Value for money in higher education Contents

6Graduate employability

107.Data on graduate employment is included in the three main UK university league tables: The Times and Sunday Times, the Guardian and the Complete University Guide. All three of these tables use the Destinations of Leavers from Higher Education (DLHE) survey data, which is collected six months after course completion. The new Graduate Outcomes Survey will replace the DLHE and collect data after 15 months. All three of these surveys use the proportion of leavers who take up graduate-level employment, or higher education level study within six months of graduation.139

108.In April the Department released the results of their Graduate Labour Market Survey (GLMS) 2017.140 The data showed that graduate employment continues to rise and that the average working age graduate earned £10,000 more than the average non-graduate in 2017. Despite this, recent ONS statistics show that in 2017 49% of recent graduates were working in non-graduate roles across the UK.141 Historically the ‘graduate premium’ has been understood as the financial return which students receive after graduation from higher education. The existence of such a premium has been cited as part of the justification for rises in tuition fees, and associated increases in student debt.

109.The graduate premium varies greatly depending on where and what a student studies. As the NAO’s report said, bad decisions can potentially “lead to poor financial outcomes”.142 In June the Department published a research report conducted by the IFS entitled ‘The relative labour market returns to different degrees’.143 It used the DfE’s Longitudinal Education Outcomes (LEO) dataset, which links information about students, including their personal characteristics, their education, their employment and income, and any benefits claimed. The study found that both the subject studied and the institution attended have a significant impact on graduate earnings. For example, medicine, maths and economics graduates all earn at least 30% more than the average graduate.144 The type of institution also matters, Russell Group institutions lead across the board in graduate earning outcomes. According to the IFS report:

These findings imply that studying the same subject at a different institution can yield a very different earnings premium. For example, the best business studies degrees have returns in excess of 50% more than the average degree while the worst business degrees have below average returns. These are considerable differences in graduate earnings.145

110.The research concluded that although other factors have an influence on graduate earnings, such as socio-economic background and prior attainment, subject and institution choice can have an even more significant impact on earning potential.

Even when comparing similar graduates, being from the highest socio-economic background adds around 8% compared to being from the lowest. However compared to the average degree, studying medicine or economics add 20% to graduates’ earnings, while compared to the average university, going to a Russell Group institution adds around 10%.146

Graduate outcomes data

111.The use of the LEO data for the research detailed above, as well as other sources of graduate employment information, has the potential to both better inform students, and better hold universities to account. Professor Peck was positive about the use of graduate employment data and a greater focus on “outputs and outcomes, not on inputs and processes”.147 On the LEO data, Professor Chris Husbands, Vice-Chancellor, Sheffield Hallam University, said:

I think the LEO data is really interesting. It tells us a huge amount about how the labour market has evolved. In terms of institutional accountability, I think there is some very hard work to be done on it. The LEO data for 2016 relates to students who graduated in 2012, who made their decisions to go to university in 2008 or 2009. It is rear-view-mirror data, and we need to remember that when we are using it for forward planning.148

112.In August last year The Economist used the LEO data to create a ranking that compares graduates’ wages with how much they would have been expected to earn regardless of their university.149 Their league table put Portsmouth and Aston Universities at the top and the Royal Agricultural College and St Andrews University at the bottom. The Economist piece explains that some of the universities in the league table “punch above their weight” due to their ability to establish links with successful industries. For example, Southampton Solent University has strong links to the maritime industry and has one of only five ship handling lakes in the world where students can train.

113.We have also heard concerns about the use of LEO data. Guild HE told us that the exclusion of self-employment data is a particular problem for graduates who enter freelance or entrepreneurial professions.150 Other problems which were highlighted in written evidence included the LEO not being truly longitudinal, and a lack of contextualisation for regional differences.151

114.Witnesses also voiced caution over holding institutions to account solely based on their graduate earnings data. Professor Vignoles told us:

there is a general issue around using graduate earnings to judge what is going on inside universities. The first thing is that when you are looking at graduate earnings you are looking at the results of higher education that happened five or 10 years previously. Using the graduate earnings to judge the quality of current provision, for example, is not a very sensible thing to do.152

115.Other witnesses discussed the need to include other factors when judging the success of institutions or individual courses. Conor Ryan mentioned the “social benefits” of courses,153 and Professor Beer described how universities help students to be flexible and think critically.154

116.Nicola Dandridge pointed out that many graduates choose to take jobs which pay less:

For instance, students studying nursing or social work, or going into the creative industries, are deliberately choosing to study for careers where the graduate salaries will not be the same as if they became bankers. They know what they are doing.155

117.We are encouraged by the increase in graduate outcomes information and believe this can both support more informed choices for students and make institutions more accountable for the destinations of their graduates. However, there is still a long way to go before students have access to robust data on graduate employment which will inform their choices.

118.Better information on graduate outcomes must lead to a greater focus in higher education on outputs and outcomes. Higher education institutions must be more transparent about the labour market returns of their courses. This is not simply a measure of graduate earnings but of appropriate professional graduate-level and skilled employment destinations. We recommend that the Office for Students instructs all providers to be transparent about levels of graduate employment and secure this through funding agreements.

Student choice

119.In its report the Treasury Committee was critical of the quality and availability of information to students about their future studies.156 The Committee highlighted the young age at which students are making choices, coupled with the financial burden which accompanies their decision. The NAO stated that students can be left in a “vulnerable” position, often with little careers advice or financial education to assist their decision-making.157

120.Sam Brook, an economics graduate from Warwick University, described value for money in terms of the monetary benefits to the individual:

Personally, I think value for money in higher education is about what costs I received at university. I went to Warwick and studied Economics. Spending £9,000 a year there got me 250 hours of contact time, which was often shared with 349 other students. Some simple back of-the-envelope statistics: that equates to a one-hour lecture being £18,000 to deliver.158

121.Amatey Doku, Vice President for Higher Education at the National Union of Students, set out the difficulties of defining students as consumers within higher education:

I think fundamentally we should not be looking at higher education as a simple commodity that can be bought and sold by students. We can’t see students as consumers in a set-up where they have still to be accepted by the institution to come in. They don’t have all the information they need to act in that way, so that they can start analysing and comparing the balance sheets of different institutions and then make an assessment about efficiency in that sense. Yes, it is not working on its own terms but we don’t think higher education works like that.159

122.The Government’s review of post-18 education lists “choice and competition across a joined-up post-18 education and training sector” as one of its terms of reference.160

How we can help young people make effective choices between academic, technical and vocational routes after 18, including information on earnings outcomes and the quality of the teaching they receive.161

123.Commenting on the review Professor Vignoles said:

I think it would be crucial for the review to understand the routes that students take into higher education, why they make the subject choices that they make, and the role of institutional incentives and funding arrangements that drive the shape of our higher education sector in ways that perhaps we did not anticipate.162

124.The Minister acknowledged that there are ways to give students access to more information in order to help them make better informed decisions.163 In June he announced a Higher Education Open Data Competition. It will award “up to five contracts of £25,000 each for the development of innovative and accessible digital tools to make use of public data on student outcomes”.164 The Minister said the competition would allow data such as LEO to be displayed in an appealing way to applicants.

125.The reforms introduced by successive governments to higher education have caused a growing tension between the perceived value of study to a student, the funding and the wider economic value of higher education. This has been caused in part by the way that the system has changed incrementally and is widely misunderstood. The current system of tuition fees and repayments is more akin to a graduate tax. Promoting better public understanding of this should form part of the HE funding review.

126.Students lack sufficient high-quality information to make informed choices about higher education and the career paths which might subsequently be open to them. Decisions to take on a financial burden lasting most of a working lifetime are often made by students without adequate information or advice. The long-term implications of an adverse choice can leave students in a vulnerable position.

127.Student choice is central to the debate over value for money in higher education. Our inquiry found a woeful lack of pre-application and career information, advice and guidance, particularly awareness of degree apprenticeships. The Government’s current post-18 review must look at routes into higher education, and the quality of careers advice which students receive.

141 ONS, ‘Graduates in the UK labour market: 2017’, accessed October 2018

142 NAO, The higher education market, HC 629, December 2017, para 19

144 Ibid, p 5

145 Ibid, p 7

150 Guild HE (VAL 47) para 9

151 University of Derby (VAL 13)

156 Treasury Committee, Seventh Report of Session 2017–19, Student Loans, HC 478, para 88–89

157 NAO, The higher education market, HC 629, December 2017, Summary: paras 10–11

161 Ibid

Published: 5 November 2018