White-collar graduates are earning thousands of pounds less in real terms than before Covid as Britain faces a “brain waste” overqualification crisis.
Accountants, civil engineers and scientific researchers are among the graduates earning far less than if they had entered the job market in January 2017, two years before the pandemic struck, according to Telegraph analysis of Indeed data.
Many professions regarded as safe bets for young people have suffered big hits to pay over this time, with some set to make scarcely more than the minimum wage next year.
Even as graduate salaries failed to keep pace with inflation, the legal minimum wage has soared, rapidly eroding the premium which university leavers once expected to earn following their studies.
According to the Resolution Foundation, annual salaries for a typical recent graduate fell in real terms by 4pc between 2001 and 2023, to just over £34,000.
Over the same period, the amount earned by a full-time worker on the minimum wage surged by almost 60pc to more than £21,700.
It means the gap between typical graduate salaries and the minimum wage has, in today’s money, been slashed from £22,000 to £12,400.
For those graduates who go into the lowest-paying jobs, the gap has almost disappeared.
While a university leaver in the bottom 10pc of graduate earners in 2001 could have expected to land a salary worth 82pc more than a worker on the minimum wage, by 2023 the premium was just 11pc – a fall in today’s money from almost £11,200 to around £2,350.
The finding comes after a recent study found that British workers are more likely to be overqualified than in any other rich OECD country, stoking fears of what is known within the education industry as a “brain waste” crisis.
It comes amid criticism of poorly performing universities for luring in undergraduates with a false promise they can find professional employment after completing their degree.
The research found that around two in five British workers are in jobs they are overqualified for, well above the average in other comparable countries.
Accounting graduates make £3,400 less than they did at the start of 2017 once adjusting for inflation, the figures show, a fall of 14pc.
Civil engineering graduates are meanwhile £1,500 worse off in real terms, earning 6pc less than had they been looking for work in January 2017.
Those opting for careers in scientific research, as admin assistants, or in sales also face hits of respectively £1,510, £1,460 and £1,000.
Even early-career software developers have on average only enjoyed an improvement in their salaries of 1pc, or £158, in nearly eight years once adjusting for living costs. The industry is typically regarded as a future-proof career path.
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Jack Kennedy from Indeed said: “It speaks to employer caution. They are taking the view that in a weak overall market, people are going to be keen to secure any graduate role they can, so there is no need to go too hard on salaries.”
Recruitment experts have warned the UK is in the grip of a “hiring recession”, hitting those with little experience like young people the hardest.
Universities have also been criticised for offering “Mickey Mouse” degrees that leave graduates with unrealistic salary expectations.
Rishi Sunak criticised “courses [that] are ripping young people off” earlier this year before being ousted as prime minister.
However, the poor pay growth for young workers over many years also comes after what economists have branded a “lost decade” for pay and living standards.
While wages have risen rapidly in 2024, salaries are yet to surpass their highest point in 2008 once adjusting for inflation, figures from the Office for National Statistics show.
Meanwhile, the National Living Wage has risen much faster than inflation and is set to hit £12.21 an hour in April, up 37pc from 2021.
This means a full-time minimum wage worker will earn around £25,400, adding to the erosion of the pay premium graduates enjoy over their peers from getting a degree.
Average graduate salaries in education were £25,000 in October and could soon fall in line with the minimum wage, according to the latest Indeed pay data.
Meanwhile, those starting out in sales or accounting will earn only marginally more through their base salary at £26,625 and £28,500 respectively.
At the same time, tuition fees are rising for the first time since 2017 to £9,535 and are expected to surpass £10,000 by the end of the decade.
All of these factors will add to doubts for young people deciding on their careers and are fuelling debates about the merits of taking on tens of thousands of pounds in debt.
Analysis by the Institute for Fiscal Studies also highlights that university leavers will face much higher tax rates than their peers, often from the moment they enter the job market.
Graduates who are basic rate taxpayers face a marginal tax rate of 37pc, compared to someone who did not go to university at 28pc.
Meanwhile, those who do well and earn more than £50,271 are hit with marginal tax rates of 51pc.
This means that for every extra hour of work they take on, they keep less than half of the pay.
Those making between £100,000-£125,000 face even steeper marginal tax rates of 71pc, leaving them with only 29p of every extra pound they earn.