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Thursday, 12 May 2011

Benefits of a University Degree: £100 000. Is that all?

Different sources give different figures, but today the BBC is reporting Vince Cable's Department of Business Innovation and Skills (the BISness) claiming a £100,000 lifetime benefit from a degree. That's the additional lifetime gross income attributable to degree possession once account is taken of loss of earnings during University study and cost of study. Other sources (like PWC in 2007) give a higher figure, around £160,000.

Three thoughts occur to me.

First, it's not a lot of money. Over a forty year working life (25 - 65)you need only add £2500 a year to gross salary to arrive at the £100,000 total.

Second, the total benefit - whether £100,000 or £160,000 - is derisory. It is no more than many 18 or 21 year olds can expect as an upfront, modest inheritance from Grandma or Uncle Fred. The benefit from University education is simply not strong enough to create a financial meritocracy.

Third, the claimed benefit anyway involves the fallacy post hoc ergo propter hoc. Think about it. Suppose that those who go to university are marginally more talented than those who don't. Then had they been denied access to university education, they would probably have done better in life anyway. It's not implausible that they would have topped up their salary by £2,500 a year simply for being a bit better at their job. The problem is that we have no control group which allows us to factor out the contribution made by the talent of the students as opposed to the talents of their teachers.

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