GRADUATES are still likely to get higher-paid jobs than non-graduates, according to a study that appears to contradict claims that they are flooding the labour market.

More than 4,500 students from 38 universities were tracked over more than seven years to measure their progress from graduating to full-time employment.

In March, two political economists had published research reporting that 40 per cent of those who had graduated in the previous three years were in jobs that did not require degrees and that starting salaries were falling. However, Peter Elias, of the Institute of Employment Research at the University of Warwick, a co-author of Seven years on: Graduates in the Changing Labour Market, released by the Economic and Social Research Council, said yesterday: “Clearly there will be a dilution eventually, but not yet. In the short term the outlook is very good.”

In the six to seven years after graduating, graduates from 1995 were earning higher than the class of 1980. Those who graduated in 1999 were earning even more.

“Our findings indicate that initial graduate under-employment is not a reliable indicator of the longer-term labour market situation. All the evidence suggests that employers continue to pay a premium to degree-holders,” Professor Elias said.

Since 1995, business studies has proved the most popular degree, and of those graduates, more have entered the private sector and been quickly promoted into management jobs.

Of the 4,500 graduates questioned from across Britain, three quarters had found degree-related jobs, two thirds of whom said that a degree had been a prerequisite for their job.

The Government says that top-up tuition fees are the only way to finance the expansion of higher education from the current level of 43 per cent of school-leavers to its target of 50 per cent.

Last night Alan Johnson, the Higher Education Minister said: “This report adds another nail to the coffin of the doom merchants who insist that more graduates means worse. Despite the expansion of the 1990s it is still a very good time to be a graduate — they have more opportunities and earn more for holding a degree.”

However the gap in pay between male and female graduates continues to grow. Shortly after graduating in 1995, men were earning around 10.5 per cent more than women on average; in 2003 that had widened to 19 per cent.

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