Beware of using qualifications as a proxy for skills

The release of a new analysis from the Institute of Fiscal Studies has sent the higher education community into a frenzy of excitement.

The Longitudinal Educational Outcomes (LEO) data allows us to understand better than ever before the impacts of different qualifications, institutions and, to some extent demographics, on individuals’ earning potential. But, it is important for us to remember some of the things that LEO doesn’t tell us.

A lot of the debate following the new analysis of LEO has focused on recognising the various other benefits that higher education offers individuals and societies. Whether this is a defence of liberal education, social mobility, or the social or economic centrality of higher education and graduates, there are many reasons to believe that a simple measure of individuals’ salaries is insufficient as a basis for making a judgement about the value of higher education. But, there is a more fundamental concern that also needs to be addressed. How much of the salary advantages associated with higher education can be accounted for by the fact that graduates have better skills than other people, and that certain graduates are even more skilled than their peers.

Employer perspectives on graduates

At the Institute of Student Employers (ISE) we spend most of our time talking to large employers about graduates. They remain very positive about graduates, with most reporting that they continue to recruit graduates every year. Our research shows that these large employers spend substantial amounts on recruiting graduates (£4739 on average for every one that they hire) and developing them once they are hired (£5739 for every hire). They also offer good starting salaries (£29,000) and rapid increases in pay (£40,000 average salary after three years). In other words, the larger employers love graduates and their behavior contributes towards the kind of graduate premium that is discussed in the IFS research.

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