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The Graduate Premium: manna, myth or plain mis-selling?

This paper challenges the £100,000 lifetime graduate earnings premium so often used by politicians to justify increasing fees for university courses, changing the terms and conditions, or increasing interest rates.

A wide range of factors influence whether graduates are likely to receive an earnings premium (i.e. higher earnings than their non-university-educated peers). These include, amongst others, pre-university education, the higher education institution attended, socio-economic background, gender, ethnicity, subject choice, degree result, work experience undertaken, the supply of graduates in the labour market, chosen career path and conditions in the employment market at the time.

This paper finds that, apart from Oxbridge, medical and dentistry graduates, there is no guaranteed graduate earnings premium for the many young people entering higher education. It raises the question as to why the government is encouraging 50% higher education participation rates if the employment market is not providing graduate-level pay in return for student investment.

The UK now finds itself with more over-qualified workers than any OECD country other than Japan, with graduates under increasing pressure to undertake further post-graduate study – MAs/MScs – in order to further set themselves apart from their peers, thereby incurring yet more debt.

The paper concludes that the UK risks creating a self-perpetuating debt-generating engine that serves only those who run it, while leaving graduates from poorer background to pay an extra 9% graduate tax on earnings over £21,000 for the next 30 years.