In the second of a two-part series on the relationship between graduate salaries and the cost of living in UK cities, Charlie Ball shows that the biggest pay packet is not always the most useful measure of success
Part one examined how graduate salaries compare with overall salaries for a number of important urban graduate employment centres in the UK. But can this be translated into estimates of actual disposable incomes?
Numbeo is a public source of data on cost of living. Data is harvested from public sources and then the selected measures are indexed to the figure obtained for New York. In addition, as indicators are updated, so are Numbeo's published measures. There are obvious issues with this data, but it's possible to work with it as it allows us to make some illustrative calculations.
The highest salary isn't always the best
There are two particular calculations of interest. The first uses Numbeo's 'Cost of living plus rent' index. The data is presented indexed to New York, but if it is re-indexed to London and then combined with salary data (again indexed to London), it gives an indication of how far a graduate starting salary might go in different graduate employment centres in the UK, given the stated cost of living and rent.
| City | Indexed disposable income measure | Graduate starting salary |
|---|---|---|
| Derby | 1.637 | £22,840 |
| Sheffield | 1.483 | £20,633 |
| Belfast | 1.474 | £20,700 |
| Coventry | 1.464 | £22,548 |
| Portsmouth | 1.439 | £23,446 |
| Glasgow | 1.427 | £21,776 |
| Nottingham | 1.426 | £20,907 |
| Liverpool | 1.413 | £19,940 |
| Aberdeen | 1.379 | £22,917 |
| Birmingham | 1.371 | £21,257 |
| Leicester | 1.369 | £19,964 |
| Leeds | 1.331 | £20,585 |
| Newcastle upon Tyne | 1.331 | £20,687 |
| Edinburgh | 1.317 | £22,481 |
| Cardiff | 1.316 | £19,908 |
| Southampton | 1.305 | £20,518 |
| Manchester | 1.281 | £21,006 |
| Cambridge | 1.255 | £23,674 |
| Bristol | 1.225 | £21,382 |
| Reading | 1.207 | £23,221 |
| Brighton | 1.139 | £21,076 |
| Oxford | 1.112 | £21,879 |
| London | 1 | £24,996 |
This does not explain what disposable incomes actually are, nor should it necessarily be taken to suggest that a graduate on an average starting salary in Derby will have 64% more disposable income than a graduate on an average starting salary in London.
It does, however, give a guide to the question of whether a graduate starting salary offers value and how much. Derby is an unusual graduate labour market: it is highly oriented towards well-paid jobs in engineering and with a relatively low cost of living. A graduate on a typical starting salary (in other words, often in engineering) will tend to have a very competitive disposable income and therefore need a very attractive offer from an alternative destination to be better off moving.
Sheffield and Belfast, by contrast, are relatively inexpensive places to live and so graduate salaries do not need to be as high in order to offer excellent value. Rent, naturally, is a very significant factor in these calculations and so cities with high local rents, such as Cambridge, Brighton, Oxford and, of course, London, will see even graduates on good local salaries having less to live on due to the amount they need to spend on living costs.
This data strongly suggests that graduates may be making rational early career decisions if they opt to stay close to home for an ostensibly lower salary in a place with lower costs of living, rather than move to a more expensive labour market for a higher salary.
There are other ways of looking at this data. Another measure in the Numbeo data is 'Local purchasing power', a measure closer to the way we wish to approach the data. This is based on the average salary of a worker, but fortunately we have already examined the ratio of average salaries to graduate starting salaries and can use that measure instead.
| City | Local graduate starting salary purchasing index | Graduate starting salary |
|---|---|---|
| Derby | 103.43 | £22,840 |
| Southampton | 95.77 | £20,518 |
| Coventry | 94.95 | £22,548 |
| Leicester | 90.44 | £19,964 |
| Liverpool | 80.97 | £19,940 |
| Sheffield | 78.39 | £20,633 |
| Nottingham | 77.65 | £20,907 |
| Glasgow | 77.53 | £21,776 |
| Portsmouth | 77.09 | £23,446 |
| Bristol | 76.81 | £21,382 |
| Leeds | 75.94 | £20,585 |
| Aberdeen | 75.41 | £22,917 |
| Manchester | 73.71 | £21,006 |
| Reading | 70.63 | £23,221 |
| Birmingham | 70.02 | £21,257 |
| Newcastle upon Tyne | 67.77 | £20,687 |
| Cardiff | 67.67 | £19,908 |
| Belfast | 67.3 | £20,700 |
| Edinburgh | 61.08 | £22,481 |
| Cambridge | 57.36 | £23,674 |
| Oxford | 56.11 | £21,879 |
| London | 51.43 | £24,996 |
| Brighton | 46.63 | £21,076 |
Using this slightly different measure changes the table, but Derby, Coventry, Sheffield and Liverpool remain near the top and Brighton, London, Oxford and Cambridge stay towards the bottom. This does suggest that these examinations reveal something worth heeding.
Based on this data, it does not necessarily follow that it is rational or even advisable for a graduate to solely look for the highest possible salary they can obtain, if that means reducing their own income after cost of living is taken into account. And a graduate may need an extremely attractive offer in London, far above the average salary, for it to be worth them leaving a less expensive labour market such as Sheffield, Liverpool or Newcastle.
This calls into question the overall value of uncontextualised graduate salaries as a measure of graduate success
Of course, this may not automatically follow later in a graduate's career. It may be that ultimately, as a career progresses, it makes financial sense to move to a more lucrative labour market where the maximum rewards on offer are higher. However, this may be at the expense of compromising on other forms of quality of life.
Better cost of living data is needed
This calls into question the overall value of uncontextualised graduate salaries as a measure of graduate success. But, more importantly, this debate requires better quality data on cost of living so that graduates can come to a better understanding of where value lies for their degree and whether it is worth remaining in a well-known jobs market on a lower salary or moving elsewhere for more money where costs are higher.
In many cases the latter will be the rational choice, and guidance can and should reflect that. But, at the moment, the assumption is that the latter choice is always better and this data strongly suggests that it is not. Graduates expected to seek the best value for their degree need better cost of living data in order to do that effectively.
Also in this series
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