Employers struggling to retain graduates amid cost of living squeeze and tight jobs market

Employers are struggling more than usual to retain graduates amid a highly competitive jobs market, reveals a fresh survey released today.

Graduate churn has reached its highest level since record began in 2011, according to the Institute of Student Employers (ISE).

Firms are now retaining just over seven in 10 graduates three years after they join, compared to around eight in 10 last year, the lowest retention rate on record.

Weak pay growth is incentivising young workers to leave their employers, the ISE said.

“Combined with high inflation and a reduction in spending power, dissatisfaction may create major retention challenges for student employers as workers move roles to seek a pay increase,” Stephen Isherwood, chief executive at the ISE, said.

“This could lead to salary becoming the main driver when young people choose a career or employer,” he added. 

Inflation in the UK is running at its highest rate since 1992, hitting 6.2 per cent last month. 

Pay is not keeping pace with the rate of price rises, meaning UK living standards are falling. Netting off inflation, graduates earn less now than they did in 2008/09. 

Poor wage growth is encouraging workers to seek other roles in a bid to secure a pay bump to maintain their real incomes.

A tight labour market has improved the chances of workers receiving a pay rise due to employers attempting to outcompete rivals amid a shallower worker pool by hiking wages.

The UK jobless rate is 3.9 per cent, around pre-pandemic levels.