Wealthy students keep earnings gap

Apr 13, 2016 by

Graduates from wealthy families “earn significantly more” in their careers than less well-off counterparts, even if they study the same course at the same university, according to research.

The study, based on 260,000 graduates in England, has examined the links between university and later income.

It shows big earning gaps between different courses and universities.

Jack Britton, of the Institute for Fiscal Studies, says it shows the persistence of “social immobility”.

The study, based on tax data, shows how the wealthiest students continue to have an advantage in their future employment, keeping them ahead of students from middle-class and low-income families.

Researchers from the Institute for Fiscal Studies, Cambridge University, the Institute of Education and Harvard University found graduates from the wealthiest 20% of families were typically earning 30% more than the remaining 80% of the graduate population, a decade after they left university.

Much of this advantage could be attributed to the university and course. For instance, medical students are likely to earn more than those who studied arts subjects.

But even taking this into account, students from wealthy families were earning 10% more than other graduates.

The research, based on incomes in 2012-13, showed graduates are likely to have higher earnings than those who did not go to university.

Graduates are also less likely to be out of work – and on average, male graduates have higher incomes than female. Although women with degrees have a greater earnings advantage over non-graduates.

By their early 30s male graduates are typically being paid £8,000 per year more than non-graduates and female graduates are earning £9,000 per year more than their non-graduate counterparts.

Graduates of the London School of Economics had the highest pay.

This is linked to London’s jobs market and reflects that economics graduates are among the highest earners.

Students with degrees from Oxford and Cambridge were also likely to have an advantage in earning power.

And London graduates, including universities such as Imperial College and King’s College, were generally likely to have higher incomes. Incomes for male graduates from King’s College London were higher than either Oxford or Cambridge.

The study found 10% of male graduates from the LSE, Oxford and Cambridge were earning more than £100,000 a decade after graduating.

For female graduates, the LSE was the only university where 10% of female graduates had this level of earnings.

The study also showed that male graduates from more than 20 unidentified universities were earning, on average, less than the non-graduate national average.

The report says this reflects the wide differences in regional earnings – with some local labour markets having low pay for graduates and non-graduates compared with an average pushed up by higher earnings in London.

The most lucrative courses in terms of future earnings were medicine, economics, engineering and law.

A man who studied medicine was likely to be earning £21,000 per year more than a graduate in a creative arts subject.

“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,” said Anna Vignoles of the University of Cambridge.

Jack Britton, research economist at the IFS said the study shows how “the advantages of coming from a high-income family persist for graduates right into the labour market”.

Pam Tatlow, chief executive of the Million+ group of new universities, said: “More than anything else these findings confirm that Britain remains a society in which some are born clutching a golden ticket that provides a passport to higher earnings regardless of where and what people study.”

Russell Group director general Wendy Piatt welcomed the evidence that a “university education provides an earnings premium for most graduates when compared with non-graduates”.

Nick Hillman, director of the Higher Education Policy Institute, said the research added important “weight and colour to what we know about social mobility”.

“Some people in the university sector have been uncomfortable about the research because it shows certain degrees lead to lower earnings.

“But there is no point opposing its publication. Evidence is the raw material of academia, so it is particularly unconvincing when people in universities argue new data should not be produced or should be ignored.”

Universities Minister Jo Johnson said: “We have seen record application rates among students from disadvantaged backgrounds, but this latest analysis reveals the worrying gaps that still exist in graduate outcomes.

“We want to see this information used to improve the experience students are getting across the higher education sector.”

Source: Wealthy students keep earnings gap – BBC News

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