Abstract
AbstractMuch research and policy attention has been on socio‐economic gaps in participation at university, but less attention has been paid to socio‐economic gaps in graduates’ earnings. This paper addresses this shortfall using tax and student loan administrative data to investigate the variation in earnings of English graduates by socio‐economic background. We find that graduates from higher income families (with median income of around 77,000) have average earnings which are 20% higher than those from lower income families (with median income of around £26,000). Once we condition on institution and subject choices, this premium roughly halves, to around 10%. The premium grows with age and is larger for men, in particular for men at the most selective universities. We estimate the extent to which different institutions and subjects appear to deliver good earnings for relatively less well off students, highlighting the strong performance of medicine, economics, law, business, engineering, technology and computer science, as well as the prominent London‐based universities.
Highlights
Higher education is seen as a potentially crucial tool for social mobility, providing a possible route for students from lower income family backgrounds to achieve labour market success and higher earnings
Our parental income measure is likely to have issues with measurement; people from poorer households might borrow the rich maximum, people from richer households might not borrow the rich maximum, and we are unable to say anything at all about the roughly 15% of people who attend university but choose not to borrow, which is likely to be weighted towards those from higher income households. Given these measurement issues – all of which are likely to bias down our estimates – we find considerable differences in earnings between graduates from richer and relatively less well off family backgrounds
The results show that individuals we classify as being from a higher income household are significantly more likely to make voluntary repayments, even conditional on their current earnings
Summary
Higher education is seen as a potentially crucial tool for social mobility, providing a possible route for students from lower income family backgrounds to achieve labour market success and higher earnings. Our parental income measure is likely to have issues with measurement; people from poorer households might borrow the rich maximum, people from richer households might not borrow the rich maximum, and we are unable to say anything at all about the roughly 15% of people who attend university but choose not to borrow, which is likely to be weighted towards those from higher income households Given these measurement issues – all of which are likely to bias down our estimates – we find considerable differences in earnings between graduates from richer and relatively less well off family backgrounds. These differences roughly halve once we condition on subject and institution choices but remain economically important at around 10%, and are statistically significant.
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