Past experience does not suggest employers will take increasing levels of graduate debt into account when determining reward strategies. From 2006, when tuition fees were first introduced, starting salaries have barely risen (2% in 2006 and 2.4% in 2007) and in the past couple of years they have not increased at all. These modest increases compare with a 7.1% rise in 2005.
Rather than graduate debt, the factor that affects salary levels most is supply and demand.
Employers pay what they can afford to attract top talent and, in a depressed economy, this inevitably leads to low or non-existent salary increases. With an average of 69 applications for each vacancy in 2010, there was little pressure on employers to raise starting salaries.
If employers were to take graduate debt into account when drawing up reward strategies, they might also find themselves having to means-test recruits, because the average level of student debt hides the fact that graduates
emerge from university with differing levels of debt. I doubt that many employers would want to make such judgements.
Some employers already recognise that starting work can be expensive for a new entrant, with travel cards, new clothes and accommodation to take into account. A one-off ‘golden hello’ payment might help to overcome
the financial worry of starting work and not disturb pay differentials.
It will be interesting to see whether the threshold at which repayment of loans is set, £21,000, might bring about a tranche of jobs with starting salaries set at, say, £20,995.
Ben Wells, senior consultant at Buck Consultants:
The Browne Review essentially suggests an increasingly commercial approach to higher education. With new levels and horizons of student debt, the value of higher education has gone up and is now a significant investment choice for young people and their parents. Is university the right investment? If it is, what return can they expect during their career? If it isn’t, where can they get better-value higher education? Savvy businesses can structure reward offerings around education being an investment in yourself.
To make rational self-investment decisions, university students will seek a clearer view on the likely ‘return’ – how much future ‘career currency’ will a degree buy? Employers can structure their employment offering to include clearer career paths and earning bands, as well as lifestyle options that could open up.
Young people who question the investment in university may be attracted to alternative forms of higher education. Companies can attract and retain these people with offerings and incentives to encourage development that rivals university. Employers can offer a mix of experienced-based development, exposure to new opportunities, formal apprentice-orientated higher education.
With higher education having a greater perceived value, the idea of learning new skills and continual development may become more valued by employees. Employers can play to this by integrating development more and more in the overall reward proposition. They might allow individuals to trade traditional benefits (pension, insurance) for investment in training and development, or could create incentives around the acquisition of new capabilities.
– Carl Gilleard, chief executive of the Association of Graduate Recruiters