Future of work

While much attention is given to choice of college major to explain income differences among recent university graduates, this study shows that what happens right after graduation may be just as important. The research explores how the first steps college graduates take in the job market can shape their long-term career and income outcomes.  

In a comparison of graduates from low-income families versus peers from wealthier families, the researchers found that the former group earns less even when students attend the same institutions and study similar subjects.  

Using data from tens of thousands of graduates in a large public university system, the authors tracked students’ early work experiences and earnings over the five years following graduation and found a large, unexplained earnings gap: five years after college, graduates from low-income families were earning about 12% less than those from higher-income backgrounds. This indicates that even after accounting for factors such as major, grades, and college attended, a meaningful earnings gap persists.  

The researchers identify the transition into the labour market (that is, students’ initial job placements) as a key contributor. The characteristics of that first job—such as salary, firm size, and whether it aligns with a student’s field of study—have a strong and lasting influence on later earnings. Graduates from low-income families are more likely to begin their careers in lower-paying, less stable, or mismatched jobs—and these early disadvantages persist over time.  

When the researchers factor in differences in the quality of first jobs, the earnings gap between low- and high-income graduates shrinks by nearly two-thirds. This suggests that the initial job match plays a crucial role in determining long-term financial outcomes, even for graduates with similar academic profiles. 

Easier access to internships, better-quality career counselling, and stronger connections between universities and employers could all contribute to levelling the playing field and improving first-job opportunities. Closing the income gap among graduates is not only about what students study, but how effectively they are supported during the critical transition from campus to career.