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Saturday 29 February 2020

Graduates still good for the economy shock

When I looked at the evidence back in the 1990s, the value of the 'graduate premium', the average lifetime earnings advantage that graduates have over non-graduates, was about £250,000. The supposition since Blair expanded the HE sector has been that this is now about zero, but a new study by the IFS apparently shows it's still there - though shrunken to £130,000 for men and £100,000 for women. This is good news for a number of reasons.

I say apparently because the study is not, at time of writing, on the IFS website, and I must rely on newspaper reports of their advance copies. 

The research I did for my Masters back in the '90s looked at the lifetime earnings of a non-graduate occupation, a second fix joiner, with a level 3 - 5 BTEC. Hanging solid-core doors of 30kg - 35kg each, on piecework, from age 18, our chippie would progress from 4 or fewer doors a day to an average of 8, peaking at times at 10, and would maintain a level of about 6-8 until his early 50s, when the number would start to decline, at age 60 to the same level as the new entrant. Peak piecework earnings in their 20s and 30s could fund an extravagant lifestyle and consumerist consumption, but would decline rapidly as physical strength and stamina decreased.

Graduates on the other hand, from 1990s data, suffered low earnings in their teens and 20s but enjoyed sharply increasing incomes from their 30s onwards which did not plateau but continued to increase incrementally until well into their sixties, then tail off only slowly, unlike the sharp drop-off for manual occupations. The shape of the graphs seems to have stayed the same, with some useful additional refinements.

The new study shows differences between the sexes. Women's earnings grow more slowly than men's in their 30s and tend to plateau, whilst male earnings continue to climb. This is almost certainly due to childbirth and childcare effects - again, as I have reported previously, this also accounts for much of the 18% average overall earnings gap in the economy, only around 4% of which is attributable to taste discrimination.

The study also points out the benefits to the economy of the graduate premium -
Overall, the IFS found the government benefited from extra tax revenue and national insurance contributions of £110,000 per man and £30,000 per woman, over and above the costs of study to the government.
And importantly, whilst the top 10% of male graduates enjoy a lifetime premium of £500,000 or more, the bottom 20% can actually lose money, their lifetime graduate premium being lower than the cost of their university maintenance and tuition costs.

This is all very bad news for Labour leadership candidate Kier Starmer standing right now on a platform of abolishing tuition fees - at a annual cost to the economy of £7.2bn - which would just make the rich richer, and even the incapable and mediocre in the bottom 20% come out evens. It would discriminate hugely against manual and non-graduate occupations, Labour's traditional voting base, and favour Labour's metropolitan elites of arts and media graduates. It is a suggestion that would fill the 'B' arks with graphic designers and telephone marketeers. And lose the next two elections.

Covid Update
==========
Whilst there is a sort of mild hysteria in the media (metropolitan based and therefore liable to contract the virus themselves) about government unpreparedness and lack of special measures to protect journalists and BBC staffers, in Germany there is a sort of despair at the dreadful state of their own health readiness - and, as Der Spiegel writes

 Enjoy!

17 comments:

Scrobs. said...

This doesn't bode well for a student of vegan-gender studies, staying away from school to attend a children's rally in Bristol...

The boss of a building firm I worked for as a QS, once claimed that when he was a Master Joiner on the tools, he was instructed to hang eight doors a day in the new college in Hastings, and 'included putting the locks in')!

Admittedly, he was moaning about Bert only doing two a day...

DiscoveredJoys said...

I always thought Blair was cunning. Not only did he persuade many to go into Higher Education and remove themselves from the list of those unemployed (a big political issue of the time) he got them to pay for it!

DeeDee99 said...

There are graduates and "graduates."

I rate the lifetime economic chances of a well-trained plumber above those of a "graduate" with a Mickey Mouse degree from a 3rd rate university.

JPM said...

WHO say that sixty to seventy percent of people could be infected by the coronavirus.

As the DM reports, it's far from just metropolitan types who are in the firing line:

https://www.dailymail.co.uk/health/article-8055207/Pupils-mother-Buxton-coronavirus-case-rushed-hospital-alongside-boyfriend.html

China says that the mortality amongst under-forties is about one in five hundred, but one in six for the over-eighties.

Men are twice as likely to dies as women, and smokers twice as likely as non-smokers. Those two stats may be related.

Mr Ecks said...



WHO are -- like you Cheese--lying leftist scum. As are the Chicom trash who lie as easily as they breathe. Also like you Cheese.

Don Cox said...

"I rate the lifetime economic chances of a well-trained plumber above those of a "graduate" with a Mickey Mouse degree from a 3rd rate university."

A third-rate university may still have some very good courses. It depends mainly on the motivation and teaching skills of the individual lecturers.

Don Cox

JPM said...

Do calm down Ecky.

The Chinese figures tally with those from Italy and Japan though.

They dealt with SARS exactly as they described too.

Yes, they could be lying or in error. We'll probably see, won't we?

Dave_G said...


I'd support a policy of having STEM subjects fee-free and loading the other subjects up to pay for them.

As for the WuFlu, the danger isn't so much the 'flu' itself as the knock-on effects economically and socially which, imho, will far exceed the effects of the illness itself.

Government/NHS preparedness be damned - if you haven't made your own preparations then more fool you.

jim said...

Once upon a time job adverts said "degree or HNC or good experience", personnel departments were reasonably friendly. Then the oil companies and big corporates decided a degree was de rigeur and the personnel dept became the anti-personnel dept. Then personnel got all professional and became HR. Nowadays its gone tickboxy and run by an app that selects 34.95mm round pegs to fit 34.9505mm round holes.

Back in the '60s we used to laugh at the Yanks and their 'cornflake packet' degrees. But they were ahead of the curve and made money. Now we shackle our young to a debt engine that enables them to become baristas and enrich the vice chancellors. Some 40% of male students and 50% of female students will never make enough to pay off their tuition costs to say nothing of the minimal GDP increment.

Mass uni education does not seem to deliver competitive advantage any more - perhaps time to reduce graduate intake to 15% (free but harder to get in) and force the HR wonks and technical colleges to look again at the non-elite. A snag, budding Einsteins will have to wait until all the not-very-good professors retire before they get to learn anything much.

Meanwhile my neighbour's son started as a bricky then widened his skills, got a girlfriend who did sums and now runs his own building contracting firm. He very successfully takes a lot of money off the top 10% of graduates who can afford top banana renovations.

Dave_G said...


£100k - £130k 'bonus' for a 40 year working career (potentially a 60 year career before too long)?

Works out at an extra £2.5k - £3.2k (or, on the 60 year span £1.6k to £2.1k) per year of your working life? Doesn't sound like much really. A extra holiday perhaps?

I'd have thought people with the abilities needed to transverse Uni would have enough 'ability' to make their own way in life i.e. self employed. I didn't get the choice of a Uni path (got to HND in electronics though) but know of such people that are envious of what I've achieved and would gladly swap if I offered it!

The example quoted by Jim is not un-typical - ask my brothers, all self-employed, non Uni educated.

Too much education - not enough ability.

Raedwald said...

I think perhaps it's less of a direct incentive than a justification of tuition fees - if someone can pay say £60k and make back £160 to £190 gross it means tuition fees and no maintenance grants are fair.

When I took my first degree only around 7% of us went to University; making money was the very last thing that motivated me. I was hungry for scholarly development and even more hungry for a student life that involved large measures of ale, sex and wacky backy. If I'd had to pay either my own maintenance or tuition fees I would have thought twice ...

Span Ows said...

jim: "Some 40% of male students and 50% of female students will never make enough to pay off their tuition costs"

Is there some source for this info? seems incredible. I think we can blame vampire Blair anyway.

jim said...

@Span Ows

The numbers come from FT Weekend 29 Feb. Cites IFS study:-

What it actually says is "..But in terms of tax revenue on earnings, it makes a loss on the cost of financing degrees of 40 percent of men and half of women".

There has been plenty of earlier stuff that student loans are far from the earner some thought.

Span Ows said...

Thanks

Charles said...

Well I have two degrees and retired to Somerset at 55. I funded my own MBA and did not work in the city or any other dubious highly paid job. Good education and a pinch of common sense goes a long way.

Span Ows said...

Funny how many commentators here are Somerset based! The Last Kingdom!

Pat said...

Clearly for 20% of graduates tertiary education is a dead loss- and it would be of considerable benefit all round were they kept out of college altogether or maybe matched to more beneficial courses.
But the fact that 80% of graduates do gain higher incomes than non-graduates does not prove that the income necessarily derived from their college courses. Clearly in some cases-medicine and engineering come to mind- the knowledge gained in the course was crucial. But in many cases the degree simply signals the employability of the individual, and any knowledge gained is irrelevant and likely forgotten.
It should be possible to arrange a signalling system that does not entail foregoing three years earnings and paying for tuition. Perhaps by promoting the more able up one level.
It should be remembered that if higher education were shrunk it only would this benefit the students, it would also free up a lot of able people now comfortably wasting their time lecturing students who don't benefit from the knowledge imparted.