The Returns to Higher Education in Britain: Evidence From a British Cohort

Abstract

We use British birth cohort panel data to examine the impact that degree level qualifications and other higher education qualifications have on the earnings of individuals in the medium to longer term. We compare the outcomes of these individuals with those of individuals who had the prospect of undertaking Higher Education but chose not to. Our approach involves 'matching' these individuals according to observed characteristics which we have in the data such as ability, family background and demographics and then comparing outcomes between individuals who proved to HE and otherwise identical individuals who had the opportunity but did not. There have been important changes to the way that higher education is funded in the United Kingdom in recent years. Until the end of the 1980s, students' tuition was publicly funded out of general taxation, while students' living costs were financed by a mixture of means-tested grants and parental contributions. The funding system has since changed, firstly with the introduction of the student loans system in the early 1990s, and secondly with the abolition of student maintenance grants and their replacement by a system of loans and tuition fee payments by students, introduced fully in autumn 1999. In other words the burden of higher education finance has been shifting away from taxpayers and towards students themselves and their parents. There has been widespread public debate about whether this policy shift is justified, or indeed whether it should go further, but it seems clear that in order for an informed decision to be made about who should bear the costs of higher education, it is desirable to know who the benefits of higher education accrue to. The benefits of, or returns to, investments in higher education (HE) fall into three main categories: * privatefinancial returns - measured by the extent to which undertaking a degree or other form of HE improves and individual's earnings and/or employment prospects.