Young people entering higher education to boost their future earnings are in for a shock, according to new research, which claims the idea of an earnings premium for graduates has become a myth.
“Any politician or policy-maker who dangles the carrot of an average lifetime earnings premium should be challenged for gross mis-selling," said co-founder of the Intergenerational Foundation think tank Angus Hanton.
"Our research proves that the current £100,000 graduate earnings premium so often touted equates to an 'annual bonus' of just £2,222 over 45 years of work, and is wiped out once National Insurance and Income Tax are taken into account.
"Furthermore, the premium is simply not enough to cover the interest accruing on the average loan. The current system is fuelling a self-perpetuating debt-generating machine which short-changes young people."
There is too great a variation in graduate earnings, depending on factors such as gender, ethnicity, background and subject studied to calculate an earnings premium, while wider economic conditions also have an impact, the report calculates.
“The UK already has more over-qualified workers than any OECD country other than Japan but higher degree qualifications have not led to increased graduate pay," said the report's co-author Stephen Kemp-King.
"Instead the over-supply of graduates has led to a glut in the employment market with companies and organisations now demanding a degree for many lower-skilled jobs without needing to pay any graduate premium at all.”
The research identified that only graduates from Oxford or Cambridge, or those who studied a medical or dentistry degree, benefited from any earnings premium.
The group urged the government to stop using the idea of earnings premium to justify increases to tuition fees, which now stand at £9,000, or changes to repayment thresholds.