University Quality, Academic Performance, and Work Experience Are Important Signals in the Labour Market
People with higher education enjoy higher salaries and are at considerably less risk of unemployment. The World Bank estimates that an extra year of university studies in Russia yields an 8% return on investment. The quality of a university, the specific field of study, and students’ individual strategies are all key factors in ensuring success in the labour market. These topics were discussed by Viktor Rudakov, Senior Research Fellow and Deputy Head of the International Laboratory for Institutional Analysis of Economic Reforms, Assistant Professor of the Faculty of Economic Sciences, HSE University, in an open lecture on ‘How and Where to Study to Become Successful in the Labour Market’.
Associate Professor Viktor Rudakov gave an open lecture on how higher education, the quality of a university, academic performance, and work experience opportunities while studying affect career success and salaries at the beginning of graduates’ working lives. On July 27, Mr. Rudakov spoke to participants of the MathBootCamp at the HSE Faculty of Economic Sciences.
Economic Benefits of Higher Education
At the beginning of his lecture, Mr. Rudakov outlined two theories that try to explain the link between education and the labour market. The first and most famous is human capital theory, which proposes that education is an investment in human capital, which increases people’s productive capacity and in turn translates to higher pay.
The second is signalling theory, which posits that education does not inherently increase people’s total economic productivity, but acts as a signal in the labour market to identify the most efficient workers. ‘I believe in the ‘weak interpretation’ of signalling theory, which is a combination of the two theories. It supposes that education is both a signal in the labour market and something that increases productivity in and of itself’, he said.
The speaker then explained the kinds of economic returns that can be expected from a university degree. He showed a graph illustrating the World Bank’s estimate of the effect of one extra year of university studies on an individual’s salary.
One extra year of university studies in the Russian Federation increases your salary by 8%, while the average return is currently about 4–5%
Therefore, it is beneficial to invest in higher education—on average, those with four-year undergraduate degrees have 32% higher salaries.
Average salaries also depend on the level of education. ‘On average, graduates earn 1.4 times more than those without university degrees. At the moment, vocational education does not yield considerable returns compared to school education,’ he said.
Mr. Rudakov also spoke about employment and unemployment rates. The unemployment rate for university graduates is halved compared to those with only a high-school education.
‘Higher education correlates with higher employment rates, better salaries, and decreased risk of unemployment. University degrees have clear economic benefits,’ he concluded. ‘Yes, the government invests heavily in vocational education, which has undergone big changes in recent years. However, a university education still offers better chances in the labour market, bigger salaries, more opportunities to find jobs, etc. Furthermore, higher education is associated with higher social trajectories.’
University Quality Does Matter
In the second half of his lecture, the associate professor discussed the interrelation between individual universities, fields of study, students’ strategies, and graduates’ success in the labour market. His conclusions were based on research conducted in collaboration with the HSE Laboratory for Labour Market Studies. He outlined four institutional trends that affect the potential returns from education: demographic changes (the number of young people decreased between 2008 and 2020), the shift to mass higher education, differentiation of education by quality, and the concentration of high-quality education in a narrow segment of major universities.
According to Mr. Rudakov, the concentration of high-quality education in a narrow segment of major universities means that employers react to the signal that someone has graduated from a prestigious university. As such, the potential return from education depends not only on having a higher education, but also on the quality of a specific university. He asked the audience about which criteria they considered when choosing where to study. Audience members replied that they chose to study at HSE University because of recommendations from family and friends, as well as the university’s rankings, programmes, and convenient website. Mr. Rudakov said that applicants should pay attention to admission quality, the university’s status (participation in state programmes) and rankings.
High-quality universities encourage collaborative learning and networking
‘Who you study with is very important, because your coursemates influence you. Moreover, after graduating, you’ll be entering the labour market alongside your university peers, so networking will help you find a good job—this is another advantage of a university education,’ he explained.
Having a degree from a high-quality university also influences potential salaries. Graduates of top universities earn 20–30% more than those who studied at lower-quality universities. Researchers have found that graduates of universities with top-quality admissions perform best out of all graduates in the labour market.
The speaker noted that in developed European countries, money is the main reason why students choose to work during their studies, which means they are often employed outside their immediate area of expertise. Meanwhile, students in Russia are willing to work in order to gain valuable experience and appeal to employers, which provides an opportunity to practice what they have learned at university. For many jobs, proven work experience in a graduate’s CV is a positive signal for Russian employers. Research shows that combining work and study during later academic years has a positive influence on graduates’ salaries in their early careers.
The associate professor also highlighted the correlation between students’ performance at university and subsequent high salaries: research shows that successful academic performance in HSE undergraduates is a reliable predictor of high pay after graduation. However, there is no such correlation for Master’s students. This is primarily due to the fact that future Master’s students actively combine work with study, which contributes to their success in the labour market after graduation, but negatively affects their academic performance.
Mr. Rudakov ended the lecture with a summary of his main conclusions.
Viktor Rudakov, Senior Research Fellow and Deputy Head of the International Laboratory for Institutional Analysis of Economic Reforms, Assistant Professor of the Faculty of Economic Sciences, HSE University
Despite the large scope of higher education and differing levels of quality, university degrees overall lead to better salaries and decreased risk of unemployment.
The quality of a university is another very important factor. This is backed up by statistics—graduates of high-profile universities earn significantly more, both because they receive a better education and because their degrees signal their potentially high productivity to employers.
When it comes to the most efficient education strategy in terms of subsequent short-term results in the labour market, students should aim to do well in their undergraduate degrees and then try to combine their academic and career trajectories while studying on a Master’s programme.