This paper shows that there are significant differences in graduate earnings, depending upon the quality of university. For example, if a university has an RAE score one standard deviation above-average, its graduates earn, on average, 4% more than the average graduate. And a graduate of a top quartile university earns 10-16% more (depending on which measure of quality is used*) than a graduate of a bottom quartile institution.
These differences control for students’ A level scores and other things, and so try to correct for the fact that better universities attract better applicants.
There seems to have been a rise in these returns over time, which suggests that as university numbers have expanded, so too has the premium upon attending a better one.
The paper is, however, silent on the question of whether good universities raise graduate earnings by giving them more skills, or merely by signalling their higher quality.
This suggests there might be a case for lifting the cap on university tuition fees. The current ceiling, of £3145 a year, has the effect of suggesting that all universities are the same, as almost all charge the maximum. But this is not so.
* There is, however, a negative correlation between the pay of teaching staff and graduate earnings.