Degree grade matters more than university reputation, report finds

Salary earnings depend more on degree classifications than the name of the institution, reports Maryam Zakir-Hussain

Graduates with top university grades tend to earn more money, but the size of the ‘pay-off’ may also depend on where and what you study (PA )

Graduates with a good degree from a less prestigious institution earn more than those with a lower-class degree from more selective universities, according to the Institute for Fiscal Studies (IFS).

New IFS research found that graduates with first-class or 2.1 honours degrees had higher average earnings by the age of 30 than those who had finished with a lower-class degree, even if those in the second cohort had gone to a more reputable university.

The findings suggest that, as far as salaries are concerned, the class of degree is more important than the institution.

The research was based on the Department for Education’s Longitudinal Education Outcomes (LEO) dataset, which links school records, university records and tax records for everyone who has taken GCSEs in England since 2002.

Ben Waltmann, senior research economist at the IFS and co-author of the report, said: “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.

Attending prestigious universities like Oxford and Cambridge may not help you to get a higher salary (PA)

“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.”

They also found that five years after graduation, median annual pre-tax earnings for both women and men who had obtained a lower second-class degree in 2013 were around £3,800 lower than for those who had received an upper second-class degree.

Furthermore, they found that the different degree classes varied “substantially” based on the subject and the institution.

Jack Britton, associate director at the IFS, reader at the University of York and a co-author of the report, said: “For many subjects, the difference between a first and a 2.1 is inconsequential for earnings. However, for others, such as economics, law, business, computing and pharmacology, it is substantial.”

The IFS noted: “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.”

Meanwhile, gender differences in the pay-off for those achieving a first-class degree at a reputable institution are “stark”, according to the IFS.

The institute found that at the most selective universities, such as Oxford, Cambridge and the London School of Economics, “the average pay-off to a first-class degree versus a 2.1 is near zero for women, but very large at around 14 per cent for men”.

“This suggests that fewer high-achieving women go on to high-earning careers,” the IFS said.

Mr Waltmann said that the graduate gender pay gap was largely down to subject choice.

However, for those women who had graduated in the same subject as men, a pay gap had emerged by the age of 30, which was partly explained by women leaving work to have children.