men are enrolling on university courses that leave them worse off in future earnings early in their careers than non-graduates.

Additional reporting by PA