Ross Clark

Wealthier by degree

Bill Gates may have dropped out of college to became a billionaire, but most students are not in his position

Wealthier by degree
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It is not a great advert for university when the universities minister says he is not especially bothered whether his own children go or not. ‘The days of degree or bust are long gone,’ Jo Johnson told the Sunday Times recently. ‘There are alternative ways into the workforce these days. Absolutely I would say to my own kids to consider them.’

But hasn’t he got it the wrong way round? Is it not the case that a degree is more essential now than ever? That the chances of getting a good job without one have greatly diminished since a generation ago, when East End barrow boys went straight into the City and industry was full of leaders who had pulled themselves up by their bootstraps?

The recent revival of apprenticeships only partially counters a huge growth in higher education over the past 25 years. The proportion of graduates in the workforce has soared from 17 per cent in 1992 to 38 per cent now. It’s a brave 18-year-old who turns down a place at university knowing there will be lifelong competition for jobs from others who acquire a few magic letters after their names.

But how much is a university education worth? Not always a lot, according to Robert Halfon, the new chairman of the education select committee. He cites the example of business graduates from Liverpool Hope University. Maybe it should be renamed ‘More in hope than expectation university’ because, five years after leaving, a quarter of its graduates are still earning less than the £15,849 a year they would be paid for a 40-hour week stacking shelves at Tesco.

In fact, business and finance studies are not an especially good route to financial success. With graduates earning an average of £30,000 per annum (according to an Office for National Statistics study in 2013) these subjects lie midway down the table. Arts graduates end up with an average £22,000, but at least they can tell themselves that life isn’t all about money. Top of that table, by the way, are medical graduates, who pull in an average £46,000, with media studies graduates languishing at the bottom on £21,000.

But, overall, the figures do suggest a strong case for going to university. The ONS found that the earnings of people educated only to GCSE level levelled off at the age of 32 on £19,000 a year. Those educated to A-level saw their earnings level off aged 34 at £22,000. Graduates, however, did not reach an earnings plateau until they hit 38 when they started earning £35,000. Given that the most anyone has to pay off a student loan is 9 per cent on salaries above £21,000, these figures clearly show that you ought to be better off as a graduate.

University broadens the mind – but is an apprenticeship the route to a higher-paying job?

What about apprentices? Not surprisingly, they make more than new graduates because they have been in the workplace longer. At the age of 21, graduates earn an average £14,000 and apprentices £17,000. Yet by 23, graduates start pulling into the lead.

All these raw figures, however, ignore an important factor. Graduates are brighter, on the whole, than non-graduates. To win a place on a higher education course they had to demonstrate a certain level of intelligence, and would be expected to do better than average whether they chose to go to university or not. What we really need to judge whether a degree is worthwhile is a comparison between the careers of graduates and people who had the chance to go to university but declined.

But where do you find such a cohort large enough to be statistically significant? The idea that you should go to university has been such an orthodoxy over the past few decades that very few have spurned it. There will always be rare cases like Bill Gates, who dropped out of college, set up Microsoft and became the world’s richest man. Most students are not in his position.

Another way to look at the question is to study the proportion of graduates employed in roles that actually require a degree. According to the ONS Labour Force Survey, a remarkable 47 per cent of recent graduates have jobs that do not strictly require a degree. Even among those who collected their degrees five years ago, 34 per cent are still not in an occupation that really needs one. These figures have increased in line with the number of graduates; in 2001 the respective proportions were 37 per cent for new graduates and 29 per cent after five years.

The fact you have a qualification that your job doesn’t specifically demand doesn’t mean, of course, that you wasted your time at university. You may well have picked up skills or broadened your mind in a way that proved helpful. Graduates in jobs that don’t need a degree aren’t all flipping burgers: some will be running their own businesses.

One thing that stands out from the statistics is that there are degrees and there are degrees. Rather than simply asking, should I go to university, the better question might be: is the particular degree I am thinking of taking going to be useful in getting a job? If you aim to study medicine the answer is almost certainly yes. Those who gained a medical degree in 2009 were earning an average £46,500 five years later.

For many other subjects it depends on where you studied. Law graduates from the London School of Economics, for example, earned a median £26,000 five years later. Those from the University of Bradford, on the other hand, were making just £12,000 five years later — a pay level that’s more barista than barrister.

As for creative arts graduates, it doesn’t much matter where you study, you are pretty much destined for modest earnings — an average £20,000 five years after graduation.

We will soon have a lot more information like this: the ONS has started to publish detailed statistics broken down by subject and university, but for the moment they are experimental and incomplete.

At least if you remain stuck at £20,000 a year you can console yourself that your degree was, in effect, free — the student loan repayments don’t kick in until you reach £21,000.