University Selectivity and the Relative Returns to Higher Education: Evidence from the UK

We study the labour market wage outcomes of university graduates by course (i.e. by subject and institution) in the UK using the Labour Force Survey (LFS). We match this data to a measure of course “selectivity” (the mean standardised admission scores at the course level) using data on high school achievement scores of students admitted to these courses. Unlike earlier UK studies, we are able to consider the effect of differences across undergraduate degree subjects, and in particular the selectivity of both the subject studied and of the Higher Education Institution (HEI) attended. Our results show that selectivity of undergraduate degree programmes plays an important role in explaining the variation in the relative graduate wages across HEIs and subjects. In fact, much of the observed differential in relative wage outcomes across courses is due to the quality of students that HEIs select. That is not to say that the effect of course selectivity on wages implies that degrees are just signals of existing ability differences.