Tackling equality gaps in graduate employment

Employment and employability are at the forefront of graduates’ thinking about their future. Instead of debating whether getting a job should be the sole, main or secondary purpose in attending higher education, we should focus more on improving the evidence base on what works to improve that employability.

Especially given the current cost-of-living crisis, with rising inflation eroding the value of graduate salaries, and with questions about the future of work looming, we owe it to young people to ensure our warm words about graduate employment are underpinned by policies and practices that deliver.

Research published today by the Centre for Transforming Access and Students Outcomes in Higher Education (TASO) and the Centre for Education and Youth (CfEY) – with data analysis by the Education Policy Institute (EPI) – shows that we are particularly lacking in evidence on what works to address inequalities in the labour market.

This means the sector needs to do more to ensure that interventions on employment and employability effectively support those disadvantaged young people who could most benefit from greater earnings and wellbeing.

Identifying the gaps

As the report outlines, existing equality gaps in employment are very large. Gaps in graduate earnings emerge immediately after graduation and increase further over time.

One year after graduation, there is an £11,300 gap between the lower and upper quartile of graduate earnings. Ten years after graduating, this gap is £24,100.

Three years after graduation, significant differences can be seen according to the subject studied and the university attended. There is a £20,000 gap between the 10 HEPs with the highest-earning graduates and the 10 with the lowest.

The evidence also shows that inequalities in the labour market are not just extensive and persistent but patterned in non-random ways.

There is a £4,500 gap in earnings between graduates from London and those from the North East, indicating why higher education (and labour market) policy needs to be at the heart of “levelling up”.

There are also significant earnings gaps after three years between graduates from different ethnic groups, with a gap of around £4,800 between the group with the highest earnings (Indian graduates) and the group with the lowest earnings (Pakistani graduates).

Many of these gaps continue to widen in the 10 years following graduation.

The trajectory of the gender earnings gap is particularly striking. In the year following graduation, male graduates earn 8 per cent more than their female peers but in the following nine years, this gap grows to 32 per cent.

Existing research highlights the importance of the choice of course (subject and institution) in driving some of the earnings differences between groups. Differences in subject choices appear to be linked to gaps by ethnicity, while provider choice is linked to the gap between graduates from more and less disadvantaged backgrounds.

Lower average prior attainment also appears to be a key driver of lower average earnings of graduates from disadvantaged backgrounds.

Initially, subject choice contributes to more of the initial difference in earnings between male and female graduates. However, as graduates age, a larger proportion of this gap can be explained by other factors such as differences in parenting responsibilities, hours worked, the propensity to ask for pay rises or apply for promotions, and labour market discrimination.

Explaining these inequalities requires us both to understand how and why higher education inequalities – for example degree awarding gaps for ethnic minorities – feed into the labour market and to recognise that the labour market has significant inequalities – of class, gender, disability, and race – that partly explain why some individuals and groups and some types of jobs see lesser rewards from their education.

It’s hard to see how we can tackle labour market inequalities without addressing inequalities in primary and secondary school too. It’s not either/or, though that does indicate the scale of the challenge and the range of policy levers and practical interventions it will take to address them.

What works

The good news is that there are a range of ideas, policies, and interventions that are currently seeking to address these inequalities.

There is also evidence that some interventions may already be tackling them. Whether it comes to work experience, IAG (information, advice, and guidance), technology-based interventions, or teaching employability skills, there is some evidence of good practice , though in almost all cases we need better evaluation of what makes those interventions work best. This includes ensuring the more general or universal interventions actually tackle inequalities, and piloting and testing interventions that target disadvantaged groups.

Higher education institutions have perhaps spent more time and resources on tackling inequalities of participation – on ensuring fairness on who gets in – than they have on inequalities in the labour market – or how they ultimately get on in life.

While HE providers may have less control over hiring and promotions, they can do better in seeking to ensure that all of their graduates, regardless of their background, have a fair chance in the labour market.

Employers also have an important role here, not simply in seeking more from higher education institutions, but in recognising how their existing practices and outcomes help to explain the patterned inequalities that evidence has shown over many years.

There are shared values here: of fairness, social mobility, and the value of good, well-paid jobs. To fulfil those values, we will need better evidence of what works to achieve them.

In the next year, TASO will be working with the sector, as well as with employers, government, and charities, to build that evidence so that future graduates experience less extensive and patterned inequalities in the labour market, and greater fairness, success, and wellbeing at work, and so ultimately in their lives.