Graduate and non-graduate earnings from the Labour Force Survey

EARNINGS SURVEY DESCRIPTION

In this study, graduate and non-graduate weekly earnings are compared. The information is taken from four quarters of the Labour Force Survey (LFS), from March 2001 to February 2002. The LFS is a random sample survey of households in the UK undertaken by the Office for National Statistics (ONS), covering around 60,000 households every quarter. The survey collects information about the personal circumstances and work of everyone living in these households, and is the largest regular household survey conducted within the UK.

For the purposes of this analysis, information on individuals’ employment and educational background is used. Focus is aimed at individuals between age 21 and 50 who were in full-time employment for which there was earnings information recorded. In addition, the 21 to 25 age group is studied to provide an insight into earnings of new graduates. The word ‘graduates’ in the discussion refers to those with degree or equivalent qualifications, including respondents with higher degrees.

Since the LFS collects information only on a sample of the population, to convert this information to give estimates for the whole population, the ONS has given each case in the survey a weight which can be thought of as the number of people that case represents. For this analysis, the total number of weighted graduates and non-graduates, aged 21-50, who are in full-time employment and have given earnings information is 3,394,000 and 10,720,000 respectively.

Graduate information from the LFS is extremely useful, and its use is complementary to the Prospects Today (PT) salary and vacancy survey which we carry out twice a year. Whilst the PT survey is a rich source of information about graduates’ early employment prospects, the information is from advertisements which are aimed specifically at graduates. There is thus a bias towards larger firms and specific graduate jobs with generally higher salaries. The LFS provides information about graduates of all ages and includes those in ‘graduate’ and ‘non-graduate’ jobs, from all degree disciplines.

More information about the LFS can be found from Office for National Statistics (ONS) website.

LIMITATIONS OF THE SURVEY

The following facts must be taken into account when making inferences from this survey.

• This analysis does not include those who are in self- or part-time employment.
• This survey does not distinguish between mature and non-mature graduates. For example, a graduate aged 40 in this survey may have graduated last year or any time in the last 20 years.

GRADUATE AND NON-GRADUATE EARNINGS BY OCCUPATION

Table 1 compares graduate and non-graduate weekly earnings by occupation and age. The results are also represented in Figure 1.

The occupational classifications used are based on the Government Standard Occupational Classification 2000 (SOC2000). The ‘others’ category includes skilled trades occupations, personal service occupations, process, plant and machine operatives and elementary occupations. See examples of types of work.

• For all ages and occupations, graduates have higher earnings than their non-graduate counterparts, earning 55.5% more on average.
• Across age 21-50, graduates working as managers or senior officials have the highest earnings, earning on average 34.1% more than graduates in professional occupations.
• Across age 21-50, graduates working as managers or senior officials earn 45.8% more than non-graduates in the same occupations.
• Across age 21-50, the difference in graduate and non-graduate earnings is the smallest for those in sales and customer service occupations (7.7%).
• For all occupations, graduate earnings increase sharply by 51.1% between age 21-30 and 31-40, but only by 4.4% between age 31-40 and 41-50. The corresponding figure for non-graduates between age 21-30 and 31-40 is 29.7%, and there is virtually no change in earnings between age 31-40 and 41-50.
• With the exceptions of sales and customer service, and others occupations, the differences between graduate and non-graduate earnings increase with age.

GRADUATE AND NON-GRADUATE EARNINGS BY TYPE OF EMPLOYER

Table 2 shows the weekly earnings of graduates and non-graduates by type of employer and age. Some of these results are also represented in Figure 2.

The types of employer used are based on the Government Standard Industrial Classification of Economic Activities 1992. The ‘others’ category includes private households with employed persons, and extra-territorial organisations and bodies. See examples of types of employer.

• Across age 21-50, graduates working in the others industry have the highest weekly earnings of £1267. This is followed by those working in financial intermediation, and real estate, renting and business activities, earning on average £697 and £657 per week.
• Across age 21-50, non-graduates working in financial intermediation have the highest weekly earnings of £477. This is followed by those working in real estate, renting and business activities (£432), electricity, gas and water (£417), and construction, mining and quarrying (£412).
• For graduates aged 21-25, the highest earners are those working in the others industry, with average weekly earnings of £423 (note that the sample size is small). This is followed by those working in real estate, renting and business activities (£401), construction, mining and quarrying (£387, small sample size), and financial intermediation (£386).
• Across age 21-50, graduates working in the others industry earn almost 3.7 times more than their non-graduate counterparts. The difference in graduate and non-graduate earnings is second highest for health and social work at 71.1%. The smallest difference is found in public administration and defence at 27.4%.
• Across age 21-50, graduates and non-graduates working in the hotel and restaurant industry have the lowest weekly earnings of £385 and £261 respectively. This is followed by agriculture, hunting, forestry and fishing, in which graduates and non-graduates earn £446 and £291 respectively per week.

GRADUATE AND NON-GRADUATE EARNINGS BY REGION OF PLACE OF WORK

Table 3 shows the weekly earnings of graduates and non-graduates by region of place of work. Table 4 shows the percentage difference in weekly earnings between graduates and non-graduates within the same age group and region. The regional classifications used are government office regions.

• Across all regions and for all the age groups studied, graduates have significantly higher earnings than non-graduates. The differences ranged from a regional average of 40.6% at age 21-30 to 72% at age 41-50.
• For all three age groups studied, graduates and non-graduates working in London have the highest average earnings compared with their counterparts in other regions, followed by those in the South East.
• Graduates and non-graduates working in Northern Ireland are the lowest earners across age 21-50. This is followed by Wales and North East.
• At age 21-25, the graduate earnings differential is the greatest in Northern Ireland at 44.8%.
• At age 41-50, the difference in graduate and non-graduate earnings is greatest in the East Midlands at a staggering 83.3%, followed by Scotland (76%), London (73.9%) and Northern Ireland (73.6%).