wage inequality and postgraduate education - stephen machin, centre for economic performance, uk
DESCRIPTION
A presentation given to the Widening Participation to Postgraduate Education: Access after the White Paper (WP2PG) Conference, 16 February 2012.Twitter #WP2PGTRANSCRIPT
Wage Inequality and Postgraduate Education
Widening Participation to Postgraduate Education Conference, February 16 2012
Stephen Machin
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• Big increase in number of graduates. By 2011, 31 percent of theadult workforce have a degree.
• Despite the big increase in graduate supply, graduates have donevery well in the labour market. Demand has outstripped supply astheir relative wages have risen.
• The graduate group has become an increasingly diverse group,
Context
• The graduate group has become an increasingly diverse group,though educational inequality has risen with more graduates comingfrom richer backgrounds. Coupled with rising wage differentials, thisimplies falling social mobility.
• More pressure to go on and get postgraduate degrees? Has thepayoff for postgraduates changed? Also, for future, the issue of £9kundergraduate fees.
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Changes in Graduate Employment Shares and Relative Wages
Graduate Employment Shares Graduate Wage Differentials
2025
Gra
duat
e E
mpl
oym
ent
Sha
res
(Per
cen
t)
Graduate Employment Shares, 1980-2008
1.6
1.65
Gra
duat
e/N
on-
Gra
dua
te W
eekl
y W
age
Rat
io
Graduate/Non-Graduate Earnings Ratios, 1980-2008
3
Notes: Based on General Household Survey data. Notes : Graduate/non-graduate earnings differentials derived from General HouseholdSurvey data. Earnings for full-timers and the ratios are derived from coefficientestimates on a graduate dummy variable in a semi-log earnings equation controlling for age, age squared, gender and living in London.
05
1015
Gra
duat
e E
mpl
oym
ent
Sha
res
(Per
cen
t)
1980 1990 2000 2008
1.4
1.45
1.5
1.55
Gra
duat
e/N
on-
Gra
dua
te W
eekl
y W
age
Rat
io1980 1990 2000 2008
HE Participation andGraduate Wage Inequality
HE Participation Graduate Wage Inequality
1.2
1.4
Log
Ear
ning
s R
atio
3040
50P
artic
ipa
tion
Per
cent
4
.81
Log
Ear
ning
s R
atio
1977 1980 1985 1990 1995 2000 2005 2009Year
Men Graduates Women Graduates
1020
30P
artic
ipa
tion
Per
cent
1981 1986 1991 1996 2001 2005 2009Year
API HEIPR
Notes: The Age Participation Index (API) is the ratio of the number of domiciled young people (aged less than 21) who are initial entrants to full time and sandwich undergraduate courses to the 18 to 19 year old GB population. The API was discontinued in 2001 and replaced by the Higher Education Initial Participation Rate (HEIPR) which has a different definition as it covers entrants to HE from a wider age range (ages 17 to 30).
Notes: 90-10 log weekly earnings gaps for full-time graduates.
Changes in Employment Shares By Graduate Education
Great Britain - Labour Force Survey
Men 1981 1986 1991 1996 2001 2006 2011
Undergraduate Degree or Higher 0.07 0.09 0.11 0.16 0.19 0.24 0.31
Of which:
Undergraduate Degree Only - - - 0.11 0.13 0.15 0.20
Postgraduate Degree - - - 0.05 0.06 0.09 0.10
Postgraduate share 0.31 0.32 0.38 0.32
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Notes: From Labour Force Surveys (annual for 1981, 1986 and 1991, quarterly thereafter). Employment shares are defined for people in work aged 26 to 60.
Women 1981 1986 1991 1996 2001 2006 2011
Undergraduate Degree or Higher 0.03 0.05 0.07 0.11 0.16 0.22 0.30
Of which:
Undergraduate Degree Only - - - 0.08 0.11 0.15 0.20
Postgraduate Degree - - - 0.03 0.05 0.08 0.10
Postgraduate share 0.27 0.31 0.36 0.33
Changing Wage Differentials By EducationMen 1996 2001 2006 2011 Change 2011-1996
Undergraduate Degree or Higher 0.390 (0.011) 0.410 (0.008) 0.406 (0.008) 0.426 (0.010) 0.036 (0.016)
Undergraduate Degree Only 0.374 (0.013) 0.375 (0.009) 0.375 (0.009) 0.391 (0.022) 0.017 (0.018)
Postgraduate Degree 0.424 (0.018) 0.482 (0.013) 0.456 (0.012) 0.497 (0.015) 0.072 (0.025)
Postgraduate/Undergraduate 0.050 (0.021) 0.107 (0.015) 0.081 (0.014) 0.105 (0.017) 0.056 (0.029)
Sample size 13731 23749 19892 11915
Women 1996 2001 2006 2011 Change 2011-1996
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Notes: The sample consists of full-time workers aged 26 to 60 in Britain Wage differentials are relative to intermediate A qualifications. Control variables included are: no qualifications, intermediate B, gender, age, age squared, London and white. Standard errors are in parentheses.
Women 1996 2001 2006 2011 Change 2011-1996
Undergraduate Degree or Higher 0.507 (0.014) 0.516 (0.009) 0.520 (0.009) 0.513 (0.012) 0.006 (0.020)
Undergraduate Degree Only 0.487 (0.017) 0.485 (0.010) 0.469 (0.011) 0.454 (0.013) -0.033 (0.022)
Postgraduate Degree 0.554 (0.024) 0.584 (0.015) 0.601 (0.013) 0.624 (0.016) 0.071 (0.031)
Postgraduate/Undergraduate 0.067 (0.027) 0.099 (0.016) 0.132 (0.015) 0.170 (0.018) 0.104 (0.035)
Sample size 7808 14626 13473 8305
Trends in Postgraduate/UndergraduateWageDifferentials
1012
1416
18T
rend
s in
PG
/CO
Per
cent
Wag
e D
iffer
entia
ls
7
Notes: The sample consists of full-time workers aged 26 to 60 in Britain Wage differentials are relative to intermediate A qualifications. Control variables included are: no qualifications, intermediate B, gender, age, age squared, London and white. Standard errors are in parentheses.
68
10T
rend
s in
PG
/CO
Per
cent
Wag
e D
iffer
entia
ls
1996 2001 2006 2011Year
PG/CO Differential, Men PG/CO Differential, Women
What Are The Skills and Tasks Implying Postgraduates Are More in Demand Than Undergraduates? [2006 Skills Survey, GB]
Skill/Job Task Postgraduates Undergraduate Only Gap (Standard Error) Regression Corrected Gap (Standard Error)
Cognitive SkillsLiteracy 4.067 3.763 0.304 (0.079) 0.299 (0.079)Simple Numeracy (Basic Arithmetic) 3.606 3.583 0.026 (0.094) 0.023 (0.093)Advanced Numeracy (Maths and Statistics) 3.004 2.715 0.289 (0.104) 0.285 (0.103)
Problem Solving SkillsThinking of Solutions to Problems 4.311 4.277 0.035 (0.064) 0.037 (0.064)Analysing Complex Problems 4.179 3.880 0.299 (0.083) 0.291 (0.083)
People SkillsMaking Speeches/Presentations 3.658 3.148 0.510 (0.095) 0.496 (0.095)
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Making Speeches/Presentations 3.658 3.148 0.510 (0.095) 0.496 (0.095)Teaching People 4.023 3.843 0.180 (0.086) 0.187 (0.085)Dealing With People 4.658 4.684 -0.026 (0.047) -0.017 (0.047)
Firm Specific SkillsKnowledge of Products/Services 3.817 3.831 0.014 (0.091) -0.002 (0.091)Specialist Knowledge or Understanding 4.704 4.548 0.156 (0.055) 0.158 (0.055)
Computer UsageUsing a Computer or Computerised Equipment 4.607 4.384 0.223 (0.068) 0.234 (0.068)Proportion That Do Not Use a Computer 0.019 0.045 -0.025 (0.014) -0.027 (0.014)Simple (General Purpose) Computer Users 0.074 0.109 -0.035 (0.021) -0.044 (0.021)Moderate Computer Users 0.428 0.486 -0.058 (0.035) -0.047 (0.034)Complex Computer Users 0.479 0.361 0.118 (0.034) 0.118 (0.033)
Routineness of JobPerforming Short Repetitive Tasks 2.689 2.890 -0.202 (0.073) -0.204 (0.073)Variety in Job 4.315 4.195 0.119 (0.061) 0.129 (0.061)
Sample Size 257 1095
Graduate Education by Family Income
HE Qualifications (by Age 33/34) and Family Income, British Birth Cohorts
1958 Birth Cohort, NCDS (in 1991) 1970 Birth Cohort, BCS (in 2004) Cross-Cohort Change
Lowest 20 Percent
Middle 60 Percent
Highest 20 Percent
HE Inequality
Lowest 20 Percent
Middle 60 Percent
Highest 20 Percent
HE Inequality
HE Inequality
Men
a) Pr[Degree] 0.10 0.15 0.30 0.20 (0.03) 0.10 0.18 0.38 0.28 (0.03) 0.08 (0.04)
b) Pr[Undergraduate Degree] 0.08 0.11 0.22 0.14 (0.02) 0.07 0.13 0.24 0.17 (0.03) 0.03 (0.04)
c) Pr[Postgraduate Degree] 0.02 0.04 0.08 0.06 (0.02) 0.03 0.06 0.15 0.12 (0.02) 0.06 (0.03)
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Notes: The sample consists of full-time workers aged 26 to 60 in Britain Wage differentials are relative to intermediate A qualifications. Control variables included are: no qualifications, intermediate B, gender, age, age squared, London and white. Standard errors are in parentheses.
c) Pr[Postgraduate Degree] 0.02 0.04 0.08 0.06 (0.02) 0.03 0.06 0.15 0.12 (0.02) 0.06 (0.03)
Women
a) Pr[Degree] 0.09 0.08 0.26 0.17 (0.03) 0.12 0.23 0.36 0.24 (0.03) 0.07 (0.04)
b) Pr[Undergraduate Degree] 0.06 0.06 0.18 0.12 (0.02) 0.08 0.14 0.25 0.17 (0.03) 0.05 (0.04)
c) Pr[Postgraduate Degree] 0.02 0.02 0.07 0.05 (0.02) 0.04 0.08 0.12 0.08 (0.02) 0.03 (0.04)
• The rapid expansion of higher education and rising earnings returnsto graduate education have been a feature of the UK over the lasttwenty years or so.
• One consequence of HE expansion has been a concomitant increasein numbers of people going on to get a postgraduate degree.
• Despite increased supply of postgraduates, their relative wageshave risen (especially for women) implying employers increasingly
Concluding Remarks
• Despite increased supply of postgraduates, their relative wageshave risen (especially for women) implying employers increasinglydemand such qualifications.
• The private wage returns this generates is good for the individualsthemselves and for universities trying to recruit postgraduatestudents, but there are wider inequality and social mobility concernsthat should not be ignored. Includes possible supply reductions fromundergraduate fee increases.
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Lindley, J. and S. Machin (2011) Postgraduate Education and RisingWage Inequality, CEP Discussion Paper 1075, available athttp://cep.lse.ac.uk/pubs/download/dp1075.pdf.
Lindley, J. and S. Machin (2011) The Boom in PostgraduateEducation and Its Impact on Wage Inequality, Centrepiece, availableat http://cep.lse.ac.uk/pubs/download/cp351.pdf.
References
Lindley, J. and S. Machin (2012) The Quest for More and MoreEducation: Implications for Social Mobility, work in progress.
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