Higher Education Credentials and Labour Market Outcomes: Expectations of Business Students in England and the Czech Republic

While the financial returns to education have been widely studied since the 1960s, the research on students‟ earnings expectations is relatively scarce. This study examines students‟ earnings expectations and their perceptions of the link between education and labour market outcomes.

A mixed-methods approach was adopted – questionnaires and focus groups were used for data collection. First year and final year Business students were surveyed at two universities in England and two universities in the Czech Republic. A repeated cross-sectional study design was used - the survey was conducted every year between 2011/2012 and 2014/2015. In addition, focus groups with students were carried out to supplement the survey results.

Several personal characteristics were found to influence students‟ expectations. Female students had lower earnings expectations and the expected gender pay gap was found to increase with work experience. The effect of gender on earnings expectations was found to be stronger in the Czech Republic. First years students expected to earn more on average compared to their final year counterparts. Ethnicity was found to be an important factor – black British and Asian British students had higher earnings expectations compared to white British students. Students from high-income families expected to earn significantly more compared to those from less affluent backgrounds.

Students expected their earnings to grow with education and experience. Students expected to earn more after graduation compared to what they would expect had they decided not to go to university. Final year English students who expected to achieve a first class honours degree had higher expectations compared with the rest of the sample. In both countries, final year students who expected to be overeducated after graduation anticipated a pay penalty. The evidence of a so-called sheepskin effect was found in final year students‟ expectations – they believed they would have been financially punished for leaving university during their final year. Students who intended to stay in their home regions after graduation had lower earnings expectations compared to those who were willing to relocate to the capital city or move abroad.

Students‟ perceptions of the link between education and labour market outcomes were evaluated in the light of human capital theory, the screening hypothesis and credentialism. Students in both countries favoured the credentialist explanations of the relationship between education and future socio-economic status. English students believed that employers prefer graduates from elite universities. On the other hand, Czech students believed that graduates from more affluent families are advantaged in the graduate labour market due to their economic capital.

This study has some implications for both policy and practice. However, while the sample size was relatively large, the results cannot be generalised to the entire population of Business students in England and the Czech Republic since non-probability convenience sampling was used to collect the data.