Students studying economics and medicine at British universities are likely to gain the largest financial benefits from their degrees, outstripping even the considerable advantages enjoyed by private school students or people from the wealthiest backgrounds, a study has found.
An Institute for Fiscal Studies report, using several years of evidence gathered from education and taxation data, showed the higher pay for graduates in a small group of subjects remained even after adjusting for student background and school type.
The study found medicine and economics graduates were paid about 20% more than the average, while degrees in business, computing and architecture offered wages more than 10% higher than average graduate earnings several years after entering the workforce.
“Average graduate earnings are around £26,000 to £30,000 five years after graduation, and so these differences could amount to earnings differentials of more than £10,000 a year. If these persist over the life cycle, this could represent a significant difference in lifetime income,” the IFS noted.
Creartive arts degrees, taken by about 10% of students, paid 15% lower than the average, and less for students from the poorest backgrounds.
Overall, the highest-earning courses, such as economics at the London School of Economics and maths at Imperial College London, offered graduate earnings twice as high as the average , while the lowest-earning courses were 40% below average.
Sam Gyimah, the higher education minister, said the results had “far-reaching ramifications” for the debate on higher education funding.
“The clutch of underperforming degrees is a problem for students – it is likely they include many of the courses whose students feel they are not getting value for money,” Gyimah told a Higher Education Policy Institute conference.
“They are also a problem for the taxpayer, since courses where students tend not to earn graduate salaries after graduation account for a disproportionate share of the costs to the public purse of the student loans system.
“And they are a problem for the reputation of the sector. They are the inconvenient kernel of truth underlying critiques of mass higher education.”
The research showed men’s wages rose faster than women’s after graduation. Graduates who attended independent schools enjoyed a considerable pay premium, above even those from the top 25% of wealthiest households who attended state schools.
Jack Britton, a senior research economist at the IFS and an author of the report, said: “Family background has an important impact on graduates’ future earnings, but subject and institution choice can be even more important.
“Even when comparing similar graduates, being from the highest socio-economic background adds around 8% compared to being from the lowest. Compared to the average university, going to a Russell Group institution adds around 10%.”
Graduates who had earlier gained an A* in GCSE maths earned considerably more than those who obtained As or Bs.
Seven years after graduation, men with A*s in GCSE maths were earning £48,000 on average, while those with As were on £39,000 – but graduates who failed to gain a C were earning less than £26,000. For women, those with A*s averaged more than £40,000, with £33,000 for As.
The authors cautioned that some of the high returns offered by some degrees or institutions may be the result of other factors that are difficult to measure.
“They may reflect differences in unobservable characteristics between different student bodies if, for example, some courses are more likely to take students with better socioemotional skills or greater preferences for work,” the research noted.