Economic Benefits of Higher Education

Universities UK – the umbrella organisation of the Vice-Chancellors in the UK – issued a report (by Pricewaterhouse Coopers) last week on the private economic benefits of getting a degree. The report shows that higher education is still a very good investment: university graduates earn on average about a quarter more than young people who leave school after their A-levels. In total, a degree will bring average additional earnings of £160,000 over a working life. Some more findings:
  • Financial benefit is greatest for men from lower socio-economic groups or from families from lower levels of income
  • The rate of return to the individual would be expected to rise from 12.1% to 13.2% following changes to the student finance package arising from the introduction of variable tuition fees
  • The benefits associated with HE qualifications increase as graduates get older
  • Graduates are more likely to be employed compared to those with the next highest qualification and are more likely to return to employment following periods in unemployment or economic inactivity
  • Significant costs associated with higher education are borne by the state
Diana Warwick, Chief Executive, Universities UK:

“We already know that graduates in the UK enjoy one of the highest financial returns of any OECD country. This report provides evidence that despite the expansion of higher education, the graduate premium has been maintained. Higher education is still clearly a worthwhile investment for the individual.

Also last week, they issued their third report on the impact of the higher education sector on the national economy (previous version were from 1997 and 2002). The report confirms the growing economic importance of the sector which had an income of almost 17 billion pounds a year in 2003/04 (compared with almost 12.8 billion in 1999/2000) and showed gross export earnings of 3.6 billion pounds. In the words of Drummond Bone, President of Universities UK:

All the evidence suggests that the direct economic importance of higher education will continue to grow in the future. The future expansion of student numbers, domestic and international, the development of knowledge transfer activities as well as a substantial volume of research all point in the same direction. Such activity depends on a continuing mix of public and private investment in the sector.

Income from private sources now amounts to 27% of all higher education income and this figure will increase significantly with the introduction of variable tuition fees. It is equally clear that public investment will continue to play a vital role in the development of the sector. It is evident from the findings of this report that such investment has a direct economic impact on the UK economy as well as maintaining the health of the sector.

I’m sure that these two reports – making a case for both more private as well as public investment in higher education – have been welcomed by the members of Universities UK…

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