Growing Within-Graduate Wage Inequality and the Role of Subject of Degree

Joanne Lindley, Steven McIntosh

Abstract

This paper provides a supply and demand analysis for the changes in subject of degree, focussing specifically on the UK but also finding similar descriptive patterns in subject choices for the US. The paper makes a unique contribution to the literature by estimating subject-specific implied relative demand shifts. We find that Maths/Computer graduates are the least substitutable in production, but also that Medical Related, Physical Sciences, and Combined graduates are perfect substitutes in production, relative to non-graduates. Almost 40 percent of the total demand shift for graduates between 1994 and 2011 was for those with STEM degree subjects, with the largest of these being for Maths/Computing degrees which are male dominated. We also find relatively large shifts for Education, Law, Other Social Sciences, Management/Business and Medical degrees. Most of the increase in demand for graduates between 1994 and 2011 was in subjects that are relatively concentrated into a few occupations. Overall, the demand for all graduates has increased at least to the same extent as the large increase in supply, with no sign of declining graduate wage differentials.