Labour market inequalities amongst UK-born university graduates: What drives wage differentials between ethnic groups?

In light of the reignited debate in the media about earnings inequalities amongst ethnic groups, this study examines whether UK-born university graduates from “Black/African/Caribbean/Black British”, “Pakistani” and “Bangladeshi” backgrounds experience ethnic penalties in the UK labour market. I draw on data from the Annual Population Survey (2013-2017), which is recently enriched by information allied to Higher Education (subject area of First degree and type of institution attended). I provide strong evidence that wage inequalities persist even after allowing for differences in Higher Education characteristics, demographic traits and job-related factors. Wage gaps are more pronounced amongst men (-13.5%) than women (-3.9%), but they remain within most sub-groups of employees. Using a decomposition technique, I find that characteristics associated with the employees’ occupation and industry sector account for nearly all of the earnings differential related to the observed covariates.