Graduates who grew up in deep poverty still earn £2,800 less than their peers 10 years on

A graduate who grew up in deep poverty will earn 5 per cent less – over £2,800 a year – than a more privileged peer working at the same firm with an equivalent degree a decade after graduation, highlighting the scarring effect of childhood poverty, according to new research published today (Tuesday) by the Resolution Foundation.

The long shadow – funded by the Nuffield Foundation – uses comprehensive data which tracks the educational pathways and earnings of over half a million graduates in England, including 35,000 who grew up in deep poverty, measured by eligibility for Free School Meals (FSM) aged 16.

Overall, after ten years of work there is a large pay gap of 13 per cent (£7,590 per year) between graduates who grew up in deep poverty and those who did not.

These poorer graduates are already underrepresented at university, with only 16 per cent obtaining a university degree compared to 32 per cent of those from more affluent families. But while a degree remains a valuable asset – at age 31 graduates overall earn almost 50 per cent more a year (£18,700) than non-graduates – the report finds that the long shadow of childhood poverty is hard to escape, even for those who overcame the hurdles of making it to graduation.

Students from poor families are less likely to attend the most selective universities – 15 per cent compared to 29 per cent of more affluent graduates – and are less likely to receive First-class and Upper Second-class honours – 36 per cent compared to 44 per cent.

All told, even when comparing graduates who were course mates and got the same degree, a 7 per (£3,800) cent gap in earnings 10 years after graduation remains. This reduction in the earnings gap – from 13 per cent to 7 per cent – shows that were access to and performance at university more similar between poor and more affluent graduates, disadvantaged young people would face a much smaller, though still significant, penalty.

There are also differences in where people work and who they work for. But even once educational outcomes and employer choice are accounted for, the authors still find a five per cent deep poverty gap in earnings a decade later – equivalent to £2,800 a year.

This as-yet unaccounted for pay penalty – where two work colleagues sitting next to each other with the same degrees and same level of experience could earn different amounts due to one experiencing poverty in childhood – highlights the enduring scars left by deprivation in early life.

Further research is needed to fully account for the diminished earnings prospects faced by graduates who experience childhood hardship. But the Foundation notes that given the long-term pay penalty, action to reduce child poverty is needed, as is action to reduce the educational disadvantage – starting at school and continuing at university – that poorer children suffer.

Julia Diniz, Economist at the Resolution Foundation, said:

“University has long been seen as a way out of poverty and up the income ladder. But while getting a degree offers everyone a big boost in earnings, graduates who grew up in deep poverty struggle to fully catch up with their more affluent peers.

“What degree you get continues to impact on your earnings a decade into your career, but poorer students are less likely to gain access to the best universities and get the best grades. And even when they do get the same degree and work at the same firm as more privileged graduates, they still earn thousands of pounds a year less.

“Understanding why the long shadow of childhood deprivation remains so hard to escape is the first step. But we can’t stop here: no young person should be penalised by poverty, and poorer graduates who have already overcome the odds should be able to reap the rewards of their hard work.”