Time for employers to take up the social mobility baton from HE

Blog posts

15 Apr 2016

Emma Pollard, Senior Research Fellow

A paper published this week by the Institute for Fiscal Studies (IFS) provides new evidence about graduate earnings and how they differ by student background and study choices. It makes use of a new source of ‘big data’ that links financial information from the Student Loans Company and HM Revenue and Customs with student data from the Higher Education Statistics Agency (HESA) to follow graduates up to 10 years after graduation.

This data source is an exciting new development, as studies of graduate earnings have previously been limited to the national destinations surveys run by the HESA, the Labour Force Survey, or individual research studies. These arguably provide an incomplete picture and under-report the diversity in graduate earnings. The new dataset, however, provides: i) scale, ii) quality, and, iii) crucially a longer duration of tracking. It has records for 260,000 students who started university in the period from 1998 to 2011.

The IFS report using this dataset looks at results for the 2012/13 tax year, and tracks the earnings of the first cohort in the dataset over 10 years. A range of variables are explored, including student family background (whether from a richer family), type of higher education (HE) institution attended (categorised by the grade requirements for entry), and subject studied at university, to see how earnings differ.

The report makes for interesting reading, with highlights including that – 10 years into careers: 

• Graduates still outperform non-graduates in the labour market (especially females), although there are some universities where the average earnings of graduates are less than those of non-graduates after 10 years.
• Median earnings are somewhat modest, at £30,000 for male graduates and £27,000 for female graduates.
• University choice and subject choice continue to have an influence on employment success, measured in terms of earnings; and the returns are highest for degrees in economics and medicine. This suggests that more guidance rather than just more information is perhaps needed for young people, especially those from less advantaged backgrounds, when making their choices about HE and future careers.

However, one of the most surprising and perhaps disturbing findings is that those from richer families earn significantly more (on average 10% more) 10 years after leaving university than other graduates on similar courses and at similar universities. The gap is larger among male graduates and for higher earners.

Existing research, for example by Sutton Trust, exploring diversity, social mobility, and HE, highlights how social background not only continues to affect individuals’ chances to access HE and the type of HE they experience (a focus for the recent HE Green Paper), but also the progress made in the labour market after HE. The new IFS research again shows how background has an impact on economic success, and this is really the first time we have seen the long-term effect of background on earnings. The authors note that ‘coming from  higher income households both protects against low earnings and provides greater opportunity for very high earnings’ and ‘graduates’ family background and specifically whether they come from a lower or higher-income household, continues to influence graduates’ earnings long after graduation, even when they experience the same higher education’.

They go on to suggest that there may therefore be implications for firms with regards to their hiring policies – an issue the Institute has explored in our recent research for the Department for Business, Innovation and Skills: ‘Understanding Employers’ Graduate Recruitment and Selection Practices’. Our research looked at the challenges facing employers when looking to recruit graduates; the approaches they adopt to attract and select graduates and how these have changed over time; and whether employers’ actions to manage recruitment and selection in an efficient and effective way could impact negatively on social mobility.

We found that although employers are interested in diversity, the majority of employers are committed to a generally ‘meritocratic’ approach to selecting graduate recruits, and feel it is important not to exclude or disadvantage certain groups, which is a somewhat passive approach. Indeed, some employers tend to regard HE as a social leveller, and thus questions of social mobility are related to HE access and not relevant to graduate recruitment. The IFS study clearly negates this assumption – background matters and continues to matter even up to 10 years after graduating.

Other employers in our study did recognise that there were issues with the diversity of their intake but find it hard to both address social inequalities head-on through consciously inclusive practices, and to monitor socio-economic background during recruitment and selection. Thus some employers’ practices continue to narrow the diversity of the potential applicant pool (such as creating links with a narrow range of ‘similar’ institutions) and some selection methods used have inherent biases (such as minimum degree classification, and lengthy competence-based application forms). Employers’ actions do matter.

References

Britton J, Dearden, L, Shephard N, Vignoles A (2016), How English domiciled graduate earnings vary with gender, institution attended, subject and socio-economic background, Working Paper, Institute for Fiscal Studies

Britton J, Dearden, L, Shephard N, Vignoles A (2015), How English domiciled graduate earnings vary with gender, institution attended, subject and socio-economic background: Executive Summary, Institute for Fiscal Studies

Department for Business, Innovation and Skills (2015), Fulfilling our potential: Teaching Excellence, Social Mobility and Student Choice, Department for Business, Innovation and Skills

Pollard E, Hirsh W, Williams M, Buzzeo J, Marvell R, Tassinari A, Bertram C, Fletcher L, Artess J, Redman J, Ball C (2015), Understanding employers' graduate recruitment and selection practices, Research Paper 231, Department for Business, Innovation and Skills

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.