Decline in earnings boost for graduates

University graduates earn more than non-graduates, but not as much as they used to, findings from Next Steps and another similar study suggest.

What we asked you 

When you were 25, we asked you about your work and how much you were earning. We also asked you about your education. 

A team of researchers, led by the University of Warwick, compared this information with data collected from participants in another cohort study, born in 1970, when they were 26 years old. 

What the research found 

On average, university graduates tended to earn more than people without a degree. However, the researchers found that the gap in wages between graduates and non-graduates is shrinking. 

Among your generation, those of you with a degree were earning 8% more than non-graduates at age 25. Around 20 years earlier, at a similar age, the graduates of the older generation born in 1970, were earning on average 18% more than those without a degree. This means that in two decades the university wage premium had dropped by ten percentage points. 

Men and women experienced similar dips in earnings. The wage premium fell from 17% to 6% for men and from 19% to 9% for women, so it is unlikely the drop is due to changing demographics in the workforce. 

The researchers suggest several factors as causes for the change, including the increased number of students attending university, the economic climate, and grade inflation. 

Why this research matters 

These findings are very relevant to policymakers developing future UK higher education policy. 

In the UK, the general consensus has been that the gap in wages between graduates and non-graduates has remained stable, despite the increasing numbers of students attending university and graduates making up a larger part of the workforce. 

This new research challenges this assumption, showing that a degree gives less of a boost to young people’s earnings than it used to. 

The researchers note that these findings relate specifically to people in their mid-20s who are at a relatively early stage in their careers, when the full impact of a degree on their salaries may not yet be known. In addition, as the researchers point out, earning more money is just one potential benefit of attending higher education. 

Read the full research report 

The college wage premium in the UK: decline and fall? by Gianna Boero, Tej Nathwani, Robin Naylor, Jeremy Smith was published in Oxford Economic Papers in April 2024.