The $25K Salary Gap New College Grads Don't See Coming
In an already‑bruising job market, recent college graduates should also brace for starting salaries that fall well below what they have in mind.
This year’s crop of grads is heading out into the world expecting to start around $80,000 a year on average, according to a new report from Clever. But the actual average starting salary is $56,153, according to the study.
That’s 30% lower and a difference of nearly $25,000, so an adjustment of expectations may be in order.
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Unrealistic Expectations
“People often have unrealistic salary expectations and often benchmark themselves against some of the most successful or accomplished recent graduates' experiences,” said Robert Johnson, Ph.D., a professor at Creighton University's Heider College of Business.
Daniel Roccato, a clinical professor of finance at the University of San Diego’s Knauss School of Business, agreed that a gap between expectations and reality for college grads on starting salaries isn’t new. But the size of the gap for this year’s grads is new, he noted, adding that many students’ expectations for starting salaries range from misconceptions to “outright delusional.”
Work Experience
Roccato, who teaches only college seniors, partly attributed this to today’s graduating students having less actual work experience than previous generations. This leaves them with less of a sense of their worth in the job market.
“A lot our students haven’t really experienced hands-on, on-the clock work – internships, after-school jobs,” he said. “Rather than work, they’ve been doing other productive things.
“That helped us (older generations) a bit I think to understand the reality of what we were going to face in the job market, what would happen when we graduated.”
Salary Disappointment and a Rough Job Market
This year’s graduating class may also be disappointed in their salary outlook for later in life. Respondents in the Clever study figured they would be making nearly $145,000 a year a decade after graduating. The actual numbers fall more in the $95,000 range. The results also reflected some anxiety, with nearly a third of respondents saying they weren’t confident that they would make enough money to live comfortably after graduating.
In addition to potential salary disappointments, just finding that first job after college can be rough in the current market, which Roccato gave a D-minus. He stressed that this varies depending on which field you’re entering.
“If you have a certain skill set, you’re going to find a job with very little difficulty,” Roccato explained. “If your skills have anything to do with the medical profession, you’ll get a job. If you can swing a hammer or fix a Tesla, you’ll get a job.”
The outlook is considerably less bright in fields like finance, accounting and insurance, Roccato said, noting that many of those jobs are dramatically changing or even just going away as a function of tech, specifically artificial intelligence (AI).
“The rise of artificial intelligence reduces opportunities for many entry level workers,” Johnson said. “AI has a disproportionate impact on entry level versus more experienced workers. The rise of AI has reduced demand for entry level workers as entry level jobs are being replaced by AI.”
What Should Recent Grads Do?
Experts say recent grads facing the tough job market and potentially disappointing starting salaries can focus more on longer-term career goals. That includes gaining experience that may not seem like where they wanted to start or for how much, but will ultimately help to get them there.
“With apologies to Voltaire,” Johnson said, “my advice to recent grads is ‘don't let the perfect be the enemy of the good.’ In other words, don't expect to land your dream job upon graduation. I also am a big believer in the adage that it is much easier to find a job when you have one. You are a more attractive job candidate if you are working in some capacity that if you are unemployed -- even if you are underemployed.”
These roles, either during the college years or right after graduation, can also develop the “soft skills” that many employers are looking for.
“Employers want to see that you have a skill set,” Roccato said. “That you’ve actually shown up and done something productive. That you’ve sort of been tested already."
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