Some recent graduates are starting their careers with pay levels that the majority of workers will never reach; nevertheless, what are the long-term effects?
REPORTED BY: Zaid Qureshi Official
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Davis Nguyen specialises in assisting college graduates launch a management consulting career. It has a reputation for paying generously; even before to the pandemic, some of the largest companies offered undergraduates salaries that frequently neared the six-figure mark.
Nguyen's clientele, however, are doing especially well in the current market. The founder of My Consulting Offer, a company situated in Georgia, US, states, "They'll come back and say, "I have two amazing proposals." The price of one is $120,000 (£91,630), while the price of the other is $140,000 (£106,900). Graduating in today's environment implies earning significantly more money than you might a few years ago.
Graduates are increasingly stepping right from the lecture hall into six-figure careers in the management consulting industry, earning salary packages most others will never see in their lifetimes. Entry-level software engineers in the Big Tech industry sometimes begin on salaries like this. Pay for first-year analysts has increased by about 30% at the top banking institutions, reaching up to a basic wage of $110,000 (£83,979) in some situations. Some newly trained solicitors at the largest London legal firms start their careers with a £107,500 salary ($141,115). According to Nguyen, since the epidemic, "20-year-olds earning $100,000 from the get-go" have become more and more common.
These youthful workers frequently work for companies where their older counterparts had to toil for years to reach six figures after starting with lesser pay. Such organisations might contend that it is a response to market demands: the recruiting crisis means that talent rivalry is still severe; if an employer wants the best applicants who are prepared to put in long hours, they must pay a high price for them.
But beyond matching market rates, can enormous pay packages for grads genuinely have any positive effects, such as encouraging longer hours or enhancing work ethic? Or may it have unexpected repercussions that affect both the younger, higher-paid workforce and them?
High salaries are expected.|| Like Six-figure earnings are earned by entry-level employees.
Graduates' salaries have been increasing over the past few years. The average starting salary for some entry-level workers in particular fields has dramatically increased, according to 2021 data from the US non-profit the National Association of Colleges and Employers. For instance, the average salary for a computer-science major has increased to $72,173 (£55,100) — a 7% increase in just one year.
First-year tech employees in the US receive an average starting salary of $110,027 (£84,000).
According to Stanford University economics expert Nicholas Bloom, demand for labour is rapidly outpacing supply in many industries, particularly in technology. The finance sector, whose jobs frequently require workweeks of more than 70 hours, has likewise increased starting salaries to attract the finest applicants. In light of the current state of the labour market, graduates are frequently given six-figure wages as a "blatant recruitment technique," adds Rue Dooley, an HR expertise advisor for the Society for Human Resource Management (SHRM), located in the US.
According to Dooley, "workers want to be looked of as a cherished asset by their company." Younger workers claim that high compensation is an expectation, but they don't necessarily mean that they demand it since they are aware of the skill shortage and are conscious of their value.
This implies that some entry-level employees can land sizable salary packages before they've even left the dorm at their institution. According to Bloom, "firms frequently quadruple in size every 18 months, so graduate incomes closely track the market."
Smaller tech start-ups are now required to offer entry-level workers higher compensation in order to compete with the larger, more established firms. According to Josh Brenner, CEO of the New York City-based employment marketplace Hired, US firms offer first-year tech workers an average starting salary of $110,027 (£84,000).
Nguyen's undergrad clients frequently secure employment with salaries much beyond those of his own entry-level management consulting positions. He thinks it's a good thing. According to him, the growing trend that led to today's six-figure beginning salaries began decades ago. High pay creates possibilities for people who otherwise would not have had them and does not deprive those who started out with lower pay of their money.
Graduates are scooping salary packages in fields like law, consulting, finance, and computer technology that many people will never earn in their lives.
Problems such as golden handcuffs are present.
Although the surge in six-figure wages has numerous benefits, these large remuneration packages also have sneaky side effects.
In other situations, these people can find themselves confined to the occupations they despise, particularly if they have based their lives around accumulating large salaries, a phenomenon known as "golden handcuffs."
According to Nguyen, such rates can also distort young workers' perceptions of pay and prevent them from choosing more fulfilling career options. Some people might eventually desire to transition into teaching or work for a nonprofit. The pay reduction used to be about $50,000. Now that it's getting close to $100,000, it might be enough to keep someone from switching careers.
Young workers may feel psychologically burdened by large salaries. Nguyen claims that some of his undergraduate clients may experience intimidation when starting their professional careers in a position that pays well. Some people with low incomes wonder, "What did I do to earn so much more than my parents ever made? " It might result in imposter syndrome.
When new hires are given six-figure wages without hesitation, others inside the same organisations may also experience unfavourable repercussions. For instance, despite years of employment with the company, seasoned coworkers may bridle at entry-level remuneration packages, especially if they take home less money than a fresh graduate. Dooley says that it might lead to problems with wage equity.
Furthermore, businesses themselves might not always get what they pay for. High salaries can effectively "buy" a candidate's willingness to put in a lot of unpaid overtime, but this does not imply that they will have a higher work ethic.
When someone first starts a work, high salary may seem nice, but after a while, they usually desire much more. According to Tomas Chamorro, the benefits of high compensation will be mentally "spent."
According to Tomas Chamorro, professor of business psychology at University College London, "the concern is that employers, in some situations, think personnel will be highly motivated because of their high salary, but in reality they take it for granted." The effects of good salary will be mentally "spent" once a person starts working, despite the fact that high salaries may seem wonderful at first.
Jobs you should seize while you can
Six-figure beginning wages will likely remain the norm in several high-paying industries given the state of the labour market. The trickle-down impact won't likely be very significant for entry-level employees in less elitist industries, either.
Six-figure incomes for an ultra-privileged subset of employees may actually deepen pay disparities instead of raising wages overall. According to Bloom, there is undeniably growing inequality and the gap only widens. If you have a degree in computer science, you could be making $250,000 by the time you're 25, whereas if you dropped out of school at 16, you might only be making $25,000 — a ten-fold difference.
Even if supply and demand in the labour market return to normal, the disparity will probably continue to widen. As Bloom demonstrates, earnings almost never decrease despite frequently increasing. For instance, according to Nguyen, management consulting salaries have long weathered the effects of recession. We've seen wages endure numerous economic downturns because businesses prepare for them and restructure pay, but they would never do away with six-figure salaries.
Six-figure graduation wages are therefore not only likely to become more and more ingrained, but they may also soar further given their resistance to the ups and downs of the market. And as the labour market normalises and jobs become scarcer, the majority of people will find it harder and harder to afford these wage packages.
Six-figure beginning salaries are here to stay, and if growth slows, it will make them even more difficult to find, according to Bloom. These are fortunate few occupations that you should seize while you can, .
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