Graduate starting salaries to fall to lowest real-term level since 2003
· Growth in cost of living outpacing graduate starting salaries
· 90% of businesses freezing salaries for new graduates this year
· But number of graduate jobs set to increase 9.1% in 2012
Starting salaries for graduates are projected to decline in real terms this year, falling to the lowest levels since 2003, according to the latest report into graduate pay and progression by Incomes Data Services.
IDS explains that the rising cost of living (as measured by RPI) means that graduates entering the workforce this summer will find themselves worse off than their predecessors were almost a decade ago, as starting salary rates for graduates lag further behind inflation.
According to IDS, the median starting salary for graduates will be £25,000 this year, unchanged from 2011. When adjusted to account for inflation, this reveals a 2% pay cut from £19,020 in 2011 to £18,705 in 2012.*
IDS also report that nine in 10 employers surveyed said they would be freezing graduate starting salary rates this year.
Nasreen Rahman, Principal researcher of IDS's 'Pay and progression for graduates 2012', comments: "It remains a buyers' market for graduate recruiters this year, with starting salaries set to stagnate for a further year."
"High rates of price inflation over the last few years have been eating away at the purchasing power of starting salaries for new graduates."
"Even though the demand for graduate recruits is showing signs of revival, the competition for places means that employers are under little pressure to increase current rates despite high inflation."
IDS explain that there were 46 applicants for every graduate vacancy in 2011, up 12% from 41 in 2010.
According to IDS, legal firms are projected to pay graduates the highest starting salaries this year, with pay of £36,000 at the median, which remains unchanged from 2011. In contrast, the lowest starting salaries in 2011 were paid by the public/not-for-profit sector (£22,958).
* The current rate of inflation stands at 3.7% (RPI as of February 2012).
Starting salaries for roles in banking and finance are also projected to remain unchanged this year, at £31,250, while starting salaries in professional services remain at £24,750.
Inflation adjusted average graduate starting salaries 2000 to 2012 (Source: IDS's ECR)
Graduate recruitment projected to rise
IDS forecasts a rise of 9.1% in graduate recruitment this year, compared to 2011, as the overall jobs market recovers.
According to IDS, the services sector is planning to boost graduate numbers by 38% in the coming year, while the public/not-for-profit sector expects to increase intake by 6.7%, a turnaround from the 5% reduction last year.
Explains Nasreen Rahman: "Demand for graduates is expected to be relatively buoyant in 2012, but this is unlikely to impact pay levels."
"With economic sentiment picking up, employers are starting to expand their graduate programmes further, with some employers now re-opening 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."