§ Mr. Alan WilliamsTo ask the Secretary of State for Education and Skills (1) what the latest Government estimate is of the extra life-time earnings arising from graduation; [140794]
(2) what the statistical sources are for Government estimates of extra life-time earnings arising from graduation; [140795]
(3) whether Government estimates of extra life-time earnings of graduates are (a) pre-tax and (b) post-tax. [140796]
§ Alan Johnson[holding answer 1 December 2003]: Higher Education is undoubtedly a good investment for the average graduate. The Department has previously estimated that first degree graduates earn on average around £120,000 more—in present value terms—over their working lives than those with two or more A-levels. The analysis is based on the spring 2002 quarter of the Labour Force Survey (LFS) for Great Britain. The £120,000 differential is derived from gross lifetime 610W earnings streams that are assumed to grow at 2 per cent. per annum in real terms and are discounted at a rate of 3.5 per cent1. The Department estimates that the differential would fall to around £90,000 using net lifetime earnings streams, given that higher earning degree-holders would pay more tax on average over their working lives than those with only A-levels.
1Real earnings are assumed to grow in line with productivity at 2.0 per cent., as set out in Annex A of The Budget 2003. The discount rate of 3.5 per cent. is the rate used by the Treasury in deciding whether public investments are worthwhile.