The privilege premium – having wealthy parents boosts your pay by up to £5k a year

money

  • Who you know not what you know – workers’ pay is higher if their parents were richer
  • Study finds “ongoing impact of background” in people’s earnings
  • Mothers and young people also hit in the jobs market for skilled non-graduates

By Chaminda Jayanetti

Having highly-paid parents boosts your pay by as much as £5,000 a year even without any extra skills or qualifications, a new study has found.

The report found that someone whose parents worked in a higher-level occupation earned a “privilege premium” amounting to thousands of pounds a year more than people with similar skills but from poorer backgrounds.

The report, compiled by the Resolution Foundation think tank for the government’s Social Mobility and Child Poverty Commission, studied the jobs market situation facing educated ‘non-graduates’.

These are defined as people who do not have a degree, but who did get at least five GCSEs at grade C or above, as opposed to those who left school with very few qualifications.

The report’s authors said the findings showed the “ongoing impact of background” in people’s earnings.

Privilege premium

The study described a privilege premium for non-graduates based on the careers and incomes their parents had. It found that men from poorer backgrounds earn £80, and women £100, a week less on average than similarly skilled non-graduate workers with wealthier parents.

In other words, a non-graduate woman earns on average £5,200 a year more purely based on wealthy parents, with non-graduate men earning £4,160 more.

The study categorised this data by separating non-graduate workers by whether their parents worked in the top third, middle third, or bottom third of occupations based on their ranking.

This privilege premium also applies to university graduates with wealthier parents, but is most pronounced among people who completed their A-Levels (or equivalent qualifications) but did not get a degree.

The report also found that a non-graduate’s career was influenced by the career paths of their parents: “Having a parent that worked in a ‘professional’ role particularly boosted the likelihood of a person being in a ‘professional’ position themselves, regardless of their own education.”

Skilled but stuck

The study uncovered specific problems faced by non-graduate mothers in today’s job market, noting that having children was the greatest single factor pushing down non-graduate women’s earnings. The report said that most part-time careers, which allowed the flexibility needed for childcare, were in lower-skilled jobs with few opportunities for progressions, meaning that many non-graduate mothers were “skilled-but-stuck”.

Out of all educated non-graduates, the study found that around 16 percent fall into this skilled-but-stuck group of overqualified mothers trapped in low-paid careers such as sales and customer service. “Their [career] route has not made the most of their education,” the report noted.

A further quarter of educated non-graduates are young mothers with few qualifications, who are at risk of getting stuck in low pay, with a median hourly wage of £8.50. Overall, mothers make up more than 40 percent of all educated non-graduates.

The report  warned of the need to create new career pathways to help mothers escape the trap of low pay: “The challenge is to reduce the impact that having children has on non-graduate women’s careers… The lack of availability of better paid part-time opportunities and the high cost of childcare is likely to act as a significant barrier to higher earnings, with the effect more pronounced for non-graduate women than (generally higher-paid) graduates.

“Policies that help boost the supply of better quality part-time roles and that increase their demand among women by making balancing employment and childcare an easier juggling act could help to boost the earnings of non-graduate women.”

The largest single group of non-graduates identified by the report are those the authors described as “ladder climbers”, who had built successful careers earning more than the national average, often in skilled trades. The report said these were mostly older men working in higher-paying occupations.

Age pay gap

In fact, the report found a considerable age divide confronting non-graduates, with older men having had far better opportunities during their careers than younger men. The report said that male non-graduates born in 1980 earned less aged 35 than men born in 1970 had at the same age, even though these younger men had been earning more when aged 23.

“Typical earners born in 1990 both entered the labour market at a lower level of pay than previous cohorts and have remained below,” the report added.

The report also found that younger non-graduate workers have also seen their career opportunities hit by the increase in university graduates taking on non-graduate jobs, caused both by the growing number of graduates in the population, but also the squeeze on graduate jobs since the financial crisis which drove university-leavers to take any work they could find.

Focus groups conducted as part of the study found that: “Not only did it become harder to find employment in the first place but routes to progression were blocked with graduates preferred to non-graduates for management positions.”

The report urged the creation of new career pathways for skilled non-graduates to help them escape the low-pay trap, and also helping mothers by creating better-paid part-time work.

The authors also criticised the government’s cuts to the work allowance in Universal Credit, which enables people to keep more of what they earn without losing benefit. The work allowance was cut in the 2015 Budget.

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