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Qualify for a graduated pay deal

Published: Tuesday, 17 May 2005   Category: Public sector | Graduate Job sector Reports

The earnings gap between graduates and non-graduates is closing, shows research into the labour market. But graduates are still far ahead in the salary stakes.

It was feared that increasing the number of people going to university might flood the jobs market with graduates and erode the financial returns of having a degree. But the latest figures from the Department for Education and Skills show that graduates are still heavily advantaged. On average, a degree holder earns 43% more per hour than someone with A-levels alone.

This earnings advantage represents a sharp fall since 2001, when graduates were on average paid an extra 51%. And it also updates the earnings gap of 59% in the last annual survey from the Organisation for Economic Co-operation and Development.

The earnings figures, drawn from the labour force survey last autumn, show a workforce which is rewarded financially for each extra set of qualifications from GCSE through to degree. Or, looked at another way, it's a workforce penalised for each set of qualifications it fails to get.

Youngsters who get the basic benchmark of five good GCSEs earn £9.41 per hour, compared to £7.65 for those without qualifications. A-level holders earn more with £10.50 per hour. But the biggest step in this earnings ladder is between degree holders and A-levels, with the average graduate earning £14.97 per hour.

The survey also casts doubt on the idea that young people would be better off getting a trade than getting a degree. It shows that people who have been through a trade apprenticeship earn about the same as those employees with A-levels - and considerably less than graduates.

The number of graduates in the working population is now about 8m, up by 1.4m people in the past six years and representing 30% of people in work. Degree holders now account for more than 80% in "professional occupations".

The Association of Graduate Recruiters is forecasting a 14% increase in graduate jobs, with starting salaries rising accordingly. This followed a 15% increase in demand for graduates last year.

At the other end of the scale there are about 4m in the workforce without any qualifications. These workers earn on average less than half the hourly rate of graduates. And they are much more likely to become unemployed. Even with the current buoyant employment levels, manufacturing jobs fell by 93,000 in the three months to January.

Education secretary Ruth Kelly, launching a strategy on workforce skills this week, suggested a deepening problem for those without skills and qualifications. She quoted research that claimed by 2012, two-thirds of all jobs would be for employees with A-levels or degrees.

Richard Wilson, head of business policy at the Institute of Directors, says the trend towards an increasing number of graduates was "irreversible". Employers would continue to use qualifications as a way of "screening" applicants, he said, and that getting a degree was likely to remain a worthwhile investment for the workplace.

The Confederation of British Industry believes more young people would benefit by going into higher education, - with anything between 40% and 70% getting degrees. With such a potential growth in graduate numbers - and the continued fall in unskilled jobs - a CBI spokesperson pointed to the serious problems for those people leaving school without qualifications or basic skills.

Saturday March 26, 2005
The Guardian, Sean Coughlan

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