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20th April 2016

Graduates might be earning less than non-graduates

Gender, parental income, university, and subject choice have large impacts on earning power, IFS finds

Data from the Institute of Fiscal Studies (IFS) show that graduates from the lowest-performing universities were earning less ten years after graduation than non-graduates. The trend was evident in both male and female graduates, raising questions about higher education’s value for money.

The IFS carried out this ‘big data’ research to find out what hinders and helps graduate earnings. Using anonymised tax data and student loans for 260,000 students since 1998, the IFS found that earnings vary by university, degree subject and parental income.

Despite not naming all the universities used in the research, the IFS did list some Russell Group Universities, showing the London School of Economics to be the only institution where more than 10% of its female graduates earning in excess of £100,000 a year, ten years after graduating.

Predictably, the degree of choice also impacts on earning in the study; creative arts and mass communication graduates had the lowest earnings, earning around £17,000 for men and £12,000 for women, which proves to be less than non-graduate earners. But the gender pay gap seemed to be higher amongst higher earners. In stark contrast to the above, 12 per cent of male and 9 per cent of female Economics graduates were found to earn over £100,000 ten years after graduation. Medicine and law graduates earned a similar amount.

Co-author of the paper, Anna Vignoles from the University of Cambridge, said “students need to realise that their subject choice is important in determining how much of an earnings advantage they will have.” Disappointingly, the study also finds that those with parents on high incomes earn around 25 per cent more than their poorer counterparts, but if the institution and subject chosen is controlled, this can fall to 10 per cent.

NUS President Megan Dunn said: “It’s hugely disappointing to see that women and poorer graduates are facing such a massive disadvantage in the workplace.” Echoing Dunn’s sentiment, Lee Elliot Major, Chief Executive of the Sutton Trust, a group that promotes social mobility, said the study helps to “explain why social mobility remains poor in the UK, despite a big expansion in Higher Education.

“Students from better-off backgrounds are more likely to go to universities and take subjects with better career prospects. But even allowing for these choices, they still earn more, which suggests that we all need to redouble efforts to improve the networks available to undergraduates, their access to internships and their access to skills valued by employers.”

Universities Minister, Jo Johnson, said the government accepted there was still a long way to go to improve social mobility. He added: “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.”

On the whole, the analysis of data does suggest that higher education does pay for the majority; graduates are more likely to be in work and earn more than non-graduates. Median earnings for graduates after 10 years were about £30,000, but were £20,000 for non-graduates of the same age.

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