Degree premium on ice as graduate salaries are frozen

Graduate starting salaries are set to fall to their lowest real-terms level since 2003 this summer as 90 per cent of businesses freeze their offers to recruits, according to analysis released today.

April 16, 2012

The median starting salary for those starting work this year will be £25,000, the report into graduate pay and progression by Incomes Data Services (IDS) reveals.

The figure is unchanged from 2011, but the rising cost of living means that graduates will be worse off than their predecessors were almost a decade ago.

When adjusted to account for inflation, this year’s figure represents a 1.7 per cent pay cut (from £19,020 in 2011 to £18,705 in 2012). Nine out of 10 employers say they will freeze starting rates this year.

But graduate recruitment is set to rise by 9.1 per cent as the job market recovers, IDS predicts. The services sector is planning to boost graduate numbers by 38 per cent in the coming year, while the public and not-for-profit sector expects to increase intake by 6.7 per cent, a turnaround from last year’s 5 per cent reduction.

There were 46 applicants for each graduate vacancy in 2011, up 12 per cent from 2010, according to IDS.

Nasreen Rahman, the report’s principal researcher, said: “It remains a buyers’ market for graduate recruiters…with starting salaries set to stagnate for a further year.

“High rates of price inflation over the past few years have been eating away at the purchasing power of starting salaries for new graduates.”

She added: “With economic sentiment picking up, employers are starting to expand their graduate programmes further, with some employers now reopening schemes that had been put on ice during the downturn.

“However, with so many graduates competing for positions, it is clear employers see little need to boost starting salaries.”

Legal firms are projected to pay the highest graduate starting salaries this year, with a median of £36,000 – unchanged from 2011.

IDS surveyed 109 employers with graduate-entry training programmes to compile the report.

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