Gender differences in subject choice leads to gender pay gap immediately after graduation

Gender differences in subject choice leads to gender pay gap immediately after graduation (@TheIFS)

October 5th is the deadline for big companies to report their gender pay gaps. In 2019 – before the pandemic disrupted data collection – the gender gap in average annual earnings for all employees stood at 37%. This gap opens up immediately after graduation, with male graduates earning 5% more than female graduates on average at age 25. Most of the initial gap can be explained by university subject choices, with women less likely to study subjects that lead to high-paying jobs. Women make up just a third of graduates in economics, the subject with the highest financial returns, and two thirds of graduates in creative arts, the subject with the lowest returns. Subject choice continues contribute to the gender pay gap over time, but its relative importance fades as other factors (like having children and working part-time) come into play.

Xiaowei Xu, a Senior Research Economist at IFS and an author of the observation, says:

“Women disproportionately choose to study subjects that yield low financial returns. Of course, money isn’t – and shouldn’t be – the only factor when it comes to choosing what to study. But more needs to be done to inform young people about the financial consequences of degree choices, and to overcome gender stereotypes, so that women are not locked out of high-paying careers by choices at a young age.”

Arun Advani, an IFS Research Fellow and co-Chair of Discover Economics, says:

“Economics leads to the highest paying jobs for graduates, but many students have limited knowledge of what it is about and some cannot access the subject at all because it is not offered in their school. This puts them off studying it at university. The Discover Economics campaign aims to provide information and opportunities for students to learn about economics, to allow them to access this rewarding and valuable degree.”