Wealthy graduates enjoy earning premium after university, study finds

13 Apr 16

Graduates from wealthy families earn significantly more than their less affluent peers despite graduating with the same degrees from the same universities, research has found.

The study, funded by the Nuffield Foundation, is the first to take a ‘big data’ approach to graduate employment destinations. It used tax data and student loan records for 260,000 students up to 10 years after graduation. It was conducted by researches at the Institute for Fiscal Studies, Institute of Education, Harvard University and the University of Cambridge.

It found that those in the top 20% of households, by family income, did better in the labour market than the other 80% of students.

Ten years after graduation, the average gap in earnings between students from higher and lower-income backgrounds was £8,000 a year for men and £5,300 a year for women.

Jack Britton, a research economist at the IFS, said: “This work shows that the advantages of coming from a high-income family persist for graduates right into the labour market at age 30.

“While this finding doesn’t necessarily implicate either universities or firms, it is of crucial importance for policymakers trying to tackle social immobility.”

The highest earning graduates tended to study medicine or economics. Median earning for medical graduates were £50,000 10 years after graduation, and for economics graduates earning were about £40,000.

Those studying the creative arts had the lowest earnings, earning no more on average than non-graduates.

There were also big differences in earning according to which university was attending. More than 10% of male graduates of Oxford, Cambridge and the LSE were earning more than £100,000 10 years after graduation. LSE was the only institution at which 10% of female graduates were earning more than £100,000 10 years on.

The study also showed that graduates are more likely to be in work than non-graduates and likely to earn much more.

Non-graduates are twice as likely to have no earnings 10 years on. Half of non-graduate women had earnings below £8,000 at around age 30, whereas only a quarter of female graduates were earning less than this. Half were earning more than £21,000 a year.

There were also some higher education institutions (23 for men and 9 for women) where median graduate earnings were less than those of median non-graduates. However, the researches noted that there was an important regional dimension to consider. Very locally focused institutions may struggle to produce graduates who earnings can outpace England-wide trends.

Anna Vignoles of the University of Cambridge and another author of the paper, said: “The research illustrates strongly that for most graduates, higher education leads to much better earnings than those earned by non-graduates, although students need to realise that their subject choice is important in determining how much of an earnings advantage they will have.”

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