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Graduates in their 20s are earning less in real terms than they were before the 2008 financial crash, and are £1,200 worse off than they were at the start of the pandemic on average, despite recent cuts to national insurance.

Chancellor Jeremy Hunt has teased further national insurance cuts in his upcoming budget, following on from the recent decrease announced in his autumn statement.

It could be welcome news to some who have seen their pay packets squeezed over recent years as a result of the cost of living crisis, though economists have warned tax cuts would be unaffordable and would need to be reversed after an election.

People aged between 22 and 29 are earning less in real terms now than they were in 2002.

This is when factoring in inflation, including rising housing and food costs, over the period.

In 2023 prices, the median salary for a graduate in their 20s is £23,990 after paying taxes and student loan – compared with £25,200 in 2020.

Helen Miller, deputy director of the Institute for Fiscal Studies (IFS), said: “This comes in the context of an ongoing, multi-year freeze to personal tax thresholds.

“By 2027 (the last year of the planned freezes), an employee earning £35,000 will be paying about £440 a year more in direct tax overall as a result of all the changes to income tax and NICs since 2021.

“The government has announced significant tax rises. Regardless of what the chancellor announces in the budget, it is highly likely that this will be the largest tax-raising parliament on record.”

Changes to student loan plans

Student loan repayments are set at 9% of income above the salary threshold, which has been frozen at £27,295 since 2021/22.

Still, a recent graduate on an average income is currently paying around £13 a month towards their student loan, so is it really a big deal?

A big factor in the impact of student debt is not just how much people pay back per month, but how much they pay back over their working lives, and when they started university.

Those who went to university on ‘Plan 2’ higher university fees (£9,000 and above from 2012/13) will pay back almost £20,000 more than the previous ‘Plan 1’ cohort in their lifetime, according to estimates by the IFS.

Those who started in the 2023 academic year or later will be eligible for ‘Plan 5’ student loans, which have different repayment terms.

The threshold will increase in line with the Retail Prices Index (a measure of inflation) instead – meaning it will likely increase more slowly than under the previous policy and more graduates will start paying back their debt sooner.

Under the new system, student debt will only be written off after 40 years rather than 30, meaning many will make repayments for longer, potentially into their 60s.

This particularly affects low to middle earners, who are less likely to have paid off their debt after 30 years.

However, under this new system no borrower will repay more than they borrowed (in real RPI terms) – so the highest earners can expect to repay significantly less than if they had started university in 2022 due to the lower interest rate.

On the other hand, people on lower incomes will end up paying back more.

‘A thundercloud waiting to burst’

Dr Farhana Ghaffar, researcher at the University of East Anglia, has been looking at the impact of the post-2012 loan system on students and young people and interviewed graduates who had been through this system to see how it had affected them.

“The idea was generally that a university degree would set you up for life, so it would set you up for a particular kind of life where you’d be able to have a home, start a family,” she said.

But in exchange for this, students are taking on “enormous” amounts of debt, which can have an emotional impact.

“I think sort of five or six years on, they were constantly worried about the debt that was getting bigger and bigger. And obviously they couldn’t do anything about it.

“They’re not at a stage yet where I think we can kind of talk too much about the long-term impacts. But something that was really striking is it was a future worry.

“You know, ‘when I get a mortgage’ or ‘when I start a family’. Someone described it almost as being like a thundercloud, waiting to burst and they just didn’t know when it would happen.”

Anastasia is a Romanian student at the University of Dundee. Her tuition fees are free because she started studying in Scotland while the UK was part of the EU.

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English students still have to pay to study in Scotland but students from other EU countries could study for free, as Scottish students do.

Anastasia isn’t sure if she would have gone to university at all if she had to pay fees.

She said: “I’d have to take a few months to think about it. And really, really think about it. I don’t think it’s a decision I could make just like that.

“If there was a way of knowing the payments would be acceptable and manageable – even though I probably won’t have a good job right after I graduate – maybe I would do that but very low chances.

But Anastasia knows that decision too could affect her future prospects, saying “[we are] in a world where everybody expects you to have a diploma for anything”.

“There are so many companies out there that will not give you the job even though you’re fully able to give them a wonderful performance, if you don’t have a diploma.”


The Data and Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open-source information. Through multimedia storytelling, we aim to better explain the world while also showing how our journalism is done.

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Going to university is not what it once was – and students face a very different question

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Going to university is not what it once was - and students face a very different question

For around 700,000 teenagers on the treadmill that is the English education system, the A and T-level results that drop this week may be the most important step of all.

They matter because they open the door to higher education, and a crucial life decision based on an unwritten contract that has stood since the 1960s: the better the marks, the greater the choice of institution and course available to applicants, and in due course, the value of the degree at the end of it.

A quarter of a century after Tony Blair set a target of 50% of school-leavers going to university, however, the fundamentals of that deal have been transformed.

Today’s prospective undergraduates face rising costs of tuition and debt, new labour market dynamics, and the uncertainties of the looming AI revolution.

Together, they pose a different question: Is going to university still worth it?

Students at Plantsbrook School in Sutton Coldfield, Birmingham, look at their A-level results in 2024. File pic: PA
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Students at Plantsbrook School in Sutton Coldfield, Birmingham, look at their A-level results in 2024. File pic: PA

Huge financial costs

Of course, the value of the university experience and the degree that comes with it cannot be measured by finances alone, but the costs are unignorable.

For today’s students, the universal free tuition and student grants enjoyed by their parents’ generation have been replaced by annual fees that increase to £9,500 this year.

Living costs meanwhile will run to at least £61,000 over three years, according to new research.

Together, they will leave graduates saddled with average debts of £53,000, which, under new arrangements, they repay via a “graduate tax” of 9% on their earnings above £25,000 for up to 40 years.

A squeezed salary gap

As well as rising fees and costs of finance, graduates will enter a labour market in which the financial benefits of a degree are less immediately obvious.

Graduates do still enjoy a premium on starting salaries, but it may be shrinking thanks to advances in the minimum wage.

The Institute of Student Employers says the average graduate starting salary was £32,000 last year, though there is a wide variation depending on career.

File pic: PA
Image:
File pic: PA

With the minimum wage rising 6% to more than £26,000 this April, however, the gap to non-degree earners may have reduced.

A reduction in earning power may be compounded by the phenomenon of wage compression, which sees employers having less room to increase salaries across the pay scale because the lowest, compulsory minimum level has risen fast.

Taken over a career, however, the graduate premium remains unarguable.

Government data shows a median salary for all graduates aged 16-64 in 2024 of £42,000 and £47,000 for post-graduates, compared to £30,500 for non-graduates.

Graduates are also more likely to be in employment and in highly skilled jobs.

There is also little sign of buyer’s remorse.

A University of Bristol survey of more than 2,000 graduates this year found that, given a second chance, almost half would do the same course at the same institution.

And while a quarter would change course or university, only 3% said they would have skipped higher education.

Students receive their A-level results at Ark Globe Academy in London last year. File pic: PA
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Students receive their A-level results at Ark Globe Academy in London last year. File pic: PA

No surprise then that industry body Universities UK believes the answer to the question is an unequivocal “yes”, even if the future of graduate employment remains unclear.

“This is a decision every individual needs to take for themselves; it is not necessarily the right decision for everybody. More than half the 18-year-old population doesn’t progress to university,” says chief executive Vivienne Stern.

“But if you look at it from a purely statistical point of view, there is absolutely no question that the majority who go to university benefit not only in terms of earnings.”

‘Roll with the punches’

She is confident that graduates will continue to enjoy the benefits of an extended education even if the future of work is profoundly uncertain.

“I think now more than ever you need to have the resilience that you acquire from studying at degree level to roll with the punches.

“If the labour market changes under you, you might need to reinvent yourself several times during your career in order to be able to ride out changes that are difficult to predict. That resilience will hold its value.”

The greatest change is likely to come from AI, the emerging technology whose potential to eat entry-level white collar jobs may be fulfilled even faster than predicted.

The recruitment industry is already reporting a decline in graduate-level posts.

A maths exam in progress at Pittville High School, Cheltenham.
File pic: PA
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A maths exam in progress at Pittville High School, Cheltenham.
File pic: PA

Anecdotally, companies are already banking cuts to legal, professional, and marketing spend because an AI can produce the basic output almost instantly, and for free.

That might suggest a premium returning to non-graduate jobs that remain beyond the bots. An AI might be able to pull together client research or write an ad, but as yet, it can’t change a washer or a catheter.

It does not, however, mean the degree is dead, or that university is worthless, though the sector will remain under scrutiny for the quality and type of courses that are offered.

The government is in the process of developing a new skills agenda with higher education at its heart, but second-guessing what the economy will require in a year, never mind 10, has seldom been harder.

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Universities will be crucial to producing the skilled workers the UK needs to thrive, from life sciences to technology, but reducing students to economic units optimised by “high value” courses ignores the unquantifiable social, personal, and professional benefits going to university can bring.

In a time when culture wars are played out on campus, it is also fashionable to dismiss attendance at all but the elite institutions on proven professional courses as a waste of time and money. (A personal recent favourite came from a columnist with an Oxford degree in PPE and a career as an economics lecturer.)

The reality of university today means that no student can afford to ignore a cost-benefit analysis of their decision, but there is far more to the experience than the job you end up with. Even AI agrees.

Ask ChatGPT if university is still worth it, and it will tell you: “That depends on what you mean by worth – financially, personally, professionally – because each angle tells a different story.”

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US and China extend tariffs deadline again

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US and China extend tariffs deadline again

The world’s two largest economies, the US and China, have again extended the deadline for tariffs to come into effect.

A last-minute executive order from US President Donald Trump will prevent taxes on Chinese imports to the US from rising to 30%. Beijing also announced the extension of the tariff pause at the same time, according to the Ministry of Commerce.

Those tariffs on goods entering the US from China were due to take effect on Tuesday.

The extension allows for further negotiations with Chinese Premier Xi Jinping and also prevents tariffs from rising to 145%, a level threatened after tit for tat increases in the wake of Trump’s so-called liberation day announcement on 2 April.

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It’s the second 90-day truce between the sides.

The countries reached an initial framework for cooperation in May, with the US reducing its 145% tariff on Chinese goods to 30%, while China’s 125% retaliatory tariffs went down to 10% on US items.

A tariff of 20% had been implemented on China when Mr Trump took office, over what his administration said was a failure to stop illegal drugs entering the US.

More on China

Sector-specific tariffs, such as the 25% tax on cars, aluminium and steel, remain in place.

Chinese stock markets were mixed in response to the news, with Hong Kong’s Hang Seng down 0.08%

The Shanghai Composite stock index rose 0.46%, and the Shenzhen Component gained 0.35%.

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Wage rises slow as retail and hospitality jobs continue to fall

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Wage rises slow as retail and hospitality jobs continue to fall

The rate of wage rises in the UK continued to slow as the number of job vacancies and people in work fell, according to new figures.

Average weekly earnings slowed to 4.6% down from 5%, while pay excluding bonuses continued to grow 5%, according to data from the Office for National Statistics (ONS) for the three months to June.

It means the gap between inflation – the rate of price rises – and wage increases is narrowing, and the labour market is slowing. Inflation stood at 3.6% in June.

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The number of employees on payroll has fallen in ten of the last 12 months, with the falls concentrated in hospitality and retail, the ONS said. It came as employers faced higher wage bills from increased minimum wages and upped national insurance contributions.

As a result, it’s harder to get a job now than a year ago.

“Job vacancies, likewise, have continued to fall, also driven by fewer opportunities in these industries,” the ONS director of economic statistics, Liz McKeown, said.

The number of job vacancies fell for the 37th consecutive period and in 16 of the 18 industry sectors. Feedback from employers suggested firms may not be recruiting new workers or replacing those who left.

Unemployment remained at 4.7% in June, the same as in May.

The ONS, however, continued to advise caution in interpreting changes in the monthly unemployment rate due to concerns over the figures’ reliability.

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The exact number of unemployed people is unknown, partly because people do not respond to surveys and answer the phone when the ONS calls.

The worst is yet to come

Wage rises are expected to fall further, and redundancies are anticipated to rise.

“Wage growth is likely to weaken over the course of the year as softening economic conditions, rising redundancies and elevated staffing costs increasingly hinder pay settlements,” said Suren Thiru, the economics director of the Institute of Chartered Accountants in England and Wales (ICAEW).

“The UK jobs market is facing more pain in the coming months with higher labour costs likely to lift unemployment moderately higher, particularly given growing concerns over more tax rises in this autumn’s budget.”

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Tax rises playing ’50:50′ role in rising inflation

What does it mean for interest rates?

While wage rises are slowing, the fact that they’re still above inflation means the interest rate setters of the Bank of England could be cautious about further cuts.

Higher pay can cause inflation to rise. The central bank is mandated to bring down inflation to 2%.

But one more interest rate cut this year, in December, is currently expected by investors, according to data from the London Stock Exchange Group (LSEG).

The evidence of a weakening labour market provides justification for the interest rate cut of last week.

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