The Immediate Post-College Transition and its Role in Socioeconomic Earnings Gaps

A new study of roughly 80,000 bachelor's degree recipients from a large urban public college system finds that characteristics of a graduate's first job can explain nearly two-thirds of the otherwise-unexplained earnings gap between students from low-income and high-income families five years after graduation.

The research [PDF], published as an NBER working paper by economists at Columbia University, tracked graduates from 2010 to 2017 using administrative education data linked to state unemployment insurance records. Low-income students -- defined as those receiving Pell grants throughout their undergraduate enrollment -- earned about 12% less than their high-income peers at the five-year mark. A substantial gap of roughly $4,900 persisted even after the researchers controlled for GPA, college attended, major, and other pre-graduation characteristics. That residual gap fell to about $1,700 once first-job variables entered the equation.

Graduates from lower-income families tended to start at employers paying lower average wages and were less likely to have their first job secured before graduation. Just 34% of low-income graduates continued at a pre-graduation employer compared to 40% of their higher-income peers. The firms employing low-income graduates paid average wages that were 18% lower than those employing high-income graduates. The researchers say that while the study cannot establish causation, the patterns suggest that supporting low-income students during their transition from college to the labor market may be a fruitful area for policy intervention.

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