College remains one of the best-established pathways for intergenerational mobility, yet graduates from low-income families still earn lower post-college incomes, on average, than their higher-income peers. Based on analysis of linked administrative and earnings data on students who graduated from a multi-campus public college system from 2010 through 2017, this brief (based on a previously released NBER working paper) finds that average earnings for low-SES graduates (those receiving Pell Grants) are 12% to 16% lower than for high-SES graduates in the first, fifth, and tenth year after graduation, leaving an unexplained gap of about $4,900 in Year 5 that isn’t accounted for by the specific college attended, GPA, test scores, or major field of study.
The authors of this brief go on to unpack an important factor in understanding this gap: the transition from graduation to first post-college job. Early post-college labor market experiences are rocky for many graduates in the sample, regardless of family background, with nearly one in three experiencing at least one quarter of zero earnings in Year 1. However, low-SES graduates are notably less likely to have connected with their first job employer before or at graduation. Among those still unattached, low-SES graduates pick up first jobs more quickly thereafter, a pattern consistent with greater financial pressure during the job search that may lead them to accept lower salaries at their first job.
First job transitions are highly predictive of later outcomes, and first job salary stands out as the strongest predictor the authors measure. Differences in the transition to the first significant post-college job—primarily driven by the first job’s salary—can explain two thirds or even more of the Year 5 earnings gap among otherwise similar low- and high-income graduates. Because field of study and first job industry do not appear to be major drivers of the earnings gap, addressing it will require a more nuanced approach. The authors note that policymakers and institutional leaders may want to experiment with supplemental financial and non-financial supports to help low-SES graduates start their search earlier, broaden their networks, and weather the financially stressful period immediately after graduation.