Increasing the educational level of the populace and accumulating human capital are essential methods to stimulate economic growth and improve individual income. Since the reform and opening up, China's investment in education at all stages has been continuously increasing. The level of education of the people has greatly improved, and while universal compulsory education is being popularized, the scale of China's higher education has been growing at a rate of about 5% per year. In 1999, for the first time, colleges and universities in China expanded their enrollment on a large scale, admitting 44% more new students than in 1998, reaching 1.547 million. Since then, the scale of universities has continued to expand, and the number of university graduates has increased year by year. In 2002, there were only 1.34 million university graduates, but by 2022, the number broke 10 million for the first time, reaching 10.76 million. It is estimated that by 2023, the number of university graduates will reach 11.58 million. China's higher education has basically transitioned from elite education to mass education over the last 20 years.

The large number of high-skilled workers generated by the expansion of universities has provided strong support for China's economic growth, moving from factor and type-driven to innovation-driven. More and more industries and enterprises are gradually adopting and developing new technologies, gradually increasing their demand for university graduates. Despite this, with the increasing number of university graduates entering the labor market each year, the competition for jobs is becoming increasingly fierce, and "difficulty in finding a job" and "low starting salary" for university graduates are gradually becoming social issues of concern.

At the same time, there is a huge differentiation in the job market performance of different groups of university graduates. Graduates from key universities (such as the 985 and 211 projects) are popular in the labor market, and they often face the choice of how to choose the best opportunity among multiple job offers. However, many ordinary university graduates are often rejected at job fairs, or their resumes are ignored. In fact, as the vast majority of graduates come from ordinary universities, the phenomena of "difficulty in finding a job" and "low starting salary" for university graduates are mostly directed at this group.

How much does a university degree influence individual job hunt?

So, does this mean that not being able to attend a prestigious university is a "doomsday" scenario, or even a reason to give up on a university education?

To answer this question, we need to understand two facts:

First, although there may only be two types of university degrees, the abilities of each individual vary widely. The latter's role in the labor market is often ignored by the media.

Second, we often talk about the pivotal role of degrees from key universities. The core focus is their impact on the initial employment of university graduates. However, we overlook the fact that the role of a degree is not constant throughout an individual's long career. My research indicates that as time goes on, degrees may fade, but the value of personal skills is everlasting.

Overall, in the past decade or so, due to the rapid increase in university graduates and the insufficient increase in corresponding high-skilled jobs, the relative imbalance of supply and demand has caused the wage premium of young university graduates (under 35) over high school graduates to decrease from about 50% to about 30%. In other words, in recent years, the wages of university graduates under 35 have been an average of 30% higher than those of high school graduates. Most of these are graduates from ordinary universities.

At the same time, university graduates with higher individual abilities have an average wage that is 10% higher than those with lower abilities – a gap that has remained basically unchanged in the past decade or so. In the most economically developed areas, due to the greater demand for skills, the wage premium for individual abilities has shown an upward trend in recent years, approaching 20% in some years.

It is important to stress that for each university graduate, the wage premium of a key university degree compared to a degree from an ordinary university is not constant throughout their entire career.

In the current competitive labor market in China, an individual's wage is determined by their labor productivity. When university graduates first enter the job market, given the increasing number of job seekers and the limited human resources of employers, the reputation of the graduates' school becomes an increasingly important factor in the recruitment process and wage determination. This is where the "foot in the door" advantage of graduates from key universities comes from.

This can indeed be illustrated by the classic "statistical discrimination" theory in economics, which states that in the event of asymmetric information regarding the applicant's capabilities between the employer and the applicant, the employer uses the applicant's group characteristics as an approximation of individual characteristics to reduce transaction costs and risks. With the accumulation of work experience, employers can observe an individual's actual work capacity more accurately, and the wage's dependence on the reputation of the graduate school weakens, while the individual's actual work capacity increasingly becomes the most important factor in determining wages. Therefore, when we use the labor market returns of key university education as the basis for decision-making, we should not only consider the advantages of entering the workplace for the first time, but also comprehensively consider the returns of key university education at different stages of an individual's career, and the role of an individual's actual work capacity.

Does a degree from a key university still have an advantage after entering the workplace?

Our research also shows that the average wage premium for graduates from key universities relative to ordinary university graduates is about 30% when they first enter the workplace, but this premium decreases year by year with work experience. After three to five years of work, there is basically no difference in wages between the two types of graduates. At the same time, graduates with higher personal abilities, whether they graduated from key or ordinary universities, the ability premium is close to 20%, and this premium is basically stable throughout their careers. The trend of a decreasing wage premium from key universities with career development and the important role of personal abilities in one's career are more pronounced in economically developed areas, mainly because the market competition in these areas is more intense and employers pay more attention to the actual contribution of individual abilities to corporate profits.

Therefore, whether from the macro perspective of labor market trends or the micro perspective of each individual's career, personal ability is extremely important. In our study, we adopted a composite indicator of personal ability; in reality, this composite indicator is highly correlated with the achievements often listed in university students' resumes when job hunting, such as passing the CET-6, obtaining scholarships during school, having a minor or double major, having internship experience, etc. The importance of these achievements does not depend on whether they graduated from a key university.

In conclusion, working hard to improve personal abilities during university, and enhancing competitiveness in the labor market, will help in the short term to find a desirable job upon graduation, and bring about superior career development in the medium and long term.