Is Mass Higher Education Working? Evidence from the Labour Market Experiences of Recent Graduates

By Elias, Peter; Purcell, Kate | National Institute Economic Review, October 2004 | Go to article overview

Is Mass Higher Education Working? Evidence from the Labour Market Experiences of Recent Graduates


Elias, Peter, Purcell, Kate, National Institute Economic Review


This paper uses a variety of recent sources of information to explore the labour market experiences of chose who gained a degree in the 1980s and 1990s. Specifically, we address the issue of 'overeducation'--the view that the expansion of higher education in the 1990s created a situation in which increasing numbers of graduates were unable to access employment that required and valued graduate skills and knowledge. Two complementary approaches to this issue are adopted. We review available evidence on the graduate earnings premium and change in the UK occupational structure, and we conduct a detailed examination of the earnings and characteristics of jobs clone by a large sample of 1995 graduates seven years after graduation.

We conclude that, while there may have been a decline from the high premium enjoyed by older graduates, for those who graduated in 1995 the average premium was holding up well, despite the expansion. Although we found differences between established graduate occupations and the newer areas of graduate employment, our evidence suggests that the development of new technical and managerial specialisms and occupational restructuring within organisations has been commensurate with the availability of an increased supply of highly qualified people.

I. Introduction

The UK higher education system has undergone a major transformation over the past twenty years, from a system that catered for an elite group of entrants as recently as the early 1980s to one that now aims to provide tertiary education to half the population of 18-30 year olds. The number of participants in higher education in Great Britain almost doubled in a decade, from 1.2 million students in 1990/91 to 2.1 million in 2000/01. These changes have been facilitated by a number of institutional and economic factors, including reform of the school qualifications obtainable at age 16, expansion of capacity (particularly of degree-level courses within former polytechnics and many colleges of higher education, incorporated within the university sector in 1992), the decline in employment opportunities for minimum-age school leavers and the associated fall in relative earnings for young people (Bynner et al., 2002).

Given the scale of this expansion, concerns have been expressed that the increased output of highly qualified people may not have been matched by an increase in demand for their skills and qualifications (Brown and Hesketh, 2004; Brynin, 2002; Keep and Mayhew, 1996, 1999). As more young people stay in the higher education sector and gain degrees, it is argued that this leads to a lowering of the graduate earnings premium, increasing diversity in the rate of returns to higher education within the graduate population (Walker and Zhu, 2003) and an increasing number of graduates relegated to non-graduate jobs. The argument is basically one of excess supply leading to skills mismatch and declining returns to education. With a wider spectrum of the ability range drawn into higher education and as employers substitute graduates into jobs which were previously the domain of non-graduates, the value of higher education in terms of the pecuniary benefits it has traditionally afforded graduates is, it is argued, increasingly eroded.

A variety of measures of mismatch have been developed and applied to a range of sources of information about graduate labour supply. Battu et al. (2000) suggest that graduate 'mismatching' could be as high as 40 per cent, Sloane et al. (1999) estimate 31 per cent, Dolton and Vignoles 12000) estimate 30-38 per cent, Green et al. (2002) produce a figure of 46 per cent and Alpin et al. (1998) report 20-30 per cent. The general scale and uniformity of these findings raises important questions about the continuing expansion of higher education.

Other critics of educational expansion at the tertiary level have suggested that the major increase in the supply of graduates could be indicative of a growth in credentialism rather than the development and enhancement of human capital (Brown, 2003; Wolf, 2003; Ainley, 1997; Keep and Mayhew, 1999). …

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