Graduates suffer again as inflation rise pushes salaries down

Published on 01/04/2011 21:01

Graduate starting salaries are set to fall in real terms for the third year in a row as they fail to keep up with rising inflation, a report out today says.

Pay analysis firm Incomes Data Services (IDS) said that with the number of candidates exceeding demand, employers had no reason to offer higher wages.

Today's report says graduates' average starting pay increased by 1 per cent to 25,100 in 2010, while RPI inflation did not fall below 3.7 per cent all year.

IDS predicts a further dip in real terms this year, adding that more than two out of three employers planned to freeze graduate recruitment.

Jessica Evans, of IDS, said: "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 said there were 44 applicants for every graduate vacancy in 2010, up 25 per cent from 35 per vacancy in 2009, and warned that the figure could be even higher this year as a backlog of unemployed graduates have a second go at finding work in their preferred areas.

Sally Hunt, general secretary of the University & College Union, said: "As students are to be hit with threefold increase in fees and record levels of debt, it is disappointing that salaries are falling again."

The news comes as recruitment firm Reed reported that job opportunities across the country fell last month.

The number of vacancies in the UK had increased sharply earlier in the year, but a report published today reveals that the rise stalled in March, suggesting that the economic recovery remains fragile.

Recruitment firm Reed said employer demand was still up by 25 per cent over the past year despite the slight decline.

And it is not only graduates suffering from the rising cost of living - Reed said that while salaries for new jobs across the economy were slightly up last month, they continued to lag behind the rate of inflation.

Official figures released last week showed real household disposable income fell 0.5 per cent in the last quarter of 2010.

Martin Warnes, managing director of reed.co.uk, said: "The sharp rise in job creation witnessed in January and February has slowed, indicating that economic recovery should not be taken for granted.

"Indeed, rising inflation, higher unemployment figures and international turbulence have been reminders that the economy remains fragile.

"However, job creation is well ahead of last year."

He said the growth seen earlier in the year had been spread across a wide range of private sector areas, but it remained a buyer's market for labour.

"With high job competition keeping salaries flat, this is a good time for employers to find the talented people they need," he added.