Differences by Degree: Evidence of the Net Financial Rates of Return to Undergraduate Study for England and Wales

By Ian Walker, Yu Zhu. Social Science Research Network, 2011

223 citations recorded by the source corpus.

This paper uses the Quarterly Labour Force Survey, the latest and largest dataset available, to provide independent estimates of returns to higher education qualifications in the UK for graduates with different degree majors, class of first degree, and postgraduate qualifications. For reasons of sample size, we collapse various undergraduate degrees into four broad subject groups: STEM (Science, Technology, Engineering and Mathematics - and here we also include Medicine); LEM (Law, Economics and Management), OSSAH (other social sciences, arts and humanities which includes languages), and COMB (those with degrees that combine more than one subject). We adopt a method which allows our data to identify the effects of experience on earnings separately from cohort effects in wages for different degree majors. We also allow for tuition fees and the tax system in calculating the NPV associated with higher education (and also the loan scheme). Ordinary Least Squares estimates show high average returns for women that does not differ by subject. For men, we find very large returns for LEM but not for other subjects. Degree class has large effects in all subjects suggesting the possibility of large returns to effort and ability. Postgraduate study has large effects, independently of first degree class. A large rise in tuition fees across all subjects has only a modest impact on relative rates of return suggesting that little substitution across subjects would occur. The strong message that comes out of this research is that even a large rise in tuition fees makes little difference to the quality of the investment – those subjects that offer high returns (LEM for men, and all subjects for women) continue to do so. And those subjects that do not (especially OSSAH for men) will continue to offer poor returns. The effect of fee rises is dwarfed by existing cross subject differences in returns.

Subfields: Accounting, Economics and Econometrics, Education

View Paper: https://www.semanticscholar.org/paper/866d548a9893d6a722ef233f43157b794fccc1af

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Citations in the corpus

Subject Choice and Earnings of UK Graduates (2011, background): “Similarly, Walker and Zhu (2010) compute large differences in the internal rate of returns by broad subject categories.”
The lifetime earnings premia of different majors: Correcting for selection based on cognitive, noncognitive, and unobserved factors (2014, background): “1See Walker and Zhu (2011) for an excellent example of lifetime earnings decomposed by major without accounting for endogenous major choice.”
Right for the Job: Over-Qualified or Under-Skilled? (2011, background): “Walker and Zhu (2010) and Bratti et al. (2008) find that, in the United Kingdom, returns to tertiary education vary significantly by class of degree awarded – i.”
Economic Returns to Education: What We Know, What We Don't Know, and Where We Are Going Some Brief Pointers (2011, unknown): “Other work focuses on specific 'ranges' of the education distribution such as higher education including, inter alia, Walker and Zhu (2008, 2011), Green and Zhu (2010) and Chevalier (2011).”
Higher education, career opportunities, and intergenerational inequality (2016, methodology): “Given the substantial returns to higher education that have been found in the UK (e.g. Walker and Zhu, 2011), participation and achievement in higher education have been a particular focus of recent attempts to reduce such inequalities of educational opportunity.”