LEO data: poorest students gain most from a degree, IFS analysis suggests

Researchers said students from disadvantaged backgrounds do better financially as a result of gaining a degree – but less well than their more affluent peers

Students from the least affluent backgrounds materially gain the most from a university degree, new analysis of LEO data suggests – but still earn less after graduation than those from more affluent backgrounds.

The analysis follows the publication of longitudinal educational outcomes (LEO) data by the Department for Education (DfE) yesterday.

The Institute for Fiscal Studies (IFS) analysis suggests that state-educated students from the poorest 20% of families benefit more on average because it “estimates that they would have earned much less still had they not gone to university”.

The report’s co-author said these disadvantaged students were unlikely to “get rich” after university, but fared better economically than their counterparts.

This group of students have, on average, the lowest median earnings of graduates at age 30: £25k for men and £21k for women. For state-educated 30-year-olds from the poorest 20% of families who did not go to university median earnings are lower still – averaging £20k for men and £11k for women.

At age 30, earnings are around 6% higher for state-educated male graduates and 27% for state-educated female graduates, the IFS finds. Those returns are highest for those from the poorest households, at 7% for men and 31% for women. Returns for privately educated students are much higher, at 29% for men and 36% for women.

The analysis suggests that although beneficial, a degree does not disrupt other factors that inhibit social mobility. The IFS estimates that within each ethnic and socio-economic group, two thirds or more of all graduates are overall better off financially because of university, but one in five is not.

Former universities minister Chris Skidmore said yesterday that the university sector was wrong to embrace value-for-money as an argument for higher education, describing it as a “tragedy” that this was a metric of excellence.

The varying benefits of higher education can “to some extent be explained by… institution and subject choices”, the IFS concluded – but “not entirely”.

Independently educated students are more likely to attend higher-tariff Russell Group universities, which may give them an advantage over state-educated students who are less likely on average to reach these highly selective institutions. Their higher-than-average earnings appear consistent across subject areas – from arts to sciences. Higher-than-average earnings could also relate to advantages accrued earlier in their educational careers, separate from the university experience.

Graduates from South Asian backgrounds are more likely to study “financially lucrative subjects” like pharmacology or law, which may explain why they outperform students from other ethnicities regardless of their university, the IFS noted.

The IFS noted that LEO data was less reliable in the context of the Covid-19 crisis because it had “widened inequalities between groups and affected the labour market value of different qualifications”.

Jack Britton, associate director at the IFS and a co-author of the report, said: “Our results show that among students from the poorest families, few get rich as a result of getting a degree. However, going to university is still an especially good financial decision for these students. One reason – regrettably – is that earnings prospects for this group are otherwise quite low.”

Ben Waltmann, senior research economist at the IFS and a co-author of the report, said:
“This report shows that university can to some extent level the playing field between people from different ethnic groups. However, significant gaps remain even among graduates and after controlling for prior attainment, subject and university choices, and a range of background characteristics.

“Strikingly, white men on average earn significantly more than men from all non-white ethnicities after controlling for the full range of observable explanatory factors.”

Read more: New social mobility index shows ‘value for money’ of HE, vice-chancellor argues

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