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Graduate salaries in context: what do they really mean?

January 2019

In the first of a two-part series on the relationship between graduate salaries and the cost of living in UK cities, Charlie Ball highlights the importance of putting the data into its proper context

Graduate salary data has gained increasing prominence of late. The introduction of the Teaching Excellence Framework (TEF) and the development of Longitudinal Education Outcomes (LEO) data based on tax records have brought graduate salary information to the forefront of the debate on employment and employability.

But at the same time there is increasing awareness that the real values of salaries as experienced by their recipients are extremely dependent on context. The wide disparities between different local economies in the UK mean that costs of living vary significantly and this, in turn, means that salary and actual disposable incomes are not synonymous.

This has a substantial impact on career decision making. While metrics place an emphasis on graduates maximising their salaries, it is not always clear that a graduate leaving behind a good job in a relatively inexpensive labour market for a higher salary in a more expensive location is actually better off.

But how do we gauge the relative attractiveness of graduate salaries and their impact on disposable incomes?

Comparing graduate and local salaries

A simple way of examining the relative attractiveness of graduate starting salaries in a given location is to compare them with the local average salary of a worker. This gives a guide to how competitive the salary for a new graduate is in that area.

This article takes the salaries of new graduates from 2016/17 after six months, from Destinations of Leavers from Higher Education (DLHE), as a measure of graduate salaries. Data from the Annual Survey of Hours and Earnings (ASHE) is used as a measure of overall salaries. They are then compared across a series of the UK's most important cities for graduate employment.

City or regionRatio of graduate starting salary to average salary Graduate starting salaryAverage salary
Glasgow City0.664£21,776£32,803
Bristol, City of0.634£21,382£33,701
Milton Keynes0.624£22,719£36,385
Newcastle upon Tyne0.571£20,687£36,208
Aberdeen City0.564£22,917£40,614
City of Edinburgh0.552£22,481£40,741
Brighton and Hove0.521£21,076£40,487
Bath and North East Somerset0.514£20,733£40,306

The most significant point is that although London has the highest graduate starting salary (£24,996), it also has comfortably the highest overall salary (£48,604), which means a new graduate starting in London earns just over half the local average salary. This may mean that graduates in London, although earning well, do not have as much local purchasing power as it appears (assuming local costs reflect local earnings - which, of course, in this case they do).

Leicester is a different matter. The average graduate starting salary is below the national average (£19,964), but is nevertheless nearly 80% of an average local salary (£25,317). This means a graduate starting in a graduate job in Leicester may be in a relatively better position, and rather better than it might appear from salary alone.

But how does this translate into examining cost of living and how far a starting salary for a graduate might go in a particular city? There is no really definitive national data on cost of living, yet this question is absolutely crucial when examining the incentives and drivers of graduate movement around the country and the true value of earnings.

However, there is information that can be used to this end, and it will be examined in part two.

Also in this series

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