A University's Special Status Is Correlated with a Substantial Increase in Salaries for Graduates

A university education is a highly sought-after commodity in Russia, yet the quality of universities and their programmes varies significantly. This gives rise to risks of inequality, both in the realm of education and in the labour market, and subsequently impacts the returns on higher education, which are manifested in the salaries earned by graduates. According to a study by Ilya Prakhov, Assistant Professor of the HSE Faculty of Economic Sciences, graduates from Russia’s top-tier universities enjoy a distinct advantage. More specifically, graduates from universities holding the status of a National Research University earn an average of 22% more than their peers from other universities, and graduating from a university which participates in the 5-100 Project enhances one's potential salary by nearly 17%. The paper has been published in the International Journal of Educational Development.

Over the past few decades, the higher education market in Russia has experienced several institutional transformations that could not but reflect on the quality of educational programmes. However, the idea of ranking universities based on their quality remains the subject of ongoing debate. In earlier papers, a university's position in the Admission Quality Rating (AQR) based on the average Unified State Exam (USE) scores of students admitted to subsidised slots, alongside the university's status, were used as indicators of the quality of education.

Ilya Prakhov, Assistant Professor of the HSE Faculty of Economic Sciences, has expanded the range of characteristics that can be used to measure the quality of higher education to include the status of federal university or national research university, participation in the 5-100 Project, and membership in the Association of Top Universities. These statuses entail additional funding for educational and research projects, help attract renowned scientists and offer stimulating contracts to faculty members, as well as supporting competitiveness in both domestic and international markets.

Prakhov’s paper uses panel data from the longitudinal study 'Trajectories in Education and Careers', making it possible to track the educational and career paths of young people starting from their high school years. Specifically, the researcher selected and examined questionnaires completed by university graduates who had entered the labour market and secured paid employment.

Nearly all regression models have confirmed the presence of a statistical relationship between the university-related indicators listed above and the salaries of graduates. In particular, the study has revealed a positive correlation between a university’s selectivity, as measured by the AQR, and the salaries earned by its graduates: an increase in the average USE score of applicants admitted to subsidised slots is associated with a 2-percent salary increase for graduates. This effect appears to be higher compared to the findings of previous studies.

Interestingly, studying at a Federal University (FU) is not associated with a salary advantage in the labour market — rather, the opposite is true, and graduates of FUs earn an average of 15% less. This can be attributed to the fact that many FUs emerged as a result of integration of multiple universities, and their special status was not granted to them based on a competitive process or performance assessment. As a result, the status of being a Federal University does not necessarily reflect the quality of education provided.

In contrast, other special statuses of universities have been found to significantly enhance the salary prospects of their graduates. The study has revealed that graduates from National Research Universities earn, on average, 22% more than their peers from other universities, while a degree from a university participating in the 5-100 Project results in an approximate 17% increase in salary.

Universities which have obtained their special status through a competitive process can invest the additional funds they receive in research and teaching enhancement, and in attracting talented scientists, all of which contributes to a better quality of education. It can be presumed that graduates of universities participating in the Priority 2030 project can also anticipate a salary boost in comparison to graduates from universities lacking the status of a research university.

Ilya Prakhov
Study author, Assistant Professor of the HSE Faculty of Economic Sciences

It is important to note that there exists a disparity in salaries between male and female graduates, with a gender pay gap favouring men by 33% to 37%. When specialization is included as an independent variable, the gender pay gap diminishes but remains relatively high, ranging from 26% to 33%.

Gaining work experience while studying at a university does not yield any additional salary benefits. This could be attributed to the fact that approximately 79% of the university graduates in the sample had such work experience, resulting in a minimal variation of this indicator.

Upon examining the impact of specialisation on salaries, the author discovered that graduates with engineering and military specialties earned higher average pay. Conversely, graduates with medical specialties were found to have the lowest salaries within the sample. This can be attributed to the extended duration of medical training, resulting in a limited range of potential jobs which graduates could hold during the study period.

Furthermore, the study examined the influence of family income and school background on salaries. A positive correlation was found between parental income and graduates’ pay. Other investigated factors included university graduates’ individual USE scores and whether they had studied at a school with in-depth courses in certain subjects. In particular, a university graduate who had attended a high school with in-depth courses in certain subjects was likely to earn, on average, 10% more compared to those who had attended regular secondary schools. This means that wage inequality can be traced back to circumstances that precede enrolment in university.

The quality of a university is not the sole determinant of its graduates' success in the labour market. A student's personal motivation, environment, school background, and various other factors can also influence their potential earnings. This is precisely why economists refer to education as a 'credence good' — it can be challenging to pinpoint the precise factors that have determined a particular graduate’s success. Therefore, all these factors need to synergistically work together for good prospects in the labour market. However, to maximise the benefits of higher education, it is crucial to begin by selecting a university that aligns best with one's abilities and interests.

Ilya Prakhov
Study author, Assistant Professor of the HSE Faculty of Economic Sciences

Large-scale initiatives in the field of higher education, such as the establishment of national research universities and the implementation of the 5-100 Project, have yielded positive outcomes. These initiatives have encouraged university competition for students, faculty, and additional funding, leading to increased efforts by universities to advance their research. This, in turn, has enhanced the quality of students and teaching performance, resulting in higher salaries for graduates. Based on these findings, the researcher concludes that supporting university programmes is crucial, since quality higher education not only benefits individual graduates but also positively contributes to society.

It is essential to establish targeted programs for Russian universities which have not received a special status for various reasons. This could incentivise their faculty to strive for high-quality teaching and enable these universities to attract talented students. Implementing such programmes can help mitigate existing disparities in the quality of higher education.

Ilya Prakhov
Study author, Assistant Professor of the HSE Faculty of Economic Sciences

IQ

October 06, 2023