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New research suggests that university reputation could matter less than final grade in determining earnings

New research by the Institute for Fiscal Studies (IFS) suggests that the reputation of the university a student attends could matter less than the grade of their final degree. In other words, a first-class degree from a less prestigious university could lead to better earnings than a lower grade from a more competitive one. The IFS suggests that students should focus less on how prestigious their university is and more upon their final grades.

The report finds that degree class has a huge impact upon future salaries. Generally, across all institutions, “earning differences between those graduating with different degree classes are large.” Higher degree classes offer significantly higher earning potential. A first-class degree compared to a 2:1 offers a 4% average pay increase for women and a 7% premium for men. A 2:2 instead of a 2:1 leads to a 7% decrease in earnings for women and 11% reduction for men.

Ben Waltmann, a co-author of the report, states, “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.”

Degree class matters more than, or as much as, institutional reputation when looking at future earning potential. The gap in earnings between a 2:1 and a 2:2 is much more significant than the “inconsequential” difference between a first and a 2:1, Jack Britton reports. Research from 2013 shows that five years after graduation a 2:1 would earn a student (pre-tax) around £38,000 less than a 2:2.

The study also reveals these consequences in future salaries of a 2:1 compared to a 2:2 are greater at more selective universities. Those who achieve (regardless of gender) a 2:2 from the most selective institutions earn on average 20% less at age 30 than those with a 2:1. This compares to an average 6% salary decrease for women, and an 8% reduction for men, when comparing the same degrees at the least selective universities.

However, the rewards of improved degree classes do vary across subjects. A first class degree over a 2:1 offers significantly improved earning potential for subjects such as economics, law, business, computing, and pharmacology. Generally, within these subjects, degree class matters far more when related to future earnings. Those studying law or economics face a 15% decrease in earnings when achieving a 2:2 compared to a 2:1, whilst those who study education or English see “no significant difference” in earnings when comparing these degree classes, according to the report.

The statistics analysed also reveal large gender differences in the benefits of a first class degree on future earnings at the most selective universities. Whilst this top grade offers nearly no future pay benefit compared to a 2:1 for women, it offers an average 14% salary increase for men. This statistic reveals that high-achieving women have lower future earning potential than their male counterparts.

The report also finds a general long-term trend of universities awarding more students higher degree classes each year. The percentage of people who achieved first class degrees trebled in 2015 compared to 1999.

Selective universities award on average more of the top two degree classes each year than less selective institutions. However it is still harder to obtain these higher-class degrees from more competitive universities. 

Image Credit: Steve Cadman/ CC BY-SA 2.0

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