Does the postgraduate premium really exist?

When more and more people are going into higher education, it is easy for undergraduates to feel that having a degree doesn’t make them very special.

Universities have enthusiastically jumped on this anxiety. Postgraduate students now make up a quarter of the UK’s higher education population and their numbers are steadily growing.

All of this is good news for universities. Postgraduate degrees have long been viewed as cash cows, regarding whose pricing universities have far greater freedom and less scrutiny than with undergraduate degrees. It is in institutions’ interests to promote the idea that postgraduate degrees enhance employability. However, the Institute of Student Employers’ (ISE) annual development survey tells a different story.

Last summer, we surveyed 138 graduate employers in the UK to find out more about their recruitment approach. Only 9 per cent reported that they were actively targeting postgraduates and offering them specific packages. Our latest survey builds on this narrative. Earlier this year, we asked 156 graduate employers whether they believe that postgraduates bring more skills to their business than undergraduates do. Only 19 per cent concurred. In contrast, 87 per cent endorsed the view that work experience, in the form of an internship or placement, indicated better skills.

We then asked whether postgraduates progress quicker in terms of salary. Only 12 per cent of employers agreed that they do. These kinds of figures cast an employer-shaped shadow over the claims that taking another degree will propel your career into the stratosphere. While there are some occupations and sectors where employers are looking for postgrads, for the most part they don't seek them out.

These figures seem to contradict existing research on the so-called postgraduate premium. Research for the Sutton Trust in 2013 reported that there was an average annual postgraduate premium of about £5,500. Given what we know about the increased likelihood of wealthier and more advantaged people taking postgraduate degrees, this has led to a lot of concern about whether postgraduate qualifications serve as a barrier to social mobility.

The findings from our survey, however, ask us to look more closely at the postgraduate premium and to think about how useful a guide it is for career decision-making, particularly at the age of 21.

First, we must recognise that a lot of postgraduate courses serve as an entry route to professions such as law, teaching and social work. People pursuing these career routes have no choice other than to pursue postgraduate study, and they undoubtedly account for a substantial chunk of the UK’s postgraduate premium.

Second, we need to make a distinction between people who return to do a postgraduate degree after a period in the labour market and those who continue to study after their undergraduate degree. The returners clearly have higher salaries when they enter and exit their programmes, and their choices about postgraduate study interact with their careers in more direct ways. Degrees such as the MBA differentiate them from their peers and allow them to specialise in more lucrative areas, or to change careers.

However, our survey casts serious doubt on the wisdom of those who continue to study straight after a first degree in the hope that adding some “postgraduateness” to their CV will give them access to the postgraduate premium. In many cases, those students could be better off focusing on getting more work experience.

We need to have a debate about the role of postgraduate study in the UK. While it is absolutely right to be worried about postgraduate qualifications creating a new barrier to social mobility, we should also be careful not to believe the hype. While, in general, postgraduate qualifications offer a substantial salary premium, our evidence suggests that employers remain unconvinced about the value of postgraduate study for entry-level hires.

Individuals should think carefully about what they want from postgraduate study, and pose some challenging questions to the universities that are so keen to sell these programmes.

Tristram Hooley is chief research officer at the Institute of Student Employers, as well as professor of career education at the University of Derby. He also holds posts at Inland Norway University of Applied Sciences, Canterbury Christchurch University and the University of Southern Queensland.