Graduate workers expect to earn OVER £5,000 MORE than the average starting salary Gen Z’s wage expectations are rapidly outpacing the market average, as the rising cost of living makes starting salaries unaffordable for graduate workers. Written by Helena Young Updated on 9 March 2023 Our experts We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality. Written and reviewed by: Helena Young Lead Writer Against a backdrop of the recruitment crisis and record-high inflation, Startups has found that, on average, today's employers are offering just over £5,000 less than what graduates expect from a base salary.Our analysis is based on the latest graduate outcome figures from the Higher Education Statistic Agency (HESA). They show that the average wage for a full-time worker who graduated in 2019-20 is £25,000. This is markedly lower than the expected starting salary stated by undergraduate students of £30,244, as found by Bright Network.The £5,000 disparity is no doubt a response to record-high inflation figures, which have made everyday living costs like rent and commuting more expensive for the average employee.Below, we’ve broken down the HESA statistics to find what’s causing the gap in pay predictions between employee and employer. Plus, we explore how SMEs can attract and train new talent without exhausting overstretched budgets. This article will cover: Why do today’s graduates expect higher wages? Have UK universities oversold the value of a degree? Are apprenticeships the new way forward? How can small businesses attract graduate talent without raising wages? Why do today’s graduates expect higher wages?Business owners across the UK are feeling squeezed by the current economic climate that has sent energy bills soaring and real wages plummeting.Naturally, their employees are also feeling the pinch. The past few months has seen a marked increase in worker action as staff members in the public and private sector demand higher wages and better job security.The action has chimed with Generation Z, the emerging labour force. For most, leaving university also means saying goodbye to the financial cushion of a student loan, or parental support.It is a scary time to suddenly be saddled with household bills and other expenses. With their spending power much diminished, it’s no wonder that graduates are feeling short-changed.Charlotte is in her final year of a physiotherapy degree at Sheffield Hallam University. In line with Bright Network’s findings, she says she would like to earn “around £30,000” as a starting salary. However, she’s not optimistic this will happen. “I don’t think a lot of starting salaries are good, which makes it hard to save as a young person,” she notes.Based on Longitudinal Education Outcomes (LEO) graduate data, the new average graduate salary in 2022 represents a 2.9% increase from the 2018/19 cohort of graduates. This stagnancy is contrasted by the annual inflation rate in 2022 of 9.067%.Comparatively, younger workers changing expectations are almost exactly inline with inflation.According to Bright Network, the new average expected salary by a university graduate has risen by 9% from £27,270 in the six months between January and June 2022.The impact of the cost of living crisis on graduatesBlackbullion’s 2023 Student Money & Wellbeing report found that 58% of students say that worries about money are negatively affecting their mental health.Joseph Black founded UniTaskr, a student app that helps users to earn money and build up their CVs, in 2017. Black says he is concerned by the impact the cost of living crisis is having on students.“Not only has it put pressure on affordability such as on food and household bills, but it has also put a strain on quality of life and mental health in students,” he says.70% of students were concerned about being able to afford accommodation. Private rent in England increased by 4.3% between January 2022-23, the highest annual percentage change since records began.Startups heard from one recent University of Manchester graduate who asked not to be named in this piece, and now works for a charity organisation in Birmingham. She says she was surprised by how little her salary of £25,000 has stretched each month.“I thought earning that much outside of London would be a cushy salary,” she relates. “But since my landlord put my rent up by £200 it doesn’t seem like a lot of money anymore.” Have UK universities oversold the value of a degree?The number of young people choosing to attend university has rapidly increased in recent years. In 2022, a record quota of 18-year-olds had a place at their first choice of university confirmed — a 20% increase on 2019, when exams were last sat.Simultaneously, the cost of university has also shot upwards. As with sales of any product or service, the boost in demand has led to surge pricing.Until 1998, full-time students in England could attend university completely free of charge. Two and a half decades later, most institutions today charge £9,250 per year of study, amounting to an average debt toll of just under £28,000 upon graduation.The current interest rate on student loan repayments of 6.3%. That means a full-time worker earning the average graduate pay package of £25,000 will take 29 years to repay 83% of their loan. Only then will it be written off.It’s not surprising that many higher education graduates are questioning the return on their substantial investment.What are the highest paid degrees in the UK?How much a graduate earns in their first year of working depends on multiple factors. These include location, employer, degree type, and industry competitiveness.In terms of degree type, specialist courses tend to be highly-skilled and return a higher average wage.For example, a mathematical science degree covers both everything from applied mechanics to accounting. That is why graduate salaries for this qualification range from £19,500 to £28,000.Below, we’ve listed the UK degrees in order from highest to lowest starting salary, on average:IndustryMedian salary of UK domiciled full-time graduatesVeterinary science£31,000Engineering and technology£28,000Mathematical sciences£27,500Computing£26,500Architecture, building and planning£25,000Education and teaching£25,000Social sciences£25,000Business management £24,000Sport sciences£23,000Agriculture and food£23,000Psychology£21,500Law£21,500Media, journalism, and communications£21,000Design, creative, and performing arts£20,000George has a high-skilled masters degree in chemistry from Newcastle University. Having graduated in 2022, he has since found a full-time job as a Junior Chemist.In terms of salary, George says he is definitely disappointed. The HESA data shows he is being paid a below-average salary for a physical science degree in the UK.“The suggested wages for graduates on my course was £27,000”, he reports. “I only started on £21,000 and am now on £23,500 after six months.” Are apprenticeships the new way forward?With more uni leavers questioning the validity of their degree certificates, alternative career routes are being positioned as a way to avoid large student debt. One of the most popular is apprenticeship schemes.Sophie Ruddock is Chief Operating Officer at Multiverse, an apprenticeship training programme which won the Startups 100 Index in 2021.Ruddock says that young people are defaulting to university due to incorrect assumptions that it guarantees a high quality, well-paid job at the end. She argues this is actually what an apprenticeship promises.“You still get the world-class learning and the qualification, but instead of the debt you get a salary, and learn some of the most in demand skills that businesses need today,” she posits.Far from being low-skilled, those who complete a degree apprenticeships (which take three to six years to complete, depending on the course level) receive a qualification equivalent to a full undergraduate or master's degree.Ruddock says that more should be done to persuade young people of the benefits of apprenticeships. “The very best jobs of the future, things like software engineering and data analytics, don't need a degree – you can start learning and earning straight from school.”What does an apprenticeship offer businesses?For the business case, apprenticeships are not just cheap labour. They are a strategic hiring decision that scales the workforce at a comfortable, steady rate.An apprentice can have their learning tailored to plug relevant skills and knowledge gaps within your business. Such bespoke training also makes future talent-based decisions, like succession planning, easier.Additionally, apprentices offer a practical learning experience for fellow staff members, as a route to develop their coaching and mentoring skills. Younger workers might also bring fresh energy, ideas, and perspective to workforces.There are also cost savings. SMEs should take advantage of the government’s Apprenticeship Levy scheme to employ apprentice workers.Companies earning over £3m in revenue each year pay 0.5% of their overall pay bill into a ‘digital fund'. A 10% government contribution is then added to each monthly payment, which the employer can use to cover any apprenticeship training expenses. How can small businesses attract graduate talent without raising wages?The majority of small companies will not be able to match the escalating pay expectations of graduate workers. Based on a recent report by the business spending tracker Pleo, 95% of UK SMEs report being impacted by the cost of living crisis.The crisis has already necessitated cuts to employee remunerations and benefits packages. Three in five have stopped or reduced staff promotions, while 61% have curtailed staff bonuses.In this climate, SMEs might feel frustrated by the demands that entry-level workers are placing on balance books. But there are still small measures that can be taken to make the pay process fairer for Generation Z. And they don’t have to compromise bottom lines.Jack Parsons is founder and CEO of The Youth Group, a job support service that has helped millions of young people to gain the work experience needed to launch and grow their careers.“Graduates may have unrealistic salary expectations, especially if they are not aware of industry averages,” acknowledges Jack Parsons. “At the same time, recruiters and hiring managers have a responsibility to provide fair and transparent salary information.”If you’re a business owner, Parsons recommends including a clear salary range or figure within the job advert, so that companies can attract candidates who are genuinely qualified for the role and its compensation. Ditto for experience levels, which often don’t align with the ‘entry-level’ description being advertised.“This can help to streamline the hiring process and save time and resources for both the company and young people,” adds Parson.Naturally, this should extend into transparent communication on pay scales and the potential earnings or promotions a worker could have in years to come, to counteract any disappointment felt by the initial pay offer.Another option is to invest in learning and development opportunities as a way to demonstrate the CV-building courses and qualifications that your company can offer in the long-term. It is also effective for reducing staff turnover.Charlotte acknowledges the useful ‘foot-in-the-door’ benefits for further career development that entry-level positions produce. “Progression is probably more accessible and the opportunities come more frequently,” she says.Why businesses should care about graduate salary expectationsThe £5,000 difference between their salary expectations and the real average wage might make today’s group of graduates seem out of touch.But as our analysis shows, there is cause for young people’s concerns. This is a generation that has emerged from a pandemic into an economic crisis, saddled by growing student debt, and with no end in sight to their inflated living costs.Understanding these worries is crucial for SMEs. The ongoing talent shortage means firms need to appeal to Gen Z talent. They might be considered the newbies today, but in just two years time, these so-called ‘Zoomers’ will constitute 27% of the workforce.Small steps bring big positives. Any recognition you can give to the difficult economic conditions that graduates have emerged into will demonstrate that you are at least listening to their concerns — a simple, but powerful way to bring young workers onboard. Share this post facebook twitter linkedin Tags News and Features Written by: Helena Young Lead Writer Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.