Graduates are demanding higher paid jobs – and it’s putting off employers

The rising cost of living is giving today’s graduates unrealistic wage expectations, causing difficulties for recruiters hiring for entry-level positions.

According to the UK Job Market Report by smarter job search engine Adzuna, vacancies are rising across all employment types except for graduate roles, which are instead falling.

Earlier this year, Startups found that UK graduates want a £30,000 annual wage for their job – around £5,000 more than the real, average starting salary.

Recruiters now say that the higher pay stipulations from students have become unaffordable for businesses, many of whom have paused hiring in the face of mounting economic uncertainty.

UK graduates face greater competition for job opportunities

Job adverts for graduate roles have dropped considerably year-on-year, as hiring managers appear to shun university leavers.

Adzuna analysis shows that the number of advertised graduate roles at the beginning of 2023 was 8.3% down when compared to December.

Over the past five months, this figure has continued falling, month-on-month, to total a drop of 20.8% in the number of vacancies for university leavers. Compared to the same period last year, the number of advertised graduate vacancies 12,983 is now 11.6% lower.

Available graduate roles are also taking almost 40 days to fill, on average – among the longest of any hiring demographic.

With an estimated 570,000 UK students set to graduate this year, around 44 people will be vying for every available opportunity in summer 2023 (compared to 36 applicants per role a year ago).

Graduates push for financial support to survive cost of living crisis

Generation Z staff members – those aged between 16-24 and the cohort leaving university this year – have borne the brunt of the financial stress caused by today’s inflationary environment.

Research by money.co.uk shows that one in eight people in this age bracket are ‘severely suffering’ over money concerns; the most of all groups analysed.

Emily Stock is Talent Partner at MVF Global, a tech company based in London. Stock says that the company has cut back on hiring as a result of the economic slowdown.

However, she has noticed that student leavers are chasing much larger salary offers, banking on a starting wage of “over £30,000”. As she sees it, the pressure from young employees for a pay increase is not without cause.

“There is more demand on entry level roles to be present in the office for initial training and upskilling,” she tells Startups.“This makes monthly travel costs much more than senior roles which tend to be hybrid or remote. The cost of living crisis has definitely also had an effect.”

The cost of travelling into work is a big concern amongst graduate workers. Earlier this year, our survey into employee attitudes to a four-day week discovered that 26% of Gen Z respondents wanted a shortened work week as a way to reduce commuting expenses.

Businesses are reacting to the trend. Average annual uni leaver salaries have been steadily increasing over the past 12 months. In May, the figure hit £27,802 – a spike of 6.62% compared to last year and over double the average increase across all pay packets.

Why businesses must not shy away from hiring graduates

The Adzuna findings suggest there is less urgency among employers to fill graduate roles. Given there are lots of candidates out there, business leaders may feel that hiring for junior roles is less important than recruiting for mid or senior positions.

More applications per role can also mean a higher workload for employers to process applications to find the best candidates.

Nonetheless, most business owners will recognise that avoiding hiring for entry-level roles is not a sustainable model. Gen Zers are the future of the workplace. The UK’s growing population means that by 2025, the group will account for 27% of the workforce.

Not to hire them would also jeopardise one of the most important people management strategies: succession planning. The process involves finding and developing future leaders or C-Suite executives, as well as more specialist individuals, from your existing manpower.

If a company does not invest in training and developing young, home-grown talent, managers will create a ticking time bomb for their long-term recruitment strategy. When the dreaded day comes that an indispensable employee hands in their notice, there will be no internal replacement.

How to attract and retain talent without overspending

Most bosses would love to hand new recruits a giant pay cheque if it would secure their long-term loyalty. If only it were that simple.

In reality, the majority of small businesses are in no position to be handing out party favours. Months of crippling overheads, labour shortages, and stagnant economic growth have battered SME cash forecasts.

Businesses have already raised wages to peak levels. In fact, May saw average advertised salaries rise by 3.3%, nearing the highest level since Adzuna records began.

So how can business owners find a compromise between meeting inflated graduate demands, without tanking cash reserves?

Stock recommends investing in organisational culture to create a work environment where young people feel supported, and where company values reflect their personal beliefs.

“I see many young job seekers looking for roles in businesses that have a fun, collaborative, startup culture. In fact, a lot of companies are now trying to replicate this to attract more graduates,” she assesses.

Learning and development (L&D) initiatives are one incentive that workers have said would keep them satisfied in their current job role. For the business case, L&D programmes are also an excellent way to shape and nurture talent for future scale-up.

Other measures, like offering a cycle to work discount scheme, can help to lift financial pressure on employees during the difficult months ahead – without risking SME budgets.

Next up: learn about 50+ benefits and perks businesses can use to boost job adverts.