Ilya Prakhov, Research Fellow, International Research Laboratory for Institutional Analysis of Economic Reforms, HSE Centre for Institutional Studies.
University education is an investment expected to bring returns, usually measured by the salary one is likely to be paid upon graduation. Prakhov uses data from three waves of a longitudinal survey* to examine future salary expectations of undergraduates recently enrolled in Moscow universities, as well as factors determining such expectations.
His findings are presented in the article ‘Determinants of Expected Return on Higher Education in Moscow’, published in Education Studies, Issue no. 1, 2017.
Higher education is generally perceived as capital expected to bring returns in the form of future earnings. Students of different subjects have been found to expect different salaries upon graduation. According to the survey, undergraduates with higher salary expectations include:
Medical students tend to have lower salary expectations (48,500 rubles), followed by future teachers (47,900 rubles) and students of art and culture (45,800 rubles).
Prakhov finds these expectations unrealistic. According to the 2014 Graduate Employability Monitoring, the average salary of a recent graduate in Moscow stood at 38,500 rubles.
While expected salary can be understood as absolute return on education, there is also relative return, i.e. the difference between one's potential salary with and without a degree. This type of expected dividends from higher education can vary for students of different majors.
Relative return expectations were found to be the highest in students of engineering, mathematics and natural sciences. "These undergraduates expect to earn 124% to 130% more upon graduation than they would have been paid without a degree," according to Prakhov. In other words, they expect to be paid 2.24 to 2.3 the amount they would have earned otherwise.
On average, undergraduates expect to earn 117% more with a degree than without it, which also means that they assess the salary of an employee with a degree as being more than double that paid to an employee without a degree.
Of all undergraduates, the lowest relative returns on education are expected by future teachers (100%) and students of art and culture (90%).
According to Prakhov, a number of factors can influence undergraduate salary expectations, notably:
Young men's salary ambitions are traditionally higher than young women's, Prakhov notes. Students from wealthy and well-educated families also expect to be paid more, as do undergraduates at state universities – which are believed to provide a better quality of education than private ones, thus creating an advantage for graduates in terms of employability and expected salary.
Undergraduates who work part-time expect to be paid more after graduation, in particular due to their competitive advantage of prior work experience.
In studying salary expectations, Prakhov factored in the undergraduates' majors, taking social sciences – law psychology, sociology, history, political science, etc. – as the benchmark, since average salary expectations of students specialising in these subjects were very close to the entire sample's average.
Future engineers and economists tend to expect higher salaries relative to this benchmark, while those studying art and culture tend to expect salaries below the benchmark.
According to Prakhov, the following student categories expect a higher than average return on their investment in education:
Interestingly, this group of respondents expect to earn more than average after graduation, but tend to be more realistic than their non-working peers in assessing the relative advantage of holding a degree.
While they are aware that having work experience as well as a degree is likely to increase their employability and chances of being offered a higher salary, their first-hand knowledge of the actual situation in the labour market leads to more realistic salary expectations.
*The study uses data from the panel survey 'Trajectories in Education and Career', including the first wave in 2012/2013 on ninth-graders in 274 Moscow schools; the second wave in 2014/2015 on the same respondents attending the eleventh grade of general school or a vocational school, and the third wave in 2015 on the same respondents as university undergraduates, vocational school students, or employees. This study's sample includes only the 1,050 respondents who were university undergraduates at the time of the third wave of the survey.