‘Large earnings penalty’ for 2:2 graduates from top universities

Graduates from the most selective UK universities who left their institution with a lower second-class degree might have ended up with better-paid jobs by going to a less-selective institution and getting a 2:1, research suggests.

The Institute for Fiscal Studies used data from the Department for Education to analyse the financial benefit, in terms of the earnings premium at age 30, of students gaining different degree classifications.

After controlling for the characteristics of different students, such as prior attainment at school, they found that women with a first-class degree could expect to earn 4 per cent more than those with a 2:1, while the premium for men was higher, at 7 per cent.

Meanwhile, the “penalty” for getting a lower second (2:2) as opposed to a 2:1 was reduced earnings of 7 per cent at age 30 for women and lower earnings of 11 per cent for men.

However, the IFS study also found variations in the benefits and penalties of different degree classes according to which subject was studied and the type of university that was attended.

For instance, both men and women who left university with a 2:2 from the most selective universities earned a fifth less on average by the age of 30 than those who got a 2:1, a gap that was much lower (6 per cent for women and 8 per cent for men) for graduates of the least selective institutions.

The study says “degree class premiums are in many cases bigger than differences in returns between university types.

“The results suggest that those who get a 2:2 from a selective university would mostly have been better off with a 2:1 from a less selective one.”

Ben Waltmann, senior research economist at the IFS and a co-author of the report, said that, other things being equal, “going to a more selective university is good for future earnings, and the fact that few students from disadvantaged backgrounds attend the most selective universities is a barrier to social mobility.

“But that being said, many graduates who get a 2:2 from a highly selective university might have got a higher-paying job had they attended a slightly less selective university and got a 2:1. Prospective students, parents and policymakers should take note.”

In terms of subjects studied, the report finds that for men and women studying law or economics, getting a 2:2 rather than a 2:1 was associated with 15 per cent lower earnings, but there was “no significant difference for those studying education or English”.

“Subjects with high labour market returns tend to have high degree class premiums and subjects with low labour market returns tend to have low degree class premiums,” the report adds.

“This suggests that even students of high-return subjects typically need to get at least a 2:1 in order to access highly paid jobs”, although “a notable exception” was medicine, given that it did not usually award degree classifications.

Meanwhile, the report also finds that at highly selective institutions such as the universities of Oxford and Cambridge, the average payoff from gaining a first-class degree compared with a 2:1 is virtually zero for women but about 14 per cent for men.

The report also assesses how the premium has changed as the proportion of students gaining different degree classes has altered but finds “earnings gaps between degree classes have been constant throughout the period we study”.

“This is consistent both with improvements in overall student attainment and with lower academic standards, as lower standards would likely have affected all degree classes, potentially leaving gaps in attainment and thus earnings between degree classes roughly unchanged.”

The IFS findings follow on from other work on the graduate premium and degree classifications in the UK, which suggest that the earnings bonus from a university education has been falling more quickly for lower classes of degree.

simon.baker@timeshighereducation.com