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Poorer students losing out in race for higher earnings

Published 13/04/2016

Graduates from wealthier backgrounds earn much more than students from poorer homes, even if they were educated at the same university, research shows
Graduates from wealthier backgrounds earn much more than students from poorer homes, even if they were educated at the same university, research shows

Students from richer homes earn thousands more after graduating than their poorer peers - even if they attended the same universities, according to research.

The new report suggests that where and what students choose to study has an impact on their future earnings, with those who attended the most selective institutions taking home the most in their pay packets.

It also gives evidence of a gender gap, with men much more likely to take home higher salaries than women, even if they went to the same institution.

The study, by researchers at the Institute for Fiscal Studies, the Institute of Education and the universities of Cambridge and Harvard, analysed tax data and student loan records for 260,000 students in England up to a decade after they graduated.

It covered graduates who started their degree between 1998 and 2011, and focused mainly on the 2012/13 tax year.

The findings show that those from the richest 20% of homes earn more in the workplace than the other 80% of students, with an average earnings gap 10 years after graduation of £8,000 a year for men and £5,300 a year for women.

Once the subject studied and the type of university was taken into account, an average student from a high-income family took home about 10% more than those from other backgrounds.

It also suggests that the 10% highest earning men from richer homes had a salary around 20% higher than the 10% of highest earners from poorer backgrounds. Among women, the highest-earning from rich homes earn around 14% more.

Study author Jack Britton, an IFS research economist, 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."

Unsurprisingly, the research found that in general, those who studied for degrees in medicine and economics were likely to take home far more in their pay packets than other graduates, but at the other end of the scale, creative arts studies had the lowest salaries, earning no more on average than youngsters who did not go to university.

Around 12% of male economics graduates and 9% of women who studied the subject were taking home more than £100,000 10 years after leaving university, compared with 6% of men who studied medicine or law, and 1% of female medicine graduates and 3% of women with a degree in law.

And there were big variations in salaries depending on the university a student attended, a finding which researchers said was in part down to differences in degree entry requirements set by institutions.

The study found that more than 10% of men who graduated from Oxford, Cambridge and the London School of Economics and Political Science (LSE) - considered among the best universities in the UK - were earning more than £100,000 a year 10 years after gaining their degrees, with former LSE students taking home the most.

LSE was also the only institution to have over 10% of female graduates earning more than £100,000 a decade later.

In total, there were 36 universities which had more than 10% of former male students earning over £60,000 10 years later, compared with 10 that had over 10% of female graduates taking home more than £60,000 at the same point.

There were also 23 institutions where typical male graduate earnings were less than the typical salaries for non-graduates 10 years on. For women, it was nine universities.

The report does note that regional differences in wages could mean that some universities that are heavily focused on their local area may struggle to produce graduates whose wages outpace England-wide salaries.

Anna Vignoles, of Cambridge University, 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."

Dr Wendy Piatt, director-general of the Russell Group said: "We welcome the IFS report's finding that a university education provides an earnings premium for most graduates when compared with non-graduates.

"Russell Group universities aim to instil both independence and rigour of thought and learning; we produce graduates with deep subject knowledge and robust analytical skills but who are also creative and entrepreneurial problem-solvers. It is a model that ensures our students have the best chance of success in the global employment market - 11 of the top 50 universities in the world, as ranked by employers, are Russell Group universities."

Professor Steve West, chairman of University Alliance, said: "The report's most striking conclusion is the extent to which a graduate's family background remains a key factor determining their earnings. This needs to change. Universities have a role to play in addressing this inequality, ensuring that opportunities are open to all with the talent to succeed and that everyone can make the most of their potential."

Megan Dunn, president of the National Union of Students, said: "This study shows so much more work has to be done to create equal opportunities for students. It's hugely disappointing to see women and poorer graduates are facing such a massive disadvantage in the workplace."

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."

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