The impact of higher education on labour market earnings

The impact of higher education on labour market earnings

The Longitudinal Education Outcomes Standard Extract– an ADR England flagship dataset – is available for accredited researchers to apply to access in the Office for National Statistics (ONS) Secure Research Service. This dataset was created by the Department for Education and its continuing development is supported with additional funding from ADR England. This research was not funded by ADR UK.

Author: Dr Jack Britton, Institute for Fiscal Studies and University of York

Date: August, 2024

Research summary

A research project by the Institute for Fiscal Studies (IFS), co-funded by the Department for Education (DfE) and UK Research and Innovation (UKRI), used linked administrative data to estimate the returns on higher education for students and the taxpayer. The research has been presented to policymakers and has been widely cited by government, including in a report from the Social Mobility Commission, a review of post-18 education, and a white paper on spreading opportunity more equally across the UK.

The findings showed notable variation on returns between subjects, with law, economics and medicine graduates demonstrating greater lifetime returns than their peers who studied languages or creative arts. The research also reported variations in earnings growth between men and women.

The improved information about the costs and benefits of different higher education degrees is beneficial for students thinking about whether, where and what to study. It can also inform policymakers considering the optimal design of the higher education system.

Data used

The Longitudinal Education Outcomes (LEO) dataset, created by DfE, links de-identified data on the characteristics, education, employment, benefits, and earnings of UK citizens. Specific component datasets used were:

  • National Pupil Database school records
  • Higher Education Statistics Agency university records
  • HM Revenue & Customs earnings and employment data
  • Work and Pensions Longitudinal Study benefits data.

This work also used the Labour Force Survey to project earnings for non-graduates above 30 years old and graduates above 40 years old, for whom administrative data is not available.

The datasets for this project were accessed on the DfE’s secure servers, but are also available in the ONS Secure Research Service.

  • Department for Education; HM Revenue and Customs; Department for Work and Pensions; Higher Education Statistics Agency, released 01 November 2023, ONS SRS Metadata Catalogue, dataset, Longitudinal Education Outcomes SRS Iteration 1.1 Standard Extract - England, https://doi.org/10.57906/pzfv-d195
  • Office for National Statistics. (2024). Labour Force Survey. UK Data Service. SN: 2000026, DOI: http://doi.org/10.5255/UKDA-Series-2000026

Methods used

The researchers observed data on those who went to secondary school in England. Specific variables used were:

  • Test scores in school
  • Whether or not they attended university
  • Which university they attended
  • Subject studied at university
  • Earnings up to their early thirties.

The team’s methods involve a combination of ordinary least squares (OLS) regressions models, which include subject or university dummies and controls for student background and prior attainment, with simulation techniques. The simulations, which draw upon both the LEO and Labour Force Survey data, enabled the team to project the lifetime earnings for all individuals from their early thirties through to their sixties.

Research findings

This project estimated the discounted present value of the lifetime returns on higher education at £130,000 for men and £100,000 for women.

It showed dramatic variation in returns for different subject areas. Returns are close to zero, or even negative on average for creative arts and languages graduates. Meanwhile they are substantial, in excess of £250,000, for law, economics and medicine graduates.

On average, increased tax revenues from undergraduate degrees more than make up for the cost they incur for the taxpayer. Overall, we estimate that the expected gain to the exchequer of an individual enrolling in an undergraduate course is around £110k per student for men and £30k per student for women.

Research impact

A series of reports from this programme of research has been published since 2018, including in the Labour Economics academic journal. This research has been heavily cited in government documents, including a report from the Social Mobility Commission, the Augar Review of post-18 education, and the UK Government's Levelling Up White Paper. It has also had attention from economists and MPs, including  Tim Leunig and Neil O’Brien, who have reflected on this work in their commentary.

The research has been presented on several occasions to policymakers at the Department for Education and at Policy Roundtables hosted by various organisations including the Resolution Foundation. This has contributed to discussions around how to optimise the higher education system in the UK. For good or for bad, the work was also influential in the previous government’s “Crackdown on rip-off university degrees” measures, that planned to implement stricter controls on university courses with high drop-out rates and poorer employment prospects.

As well as the impact on policy and practice within the education system, this work has relevance for prospective university students. This information builds on a body of evidence about the costs and benefits of different higher education degrees and can help students considering whether, where and what to study.

Research outputs

Publications and reports

Blogs, news posts, and videos

Presentations and awards

  • Royal Economic Society Conference, Special Session on Higher Education Returns, March 2019
  • Rybcynski Prize for Best Piece of Economics Writing, Jack Britton, 2019

About the ONS Secure Research Service

The ONS Secure Research Service is an accredited trusted research environment, using the Five Safes Framework to provide secure access to de-identified, unpublished data.

If you use ONS Secure Research Service data and would like to discuss writing a future case study with us, please get in touch at IDS.Impact@ons.gov.uk. Please also report any outputs here: Outputs Reporting Form.

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