Graduate starting salaries set to fall in real terms for third year in a row

Graduate starting salaries are predicted to fall in real terms in 2011, the third consecutive year of decline, according to a report published earlier this week by the employment research organisation Incomes Data Services (IDS).

IDS research indicates that the average starting salary for graduates will rise by 1% this year, reaching an average of £26,045. This increase is well below the rate of inflation, with the retail price index (RPI) reaching 5.5% in February 2011.

The report from IDS, Pay and Progression for graduates 2011, says that the average graduate starting salary increased by just 1% in 2010, while RPI did not dip below 3.7% all year.

Jessica Evans, senior researcher for the report, commented, ‘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.’

Overall, IDS predicted a modest 1% increase in graduate recruitment in 2011, with the public and not-for-profit sector’s graduate intake set to fall by 5%. Graduate recruitment soared by 16% in 2010 as companies emerged from recession, with the law and accountancy sectors increasing their intake by 19%.

Analyses of average graduate starting salaries vary. The Association of Graduate Recruiters (AGR), which includes many large blue-chip companies, published a survey earlier this year that showed the average starting salary paid by its members in 2009-2010 was £25,000, the same as the year before, and this was predicted to remain the same in 2010-2011 – the third consecutive year of stagnation.

However, other research suggests a lower starting salary. The Higher Education Statistics Authority (HESA) found that 2008 graduates who were in full-time employment in the UK six months after graduating earned an average of £20,000.

Source: Target Jobs News Editor, 7th April 2011