̽��ֱ�� of Cambridge - Institute for Fiscal Studies

Graduate earnings: what you study and where matters – but so does parents’ income

fpjl2 — Wed, 13 Apr 2016 09:27:34 +0000

Latest research has shown that graduates from richer family backgrounds earn significantly more after graduation than their poorer counterparts, even after completing the same degrees from the same universities.

̽��ֱ��finding is one of many from a new study, published today, which looks at the link between earnings and students’ background, degree subject and university.

̽��ֱ��research also found that those studying medicine and economics earn far more than those studying other degree subjects, and that there is considerable variation in graduates’ earnings depending on the university attended.

̽��ֱ��study was carried out by the Institute of Fiscal Studies and the universities of Cambridge and Harvard, including Professor Anna Vignoles from Cambridge’s Faculty of Education. It is the first time a ‘big data’ approach has been used to look at how graduate earnings vary by institution of study, degree subject and parental income.

̽��ֱ��researchers say that many other factors beyond graduate earnings, such as intrinsic interest, will and should drive student choice. However, they write that the research shows the potential value of providing some useful information that might inform students’ choice of degree – particularly to assist those from more disadvantaged backgrounds who might find it harder to navigate the higher education system.

“It would seem important to ensure there is adequate advice and guidance given that graduates’ future earnings are likely to vary depending on the institution and subject they choose, with implications for social mobility,” write the researchers in the study’s executive summary.

̽��ֱ��research used anonymised tax data and student loan records for 260,000 students up to ten years after graduation. ̽��ֱ��dataset includes cohorts of graduates who started university in the period 1998-2011 and whose earnings (or lack of earnings) are then observed over a number of tax years. ̽��ֱ��paper focuses on the tax year 2012/13.

̽��ֱ��study found that those from richer backgrounds (defined as being approximately from the top 20% of households of those applying to higher education in terms of family income) did better in the labour market than the other 80% of students.

̽��ֱ��average gap in earnings between students from higher and lower income backgrounds is £8,000 a year for men and £5,300 a year for women, ten years after graduation.

Even after taking account of subject studied and the characteristics of the institution of study, the average student from a higher income background earned about 10% more than other students.

̽��ֱ��gap is bigger at the top of the distribution – the 10% highest earning male graduates from richer backgrounds earned about 20% more than the 10% highest earners from relatively poorer backgrounds. ̽��ֱ��equivalent premium for the 10% highest earning female graduates from richer backgrounds was 14%.

̽��ֱ��study also showed that graduates are much more likely to be in work, and earn much more than non-graduates. Non-graduates are twice as likely to have no earnings as are graduates ten years on (30% against 15% for the cohort who enrolled in higher education in 1999).

Partly as a result of this, half of non-graduate women had earnings below £8,000 a year at around age 30, say the researchers. Only a quarter of female graduates were earning less than this. Half were earning more than £21,000 a year.

Among those with significant earnings (which the researchers define as above £8,000 a year), median earnings for male graduates ten years after graduation were £30,000. For non-graduates of the same age median earnings were £21,000. ̽��ֱ��equivalent figures for women with significant earnings were £27,000 and £18,000.

“ ̽��ֱ��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 Professor Vignoles.

̽��ֱ��researchers also found substantial differences in earnings according to which university was attended, as well as which subject was studied. They say however that this is in large part driven by differences in entry requirements.

For instance, more than 10% of male graduates from LSE, Oxford and Cambridge were earning in excess of £100,000 a year ten years after graduation, with LSE graduates earning the most. LSE was the only institution with more than 10% of its female graduates earning in excess of £100,000 a year ten years on.

Even without focusing on the very top, the researchers say they found a large number of institutions (36 for men and 10 for women) had 10% of their graduates earning more than £60,000 a year ten years on. At the other end of the spectrum, there were some institutions (23 for men and 9 for women) where the median graduate earnings were less than those of the median non-graduate ten years on.

However, the researchers say that it is important to put this in context. “Given regional differences in average wages, some very locally focused institutions may struggle to produce graduates whose wages outpace English wide earnings, which includes those living in London where full time earnings for males are around 50% higher than in some other regions, such as Northern Ireland,” they write.

In terms of earnings according to subject, medical students were easily the highest earners at the median ten years out, followed by those who studied economics. For men, median earnings for medical graduates were about £50,000 after ten years, and for economics graduates £40,000.

Those studying the creative arts had the lowest earnings, and earned no more on average than non-graduates. However, the researchers say that some of these earnings differences are, of course, attributable to differences in student intake – since students with different levels of prior achievement at A-level take different subject options.

“When we account for different student intakes across subjects, only economics and medicine remain outliers with much higher earnings at the median as compared to their peers in other subjects,” write the researchers.

After allowing for differences in the characteristics of those who take different subjects, male medical graduates earn around £13,000 more at the median than similar engineering and technology graduates, the gap for women is approximately £16,000. Both male and female medical graduates earn around £14,000 more at the median than similar law graduates.

“Earnings vary substantially with university, subject, gender and cohort,” said study co-author Neil Shepherd of Harvard ̽��ֱ��. “This impacts on which parts of the HE sector the UK Government funds through the subsidy inherent within income contingent student loans. ̽��ֱ��next step in the research is to quantifying that variation in funding, building on today's paper.”

Reference:
Institute for Fiscal Studies working paper: 'How English domiciled graduate earnings vary with gender, institution attended, subject and socio-economic background', Jack Britton , Lorraine Dearden , Neil Shephard and Anna Vignoles.

First ‘big data’ research approach to graduate earnings reveals significant variations depending on student background, degree subject and university attended.

̽��ֱ��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

Anna Vignoles

Sir Cam

Sidney Sussex General Admission, Cambridge 2012

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Big data shows the graduate pay premium is bigger for women

Anonymous — Fri, 25 Sep 2015 09:51:04 +0000

A new study using big data has confirmed that those who complete university can expect to earn, on average, a decent premium for their degree. This alone won’t come as a shock – previous studies have shown that attending university pays off for most graduates. But my colleagues (Neil Shephard of Harvard ̽��ֱ�� and Jack Britton of the Institute for Fiscal Studies) and I confirmed that this “graduate premium” is much higher for women than for men.

Using government administrative data, we looked at the median earnings of English men and women ten years after their graduation. We found that women graduates earn three times as much as women without a degree, while male graduates earn around twice as much as male non-graduates.

While women benefit more from their degrees than men, the gender gap in graduate earnings remains stark.

Using big data

Part of what makes this work novel is our use of big data – specifically, government administrative data in the form of tax and student loan records for over 260,000 graduates, collected up to ten years after their graduation. This is the first time a “big data” approach has been used to look at graduate earnings in England.

Previous work has estimated the premium earned by graduates using survey data. But the administrative data give a much more accurate picture than existing surveys, which tend to be based on much smaller samples of people who self-report their earnings, which makes the information subject to biases.

Using this anonymised tax data and student loan data, we looked at cohorts of graduates who started university in the period from 1998 to 2011, and observed their earnings (or lack thereof) in the tax year 2011/12 – though the results hold for graduates in other tax years, too.

̽��ֱ��work, funded by the Nuffield Foundation, suggests that survey data has previously underestimated the earnings of graduates, particularly higher earning graduates. These new data indicate that ten years after graduation, 10% of male graduates were earning more than £55,000 per annum, 5% were earning more than £73,000 and 1% were earning more than £148,000.

Ten years after graduation, 10% of female graduates were earning more than £43,000 per annum, 5% were earning more than £54,000 and 1% were earning more than £89,000.

Our analysis is not causal, since we are simply comparing the earnings of graduates and non-graduates. Still, the results add to the evidence that, on average, graduates fare much better in the labour market than non-graduates.

Hit by recession

̽��ֱ��study also produced a number of other interesting findings. Crucially, we found that the recession had a large impact on the earnings of people in their 20s and early 30s. This is particularly true for women, who experienced much lower earnings than previous cohorts. Over a four year period, men’s earnings were cumulatively 14% lower than expected, based on previous cohorts. For women over the same period, they were 20% lower than expected.

We’ll have to wait and see what this means in the long term, but there is no doubt that the recession has taken a toll on graduates in these cohorts in the short term.

Yet the research also indicates that graduates fared better than non-graduates through the recession – that is, they saw proportionally smaller drops in their earnings. So it also appears that higher education provided some protection from the economic downturn.

As with any study, there are limitations to the analysis. We used administrative data from both the Student Loan Company (SLC) and Her Majesty’s Revenue and Customs (HMRC) to observe how the earnings of students who take out a loan from the SLC change through the years as they mature in the labour market. This means we can only identify graduates who have borrowed money from the Student Loan Company, which is around 85% of English graduates in the period we looked at.

This means that there are some graduates whose earnings we cannot identify. Even so, we have reason to believe that they are likely to be higher earning graduates, on average if we assume that those who don’t take a loan are likely to come from more advantaged backgrounds and hence on average have higher levels of prior achievement and attend higher status institutions. If anything, the data we used is likely to underestimate average graduate earnings.

Despite these caveats, there is no doubt that this type of big data analysis allows us to better understand how earnings evolve during a graduate’s career. This is important if we are to understand not only the extent of the graduate wage premium, but also how earnings vary across different types of graduates.

Anna Vignoles, Professor of Education, Jesus College, ̽��ֱ�� of Cambridge

This article was originally published on ̽��ֱ��Conversation. Read the original article.

̽��ֱ��opinions expressed in this article are those of the individual author(s) and do not represent the views of the ̽��ֱ�� of Cambridge.

Anna Vignoles (Faculty of Education), together with colleagues at the Institute for Fiscal Studies and Harvard ̽��ֱ��, authors a study that finds women with degrees earn three times as much as non-graduates within a decade of leaving university.

There is no doubt that this type of big data analysis allows us to better understand how earnings evolve during a graduate’s career

Anna Vignoles

Caro Wallis

Congratulations, Graduates!

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Graduates who went to private schools earn more than graduates who did not, finds study

fpjl2 — Fri, 31 Oct 2014 14:59:21 +0000

New research shows that graduates who went to private schools earn substantially more than those who went to state schools. Even amongst graduates who went to the same university to study the same subject and who left with the same degree class, those who attended private school earned on average 7% more.

Previous work by the researchers found that graduates who attended private schools are more likely to enter higher status and higher paying occupations. But, once they matched occupations in the comparison fields for the latest research, latest research showed that those who went to a private school still earn 6% more, on average, than those who went to a state school. This is currently equivalent to around £1,500 a year.

̽��ֱ��findings suggest that even when universities widen participation to students from poor backgrounds, there are social inequalities in the success of graduates when they leave higher education.

̽��ֱ��new study, published recently by the Institute for Fiscal Studies, and funded by the Nuffield Foundation, concludes that further research is needed to determine the causes behind the pay gap - whether it is access to particular social networks or better non-cognitive skills such as confidence or self-esteem. Regardless of the explanation, the authors suggest that these results add further weight to the argument that higher education is not the great leveller it was hoped to be.

“Whilst universities have been making strenuous efforts to widen participation in recent years, what happens after students leave their university is also enormously important for their prospects for social mobility. If higher education is to be a route to social mobility then the link between family background and adult outcomes must be broken, or at least reduced, for graduates,” said study co-author Professor Anna Vignoles, from Cambridge’s Faculty of Education.

“These results suggest that there is a pressing need to understand why private schooling confers such an advantage in the labour market, even amongst similarly achieving graduates.”

Researchers used longitudinal samples from the Destination of Leavers from Higher Education survey to look at gross annual earnings six months after graduation, with a sample of 75,000 graduates and for a subset of these they looked at earnings three and a half years after graduation.

̽��ֱ��researchers found that after six months the graduates who attended private school earned an average of £3,000 more than their state school contemporaries. They then looked at the earnings of graduates who left university in 2007 in January 2011, approximately three and a half years later. After this time the gap had increased, with former private school pupils earning an average of £4,500 more than those who attended a state school - amounting to a pay gap of roughly 17%.

Arguably this might be expected, say the researchers, as some of the higher earnings of graduates who attended private schools is down to the fact that they have better A-level grades and this in turn enables them to go on to attend more prestigious universities and study subjects which tend to be more highly rewarded.

But once the researchers analysed graduates who went to the same university to study the same subject and who left with the same degree class, those who went to private schools still earn an average of 7% more three and a half years after graduation.

Amongst graduates from the same backgrounds, who studied the same subject in the same university, and who went into the same occupation, those from private schools still earn 6% more, on average, than those from state schools.

“Our research shows that, even amongst those who succeed in obtaining a degree, family background – and in particular the type of school they went to – continues to influence their success in the work place,” said co-author Dr Claire Crawford, from the ̽��ֱ�� of Warwick’s Department of Economics.

Implicit within government policies to achieve social mobility through improving school and university results is the assumption that once a person has graduated from university, their family background and the school they went to will cease to impact on how much they earn, say the study’s authors, writing for the website ̽��ֱ��Conversation.

“But our new research proves that there is actually a strong relationship between the kind of schools graduates attended and their success in the labour market. Future research might usefully focus on why the influence of family background lingers long beyond graduation,” they write.

New study shows that - even after controlling for subject, degree class, alma mater and occupation - graduates who attended private schools earn on average 6% more than those who attended state schools.

If higher education is to be a route to social mobility then the link between family background and adult outcomes must be broken

Anna Vignoles

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