Davis Nguyen specialises in helping college seniors begin a career in management consulting. It’s an industry that historically pays well: even before the pandemic, some of the biggest firms offered undergraduates salaries that often approached the six-figure mark.
However, in the current market, Nguyen’s clients are doing particularly well. “They’ll come back and say ‘I have two great offers’,” explains the founder of My Consulting Offer, based in Georgia, US. “One is for $120,000 (£91,630), the other is for $140,000 (£106,900). Today’s climate means graduates can earn much more money than a few years ago.
Management consulting is among the sectors in which graduates are increasingly walking straight from the lecture hall into six-figure roles – earning pay packets most people will never see in their lifetimes. In Big Tech, entry-level software engineers are often starting on such wages. At the largest banking corporations, pay for first-year analysts has spiked nearly 30% – a $110,000 (£83,979) base salary, in some cases. At the biggest London law firms, some newly qualified solicitors begin their careers on a £107,500 salary ($141,115). Nguyen says “20-year-olds earning $100,000 from the get-go” has increasingly become the norm since the pandemic.
Often, these young employees are joining firms where colleagues began with lower pay, and had to work hard for years to earn six figures. Such organisations would argue it’s a response to market needs: the hiring crisis means the competition for talent remains fierce; if an employer wants the best candidates willing to put in long hours, they have to pay a high price for them.
However, beyond matching the market rate, does offering graduates huge pay packets actually bring benefits, like incentivising longer hours or boosting work ethic? Or can it create unintended consequences, for both the young high-earner as well as the wider workforce?
Nicholas Bloom, professor of economics at Stanford University, says demand for labour is fast outstripping supply in sectors, particularly in tech. The financial industry – with jobs that often require 70-hour-plus workweeks – has also driven up starting salaries to hire the best candidates. So, in most cases, graduates are being handed six-figure salaries simply as a “blunt recruitment tool” amid the current labour market conditions, adds Rue Dooley, an HR knowledge advisor for the Society for Human Resource Management (SHRM), based in the US.
“Workers want to be thought of as a prized asset by their employer,” says Dooley. “Younger employees are saying high pay is an expectation not because they necessarily demand it, but because they’re aware of the talent shortage and they know their price.”
This means some entry-level workers can secure huge pay packets before they’ve even left the college dorm. “We’re regularly seeing firms double in size every 18 months, so graduate salaries are closely following the market,” adds Bloom.
In tech, smaller start-ups are also now having to pay entry-level employees higher salaries to match the more-established corporations. Josh Brenner, CEO of recruitment marketplace Hired, based in New York City, says US employers are paying first-year tech workers an average starting salary of $110,027 (£84,000).
Nguyen’s undergrad clients often land jobs with wages that dwarf the pay of his own first management consulting role. He believes it to be a good thing. “The six-figure starting salaries of today are an upward trend that stretches back decades,” he says. “High pay opens up opportunities for people who simply wouldn’t otherwise have had them, and it doesn’t take money away from those who started on lower pay.