Leader: Degrees retain market value, but for how long?

The financial benefits conferred by a degree will loom large this autumn as arguments rage about whether higher tuition fees can be justified. Ministers have lost no opportunity to quote the lifetime salary premium of £400,000 said to be enjoyed by graduates. This figure has remained constant despite the growth in the proportion of the population with higher education qualifications. Logic suggests that graduate status should not be as prized by employers now that one in three adults has a degree.

Detailed international comparisons published this week by the Organisation for Economic Cooperation and Development will hearten those who believe graduates should pay more. Taking account of fee levels, government subsidies, taxation and the reduced risk of unemployment, the OECD's economists find that the gap between graduates and those with the equivalent of five good GCSEs is wider in Britain than in any leading industrialised nation. For every pound spent on higher education, UK graduates can expect an annual return of 18p during their working lives. Nor does the report bear out concerns about the impact of mass higher education on the labour market: before controlling for the cost of tuition, the US sees the highest rate of return. Although US participation rates are high, levels of pay for unskilled work are correspondingly low.

Such studies have their critics. Are employers not merely using university education as an indicator in spotting likely high-flyers? Would the cream not rise to the top without the benefit of a degree? Generations of relatively uneducated self-made millionaires demonstrate that it can. But these statistics show that in an increasingly qualifications-conscious society, a degree still has market value, as well as intrinsic worth. How long the rate of return will remain high is something the OECD does not dare to predict. The economists warn that the premium may reflect a temporary shortage of highly educated workers that will gradually decline. They also suggest that future financial benefits may be low for the "marginal student". Neither caveat will disturb the supporters of top-up fees, but they highlight issues that need to be addressed when the government reviews its targets for expanding higher education.