Select Committee on Education and Skills Minutes of Evidence

Supplementary memorandum submitted by Professor David Eastwood, Chief Executive, Higher Education Funding Council for England (HEFCE)


  At my appearance before the Education and Skills Select Committee on 29 January 2007 the issue of the graduate earnings premium was raised. I quoted a figure of around £150,000 which led you to mention a figure of £400,000 that Ministers had used previously. I promised to let you have a note on authoritative sources.

  The figure of £400,000 was cited in Parliamentary debates and written answers during the period 2001 through to 2003 primarily by Margaret Hodge, the then Minister for Lifelong Learning and Higher Education. We have been advised by the Department for Education and Skills (DfES) that this estimate was based on an analysis of the Labour Force Survey (LFS) which added up the earnings gap between graduates and the rest of the population over a working lifetime, on average. Whilst this can be described as a "graduate premium", it is a somewhat simplistic measure based on gross income which takes no account of personal characteristics or earnings growth and perhaps most importantly, does not represent the additional earnings in present value terms.

  Since then, the DfES and others have carried out more sophisticated analyses of the LFS and the present "official" statement on this matter from the DfES is:

    "Over the working life, we believe the average graduate premium remains comfortably over £100,000 after tax and in today's valuation, compared to what a similar individual would have earned if they just had A levels".

  In February 2007 Universities UK published a report of work carried out by PricewaterhouseCoopers (PwC) The Economic Benefits of a Degree which is available at:

  In this report, PwC estimate the average additional gross lifetime earnings of graduates to be in the region of £160,000. The report also considers the returns to different subjects and includes a lengthy bibliography of other relevant work in this field.

  So, to conclude, the £400,000 figure dates from 2001 and is a very broad and simple estimate in gross cash terms that compares graduate earnings with the earnings of the rest of the population over a working lifetime, on average. This includes a very large number of individuals who are not qualified to go onto study at higher education level. More recent studies quote figures above £100,000 and in the region of £160,000. These provide more refined estimates by comparing the earnings of graduates with those in the working population who completed their education at A level. They also discount future additional earnings to net present value. However, it should be appreciated that even these more sophisticated estimates involve judgements and assumptions about what graduates would have earned had they not entered higher education, and about future earnings of both graduates and non-graduates.

March 2007

previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 9 August 2007