Salary 'advantage' of getting a degree falls sharply
New analysis has found that investing in a degree has become a bit of a ‘gamble’ as the financial return diminishes.
The financial advantage of obtaining a degree has diminished to the point where investing in one is now a bit of a ‘gamble’.
That's according to research from Dr Malcolm Brynin, a scholar at the Institute for Social and Economic Research at the University of Essex.
He looked at data from the British Labour Force Survey between 1993 and 2008 and found that the 'graduate premium' had shrunk significantly during this 15-year period.
Losing the lead
The analysis reveals that back in 1993, those with a degree earned 52% more than those with no or a low education. Meanwhile those with A-levels only managed to earn 14% more than less educated peers. The gap between graduate and A-level earnings at this time amounted to 38%.
But by 2008 this sizeable financial advantage had fallen, with the gap between graduate and A-level school leaver wages shrinking to 27%.
Taking a gamble
The report entitled 'Individual Choice and Risk: The Case of Higher Education' found that although graduates were paid more on average, a "high proportion" of those with a degree earned much the same as those with A-levels.
This is important as students are now expected to shoulder more of the cost of their education. With most universities charging £9,000 a year, that investment isn’t small change.
So with less economic benefit to getting a degree, investing in one is deemed by the scholar to be a risky financial ‘gamble’.
The grey area
One might think the solution to the increased risk of investing in a degree was to play it safe and not go to university.
But Brynin has warned of a shift in the jobs market that doesn’t make things so black and white.
He has found that "occupational signals are fuzzy" as the boundary between graduate and non-graduate work has become blurred.
The expansion of higher education means more graduates are flooding the job market and in order to absorb this surplus more jobs seem to require a degree as a minimum.
The problem is these roles aren’t necessarily graduate roles and this phenomenon has created a ‘grey zone’ of jobs; labelled graduate but really low paid non-graduate roles.
Brynin says: “While some occupations have become wholly graduate, and others remain wholly non-graduate, many occupations are now partially graduate, producing unclear occupational choices.”
The result is that the pressure is on school leavers to become graduates in order to earn only an average wage.
Government failures
Brynin blames the Government and economists for causing this confusion for school leavers by delivering a vague message on the true financial advantage a degree can afford and thereby creating a self-fulfilling prophecy.
He says the use of an ‘average’ amount a graduate is better off by - often touted by officials - can be misleading
Lord Browne’s review into higher education in 2010, for example, claimed graduates were on average £100,000 better off over their lifetime than those with A-levels.
But as we know some graduates with vocational degrees like medicine go on to have a higher earning capacity while those with more general degrees tend to have less.
Brynin says the effect of not presenting information in the right way is damaging how school leavers perceive a degree and the high level of financial risk associated with it.
He said: "This powerful message masks the risks individuals face when they perhaps decide they have no choice but to invest.”
“One possible interpretation is that individuals are being asked to risk financial loss over their careers in response to on-going policy failures.’
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