Family Background Shown to Impact on Graduate Earnings

It has been well documented that university graduates from certain subjects and from certain universities earn considerably more than others. For example, five years after graduation, men from the highest earning universities earn almost 50% more than graduates from other Russell Group universities (30% for women), while male Russell Group graduates earn over 40% more than those who attended the average post-1992 institution (35% for women). Meanwhile, economics graduates earn over 40% more than history graduates who in turn earn 15% more than sociology students.

But to what extent are the earnings differences across university courses down to the course itself, and to what extent are they due to differences in the students doing the courses?   In other words, do Russell Group and economics graduates earn more because they have better A levels and are from wealthier backgrounds, or does the subject you study and the university you go to have an effect over and above your background and prior attainment?

These are questions answered for the first time using large-scale administrative data in new research by a team led by the IFS and produced with funding from the Department for Education.

The results…

Prior attainment and socio-economic background do matter. Comparing graduates who attended the same university, took the same degree subject and who have similar background characteristics, every extra A-level at grade A raises your earnings by around 3%, while coming from the highest socio-economic background adds around 8% compared to coming from the lowest.

But crucially, the subject you study at university and the higher education institution you attend also matter a lot.

Earnings differences:

  • Economics and medicine students earn around 60% more than history and English students five years after graduation, around £40,000 per year compared to little over £25,000.
  • Typically, graduates of STEM subjects like physics and maths have higher earnings than subjects like psychology and sociology.
  • Those who studied creative arts, social care and media earn the least, around £20,000 five years after graduation.
  • Even after accounting for differences in students’ background characteristics and prior attainment, graduates from Russell Group universities have the highest earnings. Overall, graduates of Russell Group universities have earnings 10-13% higher on average than graduates of other institutions with the same observable characteristics. Graduates of the top 10 universities have earnings at least 14% more than apparently similar graduates of the “average” university. The bottom 20 institutions have graduates who earn 10% less than those from an “average” institution.
  • Students from poorer backgrounds earn considerably less than their peers from richer backgrounds. Independent school students earn around 45% (£10,000) more on average five years after graduation than state-school students from poorer backgrounds. When comparing students with similar prior attainment who attended the same institution and studied the same subject independent school students still earn 8% more.

Some of this large gap in earnings is explained by differences in prior attainment and background characteristics of students, but even after these differences are accounted for, significant gaps in earnings remain.  The writers of the report estimate studying medicine or economics increases earnings five years after graduation by more than 25% (between £6,500 and £8,400 per year) compared to studying biological sciences, history or English.

In addition, some subjects like computing and business, where average earnings don’t look especially high, actually seem to add a lot to earnings once you account for the background and A level grades of the students. So while computing graduates come 14th out of 30 subjects in terms of male earnings (18th for women) they leap up to 4th when taking account of their prior attainment (7th for women). To put it another way, for students with a weaker set of A level grades, studying computing increases the chances of earning a relatively high salary.

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