The Postgraduate Premium

Report Overview

This report by Joanne Lindley and Stephen Machin revisits the debate about why social mobility levels are relatively low in Great Britain and the United States of America compared to other countries. It focuses on three main areas within this debate: the changing role of educational inequalities; the expectation of ever higher levels of education as revealed in increasing numbers of workers holding postgraduate degrees; and potential differences by gender.

Key Findings

• Both Britain and the US have shown significant educational upgrading over time. By 2011 in Britain, the proportions of male and female graduates in the workforce converged and are now very similar. This gender convergence occurred earlier in the US (around the mid-1990s), where women workers now have higher levels of education on average than their male counterparts.
• As these significant education upgrades have occurred, educational inequalities by family income have risen in both countries through time. This has reduced social mobility as people with the highest education levels increasingly come from richer backgrounds, whilst the relative wages of the more educated have risen.
• There has also been an increase in the numbers of postgraduates – those staying on in higher education after obtaining their undergraduate degree. 11 per cent of people in work (aged 26-60) in Britain now hold a postgraduate qualification, up from 4 per cent in 1996.
• In the past, employers used to accept O-levels or A-levels for many jobs. More recently, a Bachelor’s degree was expected. Now, graduates seek to distinguish themselves increasingly by acquiring a postgraduate degree. But as the requirements of the labour market have become more demanding, this has exacerbated educational inequalities as workers with postgraduate degrees increasingly come from richer family backgrounds.
• There is a significant wage premium for those with postgraduate qualifications. Somebody with a Master’s can on average expect to earn £5,500 more a year – or £200,000 over a 40 year working life – than someone only holding a Bachelor’s degree. In the US, the annual premium is almost twice as high – $16,500 (£10,300).
• Women’s increased education has proven to be a key factor in narrowing gender wage differentials over the last thirty years. There are now equal numbers of male and female postgraduate students in the UK, and women constitute the majority of postgraduates in the US. However, men and women have also been equally affected by changes in educational inequality in Britain, as education-related wage differentials grow.
• These patterns of rising wage differentials for those with the highest levels of education, coupled with rising higher educational inequality by family income, will make it harder to shift the already low levels of social mobility in Britain and America. As educational expectations grow and the economic and social position of workers with no or limited qualifications (especially men) has worsened, the need to improve the education and training of a significant section of the workforce becomes ever more important.

Recommendations

1. It is vital that our brightest graduates are not priced out of postgraduate study. Therefore, a targeted state-backed loan scheme should be introduced to support postgraduate students from low and middle income backgrounds.
2. With postgraduate qualifications increasingly essential in many professional careers, Government, professional associations and universities should develop a coherent offer, including bursaries, to enable good graduates from low and middle income backgrounds to continue their studies without incurring significant extra debts.
3. The impact of the new £9000 fee arrangements for undergraduates on the social mix in postgraduate education should be kept under careful review, so that appropriate action can be taken where it can be demonstrated that it is further reducing social mobility.
4. The Office for Fair Access should look at universities’ postgraduate recruitment patterns as part of their annual assessment of access agreements, and consider what steps are being taken to ensure a broad social intake.
5. HEFCE should help improve our understanding of postgraduate study and financing by collecting data on fees, costs and the socio-economic background of students.
6. Action should be taken by the professions – building on successful programmes already operating in fields such as the Law – to ensure that they fully represent the talents of society as a whole, and not just a narrow elite.