Schoolzone | The impact of undergraduate degrees on lifetime earnings

The impact of undergraduate degrees on lifetime earnings

Date: 29.04.2020

Going to university is a very good investment for most students. Over their working lives, men will be £130,000 better off on average by going to university after taxes, student loan repayments and foregone earnings are taken into account. For women, this figure is £100,000. (These and other numbers are in “discounted present value” terms, which means counting earnings later in life less than those earned earlier on. Without discounting, returns look much bigger.)

However, these average returns mask large differences across individuals. So while about 80% of students are likely to gain financially from attending university, The IFS estimates that one in five students – or about 70,000 every year - would actually have been better off financially had they not gone to university.

At the other end of the spectrum, the 10% of graduates with the highest returns will on average gain around half a million pounds in discounted present value terms. Much of this variation is explained by the subject studied at university: students of medicine and law, for example, achieve very high returns on average, while few of those studying creative arts will gain financially from their degrees at all.

 

Key findings:

  • Median earnings of male graduates grow strongly throughout their 30s, and this earnings growth far outstrips that of non-graduates. 

  • Median earnings growth for female graduates in their 30s is moderate, but still higher than that of non-graduates. 

  • Accordingly, the causal effect of undergraduate degrees on earnings grows after age 30 for both men and women, but much more strongly for men. 

  • The average lifetime earnings gain from undergraduate degrees is substantial for both men and women, but much smaller than the difference between the gross earnings of graduates and non-graduates. 

  • The average gain in net lifetime earnings is even smaller due to the progressivity of the tax system. 

  • The subject studied at university is hugely important. N

  • However, studying a subject with high average returns is no guarantee of high returns. 

  • Overall, we expect 85% of women and around three-quarters of men to achieve positive net lifetime returns. 

  • Financing undergraduate degrees is expensive for the taxpayer, but on average increased tax revenues more than make up for it. 

  • However, these gains are driven mainly by the highest-earning graduates. 

 

Read the IFS report here