Wage expectations of UK students: how do they vary and are they realistic?

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Description/Abstract

The wage expectations of university students have relevance for human capital theory, models of student enrolment, and public policy on provision of higher education. However these expectations have been the subject of relatively little research in industrialised countries. The paper investigates students’ expectations with UK survey data that are superior to those used in several existing studies in various ways, including their coverage of a representative sample of universities and the rich nature of the information on socio-economic background. The analysis first shows how wage expectations vary with time remaining at university, ability and quality of the university. The paper then compares expectations with the actual wages earned by the same cohort on graduation, using data that are drawn from an attempted census of all graduates. This provides a more reliable basis for assessing the realism in students’ expectations than in existing studies. Results support the hypothesis that full-time students overestimate their starting salary, bringing a fundamental assumption of human capital theory into doubt.