Graduate Earnings Premia in the UK: Decline and Fall?

Gianna Boero, Tej Nathwani, Robin Naylor and Jeremy Smith
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Gianna Boero: Department of Economics, University of Warwick
Tej Nathwani: Higher Education Statistics Agency
Robin Naylor: Department of Economics, University of Warwick

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: A long-standing puzzle in the economics of education concerns the observed constancy of the average earnings premium for a degree despite a prolonged period of substantial growth in the share of graduates in the working population in the UK. Focusing on birth cohorts between 1970 and 1990, we produce evidence of a recent decline in the earnings premium for graduates over non-graduates by age 26. For those born in 1990, we estimate an average graduate earnings premium of 10%, contrasting with an estimate of 17% for the 1970 birth cohort. We also find a substantial increase in dispersion around the average premium according to class of degree awarded. Combined with a falling average, this has left the earnings of 1990-born graduates awarded lower degree classes only 3% above that of non-graduates. Among the 1970-born cohort, the equivalent earnings premium was 14%. We suggest that this precipitous fall is consistent with a ‘double-scarring’ effect associated with the combination of increased higher education participation and a rise in the proportion of graduates awarded an upper honours degree over the span of the two cohorts.

Date: 2021
New Economics Papers: this item is included in nep-edu, nep-eur and nep-ltv
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1387

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