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Competition narrows degree gap earnings

New graduates can expect higher career earnings than those less qualified but the differential has narrowed as an increasing proportion of the population has gone into higher education, according to an analysis by the Office of National Statistics.

The ONS Labour Force Survey data show that, on average, employees aged 22 to 64 with a degree level qualification or higher were paid 85 per cent more last year than those educated to around the GCSE level, down from 95 per cent in 1993.

The narrowing of this earnings gap can be explained by the greater competition for the higher paid positions normally occupied by graduates.

In that period the percentage of the workforce with a degree-level education or higher has risen from 12 to 25 per cent but the percentage of jobs classed as “high skill” has grown only from 22 to 28 per cent. So while 68 per cent of degree-level employees were working in high skill jobs in 1993, the number had fallen to 57 per cent by 2010.

Nevertheless, investing in a degree-level education is still a good decision, Nicola Dandridge, chief executive of Universities UK, said in a statement on 24 August.

“Looking at all graduates, degree holders continue to earn considerably more than non-graduates over a working lifetime, and are also more likely to be in employment. Despite the exponential growth in the number of people gaining a degree since 1993, there still remains a considerable pay premium for graduates,” she said.

Moreover, graduates would be able to benefit from any improvements in future job prospects.

“The recession has been very hard for the whole jobs market, including graduates, but there are signs that things are improving. A recent survey by the Association of Graduate Recruiters showed that graduate vacancies are predicted to increase by 2.6 per cent this year and that there had been a boost in starting salaries for the first time in two years.

“UK graduates are still in a better position to succeed and remain highly valued by employers, here and overseas,” she said.