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The graduate gender pay gap

July 2020

The latest data shows that, while the gender pay gap is wider for non-graduates, it is still sizeable among those who have studied at university. But how does the UK compare on the international stage?

Recent data from the Office for National Statistics (ONS) suggests the difference in pay between men and women is at its lowest since the survey began in 1997.1

Down half a percentage point from 2017, the latest figures indicate an 8.6% gap in earnings between men and women in full-time employment. The gap widens to 17.9% when the earnings of part-time workers are taken into account.2

However, it's important to note that the difference in earnings between those aged 18 to 39 was found to be close to zero in 2018, a fact that highlights the complex nature of this issue.3

While there is no definitive answer as to why this gap exists, multiple contributing factors have been identified. One is the level of education an individual has attained, as the difference between male and female pay is much greater among non-graduates than it is among graduates.

Nevertheless, a sizeable gap does exist between male and female graduates.

The graduate gap

New experimental Graduate Outcomes data from HESA reveals that 15 months after their 2018 graduation, male graduates were paid 10% more than female graduates.4

Further, recent research has shown that, in the UK, once differences in 'pre-university characteristics' are accounted for, attaining a university-level education increases women's earnings by 28% on average at age 29, compared with an 8% increase for male graduates at the same age.5

Nevertheless, despite these generous returns, female graduates continue to find themselves earning less than their male counterparts throughout all stages of life, with Department for Education figures showing that the median earnings of women five years after graduation are £3,600 less than that of men at £24,700 and £28,300 respectively.6

And whereas the average median income of women typically increases with time after graduation, it increases for men at a much more rapid pace. An 8% gap in favour of men one year after graduation extends to 11% three years after, 15% five years after and 31% ten years after.7 These figures are alarming, although on closer inspection the complexity of the situation becomes even more apparent.

Across OECD countries, tertiary educated women in full-time employment only earn, on average, 75% of the earnings of men.

The impact of subject choice

A major contributor to this trend is motherhood. Regardless of the fact that attending university reduces the likelihood of a woman having children by the age of 34, there is no evidence to suggest that this effect continues into their early 40s.8

Interestingly, it is from this point onward that the gap widens and both economic inactivity and part-time work become much more prevalent among female graduates. This may help to explain why fewer women are found to be in either leadership roles or the top salary quartile, as part-time employees tend to receive lower pay, with evidence also suggesting that they are presented with fewer opportunities for career progression.9

Ostensibly, it is true that 'the motherhood factor' can help to explain the unequal returns that women receive years after graduation in comparison to men. However, it does not help to explain the existence of such a gap before 40. Choice of degree subject and university can also have an effect on graduate outcomes.

Women are more likely to enrol onto courses associated with lower returns.10 For instance, the humanities, associated with lower earning potential than STEM subjects, are dominated by women, who made up 64% of all graduates in these subjects in 2016/17. Women accounted for just 4% of technology, engineering and maths graduates.

This issue is further compounded by the propensity for women to 'settle' for lower pay regardless of the occupation in question. Even when surveyed, women’s expectations for a starting salary were found to be 15% lower than that of men.11

International comparisons

While the UK does have an issue with differences in pay between male and female graduates, it is not alone in this respect, as women do not earn as much as men in any OECD or partner country.12

In fact, not only is the UK's gap between male and female graduates smaller than both the OECD and EU23 average, but we can also see that out of 36 OECD countries, the UK has the 13th smallest gap, one that is not much wider than that of the countries preceding it – with Costa Rica being the exception.13 However, the pay gap between men and women working in education is larger than any other OECD member country, with women in this sector earning just 60% of the earnings of tertiary educated men.14

Across OECD countries, tertiary educated women in full-time employment only earn, on average, 75% of the earnings of men, a figure which shrinks by 6% when those employed on a part-time basis are taken into account. This gap is very similar to that of the UK where tertiary educated women in full-time employment make 78% of the earnings of men according to OECD data, which is equal to that of both Switzerland and Spain, but smaller than that of the United States and Canada - standing at 71% and 73% respectively.15 16

Similarly to the UK, there is no single reason that can explain the gaps between genders across OECD counties. In some countries significant numbers of women go on to raise a family full time after leaving education. On the other hand are longstanding issues of gender stereotyping, discrimination and the weight of social conventions. Nevertheless, particular emphasis is put on the subject choices of women, as the trend of women studying subjects associated with lower earning potential is replicated across OECD countries.

There are actions being taken to address the gap between male and female wages, with campaigns such as WISE being employed to encourage women to choose subjects associated with greater returns. However, it is hard to imagine the gap closing completely without significant societal shifts.

Notes

1. The Gender Pay Gap: 2018 Briefing, Institute of Economic Affairs, 2018.

2. Gender pay gap in the UK: 2018, Office for National Statistics, 2018.

3. Ibid.

4. Higher Education Graduate Outcomes Statistics: UK, 2017/18 - Summary, HESA, 2020.

5. The impact of undergraduate degrees on early-career earnings, IFS, 2018.

6. Graduate outcomes (LEO): Employment and earnings outcomes of higher education graduates by subject studied and graduate characteristics in 2016/17, Department for Education, 2019.

7. Ibid.

8. The impact of higher education on the living standards of female graduates, IFS, 2018

9. The Gender Pay Gap: 2018 Briefing, Institute of Economic Affairs, 2018.

10. Education at a Glance 2019: OECD Indicators, OECD, 2019.

11. What do graduates want? 2019, Bright Network, 2019.

12. Education at a Glance 2019: OECD Indicators, OECD, 2019.

13. Ibid.

14. See graph on page 88

15. Ibid.

16. See table on page 93

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