A world-class education is perhaps not the ultimate factor in career earningsCantab12

A report published today by the Institute of Fiscal Studies (IFS) has shown that graduates who come from wealthy backgrounds on average earn "significantly more” over the course of their careers than those who do not – even if they have studied the same course at the same university.

The study, led by University of Cambridge Professor of Education Anna Vignoles and Harvard Economics and Statistics Professor Neil Shepherd, used tax data and student loan records from 260,000 graduates in England to analyse the variation in graduate earnings according to “gender, institution attended, subject and socioeconomic background.”

The report shows that those who had studied at the London School of Economics (LSE) had the highest average earnings ten years after graduation, followed by graduates from Oxford and Cambridge. Furthermore, 10 per cent of male graduates from LSE, Oxford, and Cambridge were found to be earning over £100,000 annually; LSE was the only university from which female graduates had the same level of earnings as their male counterparts.

The IFS suggests that this may be explained by LSE’s focus on courses such as Economics and Law, which, along with Medicine and Engineering, are the most lucrative in terms of future earnings according to their research.

Graduates of other London universities, such as Imperial College and King’s College, were also likely to have higher incomes; male graduates of the latter had higher average incomes than those from either Cambridge or Oxford. The report states that this reflects differences in regional earnings, given that average pay in London can be 50 per cent higher than in other areas where the local labour markets deliver low pay for both graduates and non-graduates.

Indeed, graduate earnings for men at 23 of 168 institutions were lower than those of non-graduate men, whereas graduate women from 9 of 166 institutions had lower earnings than non-graduate women.

The report did not name these institutions, citing a lack of resources to ask each institution for permission, but it did say that some institutions that attracted mostly local students “may struggle to produce graduates whose wages outpace England-wide earnings” due to the characteristics of their local labour markets.

Graduates from creative arts courses were found to have the lowest salaries overall, earning typically no more than non-graduates ten years after graduation, regardless of their institution.

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

“The research illustrates strongly that for most graduates, higher education leads to much better earnings than those earned by non-graduates,” said Professor Vignoles. However, she added that “students need to realise that their subject choice is important in determining how much of an earnings advantage they will have.”

The research shows that graduates who come from the wealthiest 20 per cent of households were earning around 30 per cent more than the remaining 80 per cent of the population a decade after leaving university.

The report attributed some of this advantage to university and course choice; however, after taking these factors into account, students from the wealthiest 20 per cent of families were shown to be earning typically 10 per cent more than their peers ten years on.

According to Jack Britton, a research economist at the IFS and a leading contributor to the study, these figures expose the enduring “social immobility” of the UK, and show how “the advantages of coming from a high-income family persist for graduates right into the labour market.”

It appeared to be a general trend that women see greater financial benefits for attending university compared with their non-graduate peers than men did. By their early 30s, male graduates are typically £8,000 better off per year than non-graduate men, compared with female graduates earning £9,000 more on average per year than non-graduate women.

This is despite the fact that graduate men still saw a significantly higher average annual salary than graduate women for all course groups except “languages and literature.”

Sally Hunt, general secretary of the University and College Union (UCU), described the report as a “wake-up call” for policy makers and employers, who “must do more to level the playing field and ensure that future generations of students are not hindered by social background or by which institution they attended.”

Lee Elliot Major, chief executive of the Sutton Trust – a group whose aim is to promote social mobility – said that the findings of the study help to explain “why social mobility remains poor in the UK, despite a big expansion in higher education”, and 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.”

Nick Hillman, Director of the Higher Education Policy Institute, stated that 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,” he added. “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.”

Jo Johnson, current Universities Minister, 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, and it’s why our reforms will continue to encourage universities to focus on teaching quality and helping their students progress into fulfilling careers.”

Pam Tatlow, Chief executive of the Million+ Group – a think-tank for 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.”

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