UK’s minimum wage is touching starting salary of college graduates — and it’s a problem

The UK’s minimum wage is now almost equal to the starting pay of many college graduates, sparking concern among employers and economists who are terming it as a growing problem, the Financial Times (FT) reported.

Wage hike brings parity with graduate pay

According to the report, Finance Minister Rachel Reeves is expected to raise the minimum wage by 4% to £12.70 per hour through this month’s budget. The increase would push the annual income of full-time minimum wage workers (40 hours per week) to around £26,416 — nearly the same as the starting salaries of many graduates.

Data from the Institute of Student Employers shows that entry-level employees in sectors like finance and accounting earn a minimum of £25,726 a year, with the median salary standing at £33,000.

Fears of declining interest in higher education

Executives warn that the shrinking gap between graduate and non-graduate pay could discourage young people from pursuing university degrees. “If you can earn nearly the same amount stacking shelves, why take on £45,000 in student debt?” one London-based CEO told the FT.

Experts fear this shift could worsen social inequality, as only wealthier students might continue to afford higher education.

Companies brace for higher costs

Businesses, meanwhile, are growing cautious over rising costs. Analysts predict that firms may respond by slowing down recruitment, accelerating automation, or outsourcing work overseas to cut expenses. Job postings across the UK have already begun to decline.

The legal profession is also under pressure, with smaller firms now paying newly qualified lawyers only slightly more than the minimum wage — a trend that could further dampen interest in the field.