How real is the graduate earning premium?

As we approach summer, there will soon be another group of graduates looking for jobs.  Soon after, another set of students will hit campuses around the country for their Fresher year.  Two very different starts, full of very different hopes and fears.

One of the reasons touted for going to university is that you’ll be better off.  Statistics suggest that graduates earn more over their lifetime than those without a degree.

Is the vague term of ‘graduate premium’ a good enough reason to spend three or more years of your life in Higher Education?

Also, is the earning premium all it’s cracked up to be?  What will it end up meaning for you?  Do you expect to earn more than non-graduates over your working lifetime?  If so, how much more?

photo by James Cridland

photo by James Cridland

I’m sceptical about the overall relevance of a graduate earning premium. We are currently in a time of change, both economically and educationally.  More people than ever are applying to universities.  With huge intakes of students, there are still not enough places to allow everyone in, even if they’ve got good grades.

With so many people doing undergraduate study and collecting degrees, will the term ‘graduate premium’ mean as much in a couple of years?  And a few years after that?  And in 20 years?

I’m sure some people end up earning a lot more off their studies than if they’d taken a different route, but it’s not guaranteed.  Far from it.  Many students will graduate into more humble circumstances and may not achieve the dizzy heights they were hoping.

Indeed, students aren’t convinced about their future career prospects.  According to a report by High Fliers Research:

  • 45% of those leaving uni believe their prospects are ‘very limited’;
  • A third of those polled think most entry-level jobs will be taken by last year’s graduates;
  • 1 in 6 students would have questioned university study had they realised how tough the graduate job market is.

If student numbers stay as they are, any premium is likely to slow to the point where it becomes misleading.  Even if graduates remain, on average, better off than non-graduates, it won’t mean much if most of the population needs a degree.  Any ‘premium’ would become a ‘norm’.

The High Fliers report suggests that students don’t expect to make as much money as they used to.  Expectations are now an average of £22,000 for their first job.  That’s down 3.1% on last year’s expectations.

Nevertheless, university is not about commanding a higher salary.  It can certainly help you toward that goal, but using study in a vague attempt to make more money in nonsensical.  Chasing a big pay packet is a time-consuming and pointless exercise when taken in isolation.

Uni Choices

The student experience can’t be judged based on future situations and perks that aren’t guaranteed.  If money is the only thing driving a person, degree study may well be a mistake.

Personal choices over the institution you study at are often based on small points, uni facilities, and various random attractions. No matter, because they’re still based on what you see and what’s actually on offer.  While you can check tables for suggested future earnings based on subject, it’s still a shot in the dark that’s frayed with uncertainty.

Your future is important.  So important that you need to rely on yourself to push for the best employment terms.  As a student or graduate, you’re in a great position.  While the job market is tough, you are the most important piece of the jigsaw.  The key isn’t where you did your degree or what you studied.  That won’t help you command a huge earnings premium.  You’re better off showing how you made use of and continue to make use of your learning and experiences.

A dedicated student who effectively pieces together their experience at one of the lowest ranked unis can easily sweep the floor with a half-hearted, uncertain student from a top ranked uni.  Graduate premium doesn’t count for anything if the person doesn’t push their achievements and seek to do better with each new day.  Your degree award doesn’t command a premium by itself.  The piece of paper you get is more a sign of the skills you’re building up personally.  Don’t let your achievement stop at that piece of paper…let it be the true start.

What does ‘graduate premium’ mean for you?

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  1. I’m glad to see you’ve touched on this debate, it’s been all over the news here in the states, and has been commented on regularly by my fellow blogger, Paul Ricklovsky. Here are a couple posts on the subject, if you’re interested in taking a look:

    We’ve been following your blog and Twitter posts for a while and really enjoy your stuff.

  2. My sister-in-law is a pharmacist. She tells me that there are more students graduating in that area than ever before now, and as a consequence wages are being depressed.

    But I think you are absolutely right to argue that a degree is about more than chasing a graduate earning premium. University can be three (or more) of the most important and formative years in a young person’s (or indeed mature student’s) life. It was for me. I developed intellectually, personally and socially in ways and at a pace I haven’t done since.

    These days university is sold in narrow vocational terms, where you are encouraged to develop a ‘skillset’ that you can take to an employer. But who wants to get themselves over 15-17,000 in debt just so the can impress a boss with a range of skills that will be out of date before the ink dries on your contract. University should first and foremost be about YOU and the only good reason for going to university is because YOU are intellectual curious about the world.

    1. Yup, I went to uni for so many reasons, but a vocational skillset was not a priority. I felt vocational preparation would be a given in the circumstances. Perhaps that was a naïve view, but I was happy with my experience.

      It needs to be a two-way approach, but any student wanting to further their scope should be in the position to develop non-specialist key skills for the workplace. The very intellectual curiosity you mention is what drives a person to develop in many ways, including those which are academic and vocational.

      I well believe what your sister-in-law says. There are many pointers toward a shrinking premium, both anecdotally and through research. In uncertain times, who knows what the future holds…

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