Graduate starting salaries to fall in real terms for third straight year

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Starting salaries for graduates are projected to decline in real terms for the third consecutive year in 2011 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 as starting salary rates for graduates lag further behind inflation. (See graph below)

The report shows that the average starting salary for graduates increased by just 1% to £25,166 in 2010, while the retail price index has not dipped below 3.7% all year.

According to IDS, starting salaries are projected to rise by a further 1% this year, reaching an average of £26,045, which remains below the current rate of inflation (RPI 5.5% in February 2011).

IDS also report that 70% of employers said they would be freezing their recruitment rates this year.

Jessica Evans, Senior researcher of IDS‟s ‘Pay and progression for graduates 2011’, comments: “With employers maintaining a guarded approach to setting starting salaries in 2011, there seems to be no let-up in the squeeze on graduate pay packets as employers continue to keep a lid on costs.” “Even though the demand for graduate recruits is showing some 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 44 applicants for every graduate vacancy in 2010, up 25% from 35 in 2009. They warn that this could increase in 2011 as a backlog of unemployed graduates have a second attempt at gaining employment in their preferred areas.

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  1. IDS have an excellent reputation for the quality of their data and their findings support other research concerning the salary and employment prospects of graduates.

    In brief, government’s argument is that graduates will earn substantially more than non-graduates, therefore it’s justifiable to charge them tuition fees (now to be £9K in most universities).

    There’s now a raft of evidence showing many graduates will never earn enough to pay back their student debts and that graduate unemployment rates are nearly as high as those of non-graduates.

    Surely everyone can see this particular government policy has reached its “sell-by” date?

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