What decides how much you’re going to earn? Background? Degree? Which university you go to?

Turns out it’s all of the above.

According to new research, how much you earn when you graduate does depend on what and where you study, but it is also shaped by your background.

Graduates from richer family backgrounds earn significantly more after graduation than their poorer counterparts, the study found, even after completing the same degrees from the same universities.

The advantages of coming from a high-income family persist for graduates right into the labour market at age 30

Jack Britton, research economist, Institute for Fiscal Studies
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Carried out by researchers at the Institute for Fiscal Studies (IFS)Institute of Education (IoE)Harvard University and the University of Cambridge, the research used anonymised tax data and student loan records for 260,000 students up to 10 years after graduation.

The data includes graduates who started university between 1998–2011 and whose earnings are then observed over a number of tax years.

Funded by the Nuffield Foundation, it is the first time a first time a ‘big data’ approach has been used to look at how graduate earnings vary by institution of study, degree subject and parental income.

According to the study, those from richer backgrounds – defined as being from roughly the top 20% of households of those applying to higher education in terms of family income – did better in the labour market than the other 80% of students.

The data suggested that male graduates from higher income backgrounds earn an average of £8,000 more than those from lower-income backgrounds, with the difference between women being £5,300.

Even after taking the subject studied into account, the average student from a higher-income background earned around 10% more than the average student from other backgrounds, the study found.

Medical students were the highest earners on average, 10 years after graduating, followed by those who studied economics.

Average earnings for men who graduated from a medicine degree were about £50,000 after 10 years, while economics graduates earned about £40,000.

Medical students were the highest earners on average. Image by Guschenkova/Shutterstock.com

But at the same time, around 12% of men and 9% of women who studied economics earned above £100,000 a decade after graduation.

This was in contrast to 6% of men who studied medicine or law, while just 1% of women who studied medicine earned more than £100,000, alongside 3% who studied law.

Those studying the creative arts had the lowest earnings, and earned no more on average than non-graduates, the study found. But it’s not just your background and what you study that make the difference – it's also where you study.

According to the data, more than 10% of male graduates from LSE, Oxford and Cambridge were earning more than £100,000 a year 10 years after graduation in 2012/13, with LSE graduates earning the most.

LSE was the only institution with more than 10% of its female graduates earning in excess of £100,000 per year a decade on.

Jack Britton, a research economist at the IFS and an author of the paper, said: “This work shows that the advantages of coming from a high-income family persist for graduates right into the labour market at age 30.

“While this finding doesn’t necessarily implicate either universities or firms, it is of crucial importance for policymakers trying to tackle social immobility.”

Fellow author Anna Vignoles, from the University of Cambridge, added: “The research illustrates strongly that for most graduates, higher education leads to much better earnings than those earned by non-graduates, although students need to realise that their subject choice is important in determining how much of an earnings advantage they will have.”