The Financial Times has reported this morning that senior figures in the City are now complaining that the minimum wage is rising so close to graduate starting salaries that it threatens recruitment into accountancy, law, and finance.
They see this as a social problem. But is it? I see this as an economic reckoning and one that says more about the structure of the UK economy than about pay at the bottom of the scale.
First, let's be clear about what the article actually says. The suggestion is that the minimum wage, which is expected to rise to £12.70 an hour soon, would bring a full-time minimum annual income for a forty-hour week, which most new graduates will work, to about £26,400. That is now close to the lowest graduate salaries in many professional services firms, most especially outside London. The warning from professional firms is that this risks undermining social mobility. As the FT reported one saying:
“Why would young people take on £45,000 of student debt if they can earn the same stacking shelves? It would actually be damaging for social mobility because only the people who can afford to pay their way through university will be immediately incentivised to do so.”
That, though, is crass: the future salary expectations of the two jobs are not the same, and if the person making the comment does not understand that, they should not be in their role. More relevant was the suggestion that higher minimum wages will drive automation or offshoring. This is undoubtedly already happening, although how the future supply chain of experienced personnel is to be maintained in that case would appear to be a question the professions are not asking, again suggesting the limits in their own competence.
What is not, apparently, being asked is why graduate pay has become so low. That worries me. It appears not to trouble these people that the young are facing an unaffordable world, and the whole business model of much of the economy is facing collapse as a result.
Firstly, that's because the fact that the minimum wage is closing in on graduate starting pay says nothing bad about the wage floor, but it does say a lot about the failure of supposedly high-value sectors of the economy to reward labour fairly. The UK has spent decades celebrating the supposed prowess of its financial services and professional services sectors while suppressing the pay of those who do the work that makes those institutions function. Inflation, rent, transport, and debt costs have soared, yet graduate pay has barely shifted. This is a real threat to social mobility, and apparently, no one cares.
Second, the executives quoted never ask why the minimum wage has to be this high in the first place. It is not because low-skilled labour is overpaid. It is because housing, food, energy, transport and other essentials of life have become so expensive that even £26,000 barely allows survival in many parts of Britain. A minimum wage at this level reflects a rentier economy extracting wealth from workers, not a booming labour market lifting them up.
Third, they do not ask how young professionals are supposed to live on graduate entry-level pay that is at the minimum wage level. After tax, student loan deductions, travel costs and rent on very basic accommodation, many new graduates in London already have precarious financial situations, and often live in ever-increasing debt. The pyramid model of professional firms, with thousands at the bottom and a few at the top, ensures that this inequality is built into the structure of the business model itself.
Fourth, this complaint ignores the simple fact that prestige cannot pay the bills. The big firms still attract graduates because of branding, not because of pay. But that model depends on illusion: the illusion of upward mobility and the promise of future wealth. As the minimum wage converges on their starting pay, that illusion collapses. A society that expects graduates to carry £45,000 of debt for the privilege of earning £26,000 is not producing social mobility; it is manufacturing resentment.
Fifth, this problem does not just affect graduates, of course. It exposes the deeper contradiction of a rentier economy. The landlords, financial institutions, and asset owners who benefit from high property and service costs (as many partners in professional services firms will) are the ones driving wages down in the name of competitiveness. What they do not seem to appreciate is that their own system of rent extraction is finally bumping against its limits.
Where does this end? If professional wages cannot rise because profit margins and partner earnings must be protected, then either automation replaces people or graduates abandon those careers. If the minimum wage must rise because basic living costs keep climbing, then firms that rely on cheap junior labour will face a reckoning. Either way, this is not a labour market malfunction. It is a moral and structural one.
What should happen instead?
First, the professions must confront the rentier economy that underlies this tension. They cannot claim to be victims of high wages while profiting from the asset inflation that causes them.
Second, the government must recognise that a fair wage floor is not a distortion but is an essential correction to a system that has allowed wealth extraction to outrun productivity. They cannot bow to pressure on this issue.
Third, the professions need to look inward. If a firm's business model collapses because it must pay a living wage to its most junior staff, the problem is not the wage. It is the model.
So the answer is not to push bottom pay down again. It is to rebuild the pay pyramid within society so that everyone who contributes to success, whether they be a cleaner or an accountant, and a graduate or not, can live decently from their work. If that embarrasses the City, so be it. Change is long overdue, and it is the rentiers and extractors of monopoly profits who must pay.
Taking further action
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One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
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A friend once commented that Council Housing came about through Workers and management finding a common cause – landlords.
Workers wanted better and cheaper housing and employers resented having to pay high wages that went to [ay landlords rent.
Some business’s notably Iceland have managed to show insight into their customers needs so why are not some large employers saying it how it is about pay and why higher wages are needed?
One other interesting comment I heard was that in business’s while the minimum wage is rising the wages of those above are not which may beg the question why get qualified and have the stresses of a managerial of supervisory job? This might be the next ‘crunch’ point.
Would you take your manager’s job for a pay uplift, after tax, of a mere £67 a month? This is how it is in the public service profession in which I work. Why bother, indeed?
This reminds me of the story about the professional services company who appointed a woman CEO about 10 years ago.
She decided to implement a fairer wage policy for more junior staff.
The partners removed her and appointed a man, who decided to leave things just as they were.
The reality that the UK is a really expensive place to live is the other side of the wage debate. As you’ve highlighted – be it energy; housing; transport; education and increasingly health – we now pay through the nose for things the govt used to provide cheaply or for free. The financialisation of the UK economy that started under Thatcher has bled us all dry.
The average shelf stacker/till operator is unlikely to be working 37/40 hours a week. Probably 20 hours and then not able to find a top up job because they are not given guaranteed work on the same days each week.
In the professions the London “elite” are paying considerably more than £26k starting salaries.
Our self centred elites do not consider how their staff can survive on a pittance. It’s not their problem, it’s society’s.
But it is their problem. If they want a big talent pool then they need to contribute considerably more by way of re-distribution of wealth.
We keep hearing from the FT and other commentators that the peasants must share a bigger tax burden because it’s not fair that in the financial and professional services they have to pay tax!!! This is a block on their productivity.
Let’s be fair if you are earning £100k + even after tax you will be taking home many times more each month than the shelf stacker.
And?
One other factor in why a graduate might choose professional services over retail; job satisfaction. While my recently graduated daughter would have been welcomed back at our local convenience store where she worked a couple of holidays, she has instead become a trainee company administrator at a financial services firm. She is enjoying mentally stimulating work in the company of other educated young adults, and has realistic prospects of a substantially higher salary in the medium term future. Things Morrisons weren’t able to offer.
Accepted.
But many can’t afford Tom take such jobs far from home when the supermarket is around the corner from their parent’s home.
There needs to be a realistic level of minimum pay. By that I mean sufficient for someone to live a decent life. If we don’t have that then the government has to, as it currently does, subsidise those on low wages. This necessary subsidy, universal credit, is often characterised as supporting scroungers. It is no such thing. It is, in fact, a subsidy to business to allow them to employ people at below economic wages. The minimum wage, even at £12.70, is too low.
As an aside I’d point out that the state pension, at about £12k per annum, is less than half the minimum wage for a full time employee. This may be fine if someone owns their own home and has an additional private pension but, increasingly, that will not be the case. So, if the minimum wage is low then the state pension is egregious low. But I digress….
A decent minimum wage will have consequences.
Without other changes it does disincentivise studying for a degree. It’s not just the £45k of debt. It’s also the loss of three years of wages and career progression (and, yes, people can progress even without a degree, albeit it is limiting). Companies will have to decide whether they actually need graduates and, if do, pay them more. This may mean that some senior employees or partners, or rentier shareholders, will have to have less. And this may reduce (in a limited way) inequality, which is good.
In the UK there is claimed to be a productivity puzzle. Why has productivity grown so little? To me the reason is clear. It’s because it’s cheaper to employ on the minimum wage, subsidised by the state, than invest in increasing productivity. I expect an increased minimum wage to lead to increased productivity.
Increased productivity, perhaps with the help of AI, will, it is argued, lead to fewer jobs. I disagree. Furthermore do we really want people employed in shit, low productivity, subsidised, jobs? I think not. Look around. There are lot’s of jobs that need doing (care workers are and obvious one). We struggle to find people to do them because the wages too low.
Overall I see higher minimum wages as a good thing. It is one of many things needed to rebalance the economy, increase productivity, and reduce inequality.
Not paying an adequate wage and relying on the government to provide top-up benefits is part of the adversarial nature of market capitalism. It gives a lie to all those shill UK economic professors and think tank pundits preaching to their students, journalists and the public in general that market capitalism, including globoal trade, provides a perfect equilibrium solution between supply and demand. Such preaching reveals the dire state of the UK economy and especially when so many voters believe that Nigel Farage offers any kind of alternative to this nonsense!
It is yet another example of someone, probably on a big salary and already fairly wealthy, moaning because they may have to pay others a bit more which may very slightly eat into the increase they will get. Selfish doesn’t come close to describing it.
Craig
My children will not have that much debt (£45K?!!) but they will still have debt which is worrying enough. To do that, my partner and I have to cut our spending elsewhere. Another tin of beans for tea, anyone?
It still puzzles me that we have to put up with low wages in a consumptive society that believes in capitalism.
How the hell do these arseholes – and that’s what they are – expect capitalism to work on low wages? The answer seems to be provided back in the day by Steve Keen.
His observation was that Neo-liberals did not concern themselves with where money came from; it was just there. Real money (wages, savings) was no different to credit – it was all just money. This is why Neo-liberals did not see the credit crunch coming in 2008 – just live for today. They could not care less as long as people bought. Not their problem if credit creates bubbles; debt destroys income. Someone else’s problem upon which Neo-liberalism could pontificate endlessly on other’s personal weaknesses.
To say these people are thick is an understatement. You are still told that employment is your goal; work to receive, to get your house, the car, the pets, the holidays, the kids, your security, your pension and savings. And yet in reality, all these things are now much harder and some nigh impossible.
The other things Neo-libs don’t take control of is greed and time. If you allow one generation to grab as much as they can for themselves, bringing forward tomorrow’s money, it stands to sense that follow on generations will have less.
Capitalism has failed. It’s done.
Time to start again I’m afraid.
Wholly agree with your overall commentary, Richard. There has been a fundamental shift…in the wrong direction and in logical thinking. Years ago (in a previous leadership role) we would recruit 300-400 graduates every year and, even then, the salaries were much higher than todays minimum living wage…we were investing in the company’s and the country’s future.
I will use an example of 4 young people I know well…all graduates from top universities. 2 are my children and I am having to pay their rent. One is doing a PhD and doesn’t even get the minimum living wage; 2 are barely above the minimum living wage and, tellingly, one is employed via a foreign-owned company who is substantially better paid than the others (that country continues to invest in young people).
I find it – quite frankly – disgusting that the argument put forward is that the minimum living wage is so close to graduate starting salaries that it is threatening recruitment into finance, accountancy and law. Partly because the minimum living wage is just that…it is barely enough for anyone to get by on with overly inflated rents, energy bills, etc., created by our fixation on enabling an unproductive rentier economy and a largely wealth-extracting financial services industry. The professions mentioned are typically the ones who have benefited from the neoliberal economy. It is, therefore, particularly galling that they have the cheek to complain. It is simple, pay graduates a decent starting salary that recognises their potential, i.e., invest in them and the country. Or, better still, stop propping-up and promoting a neoliberal / rentier economy and, most of all, stop being so personally greedy taking your large salaries and bonuses, etc., and expecting the starting graduates to be little more than indentured serfs.
I am fortunate enough to be in a role / organisation where the main metrics for success are not purely financial (they are focused on long-term creation of a positive legacy, economic benefit to local communities, etc.) and where, if bonuses are payable, they are payable to all as we have all contributed to the achievements. In other words, they could easily solve their own problem….stop being so narrow-minded, self-serving and greedy.
Isn’t is about time we seriously discuss how to cancel student debt, and return to the principle of free education?
Yes, in a word
Danny Dorling has done stuff on this
There is an interesting thing happening in Japan – it’s been termed “low desire society” which in a nutshell is that the younger generations of Japanese people have concluded that the dream that is sold to them (i.e. study hard, work hard and play hard) doesn’t actually come true – so in response, many have become despondent. I’m not sure if it is widespread but there is a lot of interesting stuff about it online.
I don’t blame them
There’s this piece on Byline Times as well. https://bylinetimes.com/2025/11/03/nigel-farage-minimum-wage-cut-for-young-people-reform-uk/
Might a submerged purpose of student debt be to make those in tertiary education, who could ask difficult, well grounded, questions of the ruling “caste”, more easily controlled?
Yes
This one seems pretty relevant, from Tony Benn:
“I expect that the House has heard of the little document, which is circulating, about the boat race between the NHS and a Japanese crew. Both sides tried hard to do well, but the Japanese won by a mile. The NHS was very discouraged and set up a consultancy. The consultancy came to the conclusion that the Japanese had eight people rowing and one steering, whereas the NHS had eight people steering and one rowing. The NHS appointed people to look at the problem and decided to reorganise the structure of the team so that there were three steering managers, three assistant steering managers and a director of steering services, and an incentive was offered to the rower to row harder. When the NHS lost a second race, it laid off the rower for poor performance and sold the boat. It gave the money it got from selling the boat to provide higher than average pay awards for the director of steering services.”
One has to smile, even through gritted teeth, at the nerve of those making such complaints. It’s people like them who’ve eroded so called graduate level entry pay and a sure remedy is in their hands if they’re prepared to splash out a bit. And hypocritical to grouse about loss of ‘social mobility’ opportunity when it’s class differentials they expect to remain in place despite their optimising behaviour.
The first thing the government should be doing is sending an invoice to every employer in Britain demanding payment for the in work benefits it has had to pay their full time employees.
Next, it should use the dataset it has to set a minimum wage to all but eliminate in work benefits. This is not just for financial reasons but also because someone working full time should be given the dignity that their work will be rewarded.
If this puts pressure on employers of the higher skilled then so much the better. I started at a Big 4 firm in 2003 on £20k, about £36k today. Most top 20 firms paid the same. It is a joke that any of them try and get away with paying less.
I wonder if anyone has estimated what the scale of that subsidy is?
in work benefit subsidies…. For young people, single.. under 35 years old… don’t expect much!
Take a 26k gross income. This means £1853.33- net / month
OK let’s pick a postcode for housing because otherwise it is not possible to do a Universal Credit calculation.
UC is calculated in two steps: 1) the Maximum Credit is calculated. It is what the law says apply in the claimant’s circumstances and is made up of elements set by law.
Universal Credit includes a housing element in the calculation for help with rent. The housing element is the maximum eligible rent applicable in the claimant’s circumstances. Someone under 35 years old renting in Croydon (postcode CR7 but ‘inner south east London) will have an eligible rent of £149.59 / week or £648.22 / month . This is how their entitlement will be calculated:
Maximum Credit (baseline of calculation)
a) Standard Allowance for someone 25 years old or over £400.14 / month (the law says!)
b) Housing Element £648.00 / month
Maximum Credit (sum of the above) £1048.36 / month
Deduction-Net earnings tapered at 55%.
c) £1853.33 x 0.55 = Tapered Earnings £1019.33 / month
Universal Credit Payable:
d) Maximum Credit £1048.36 Less Tapered Earnings £1019.33 = UC Payable £29.03 / month paid as £29.00 in arrears.. This is the support they will get from UC.
If you look at rents for one room shared accommodation in that postcode (I had a very quick look) it will be very minimum £700 to £1000 / month and the competition is fierce to find something decent at the lower end, endless you live in a box room !! – So £900 for a room in a share house / flat would seem likely…. (I don’t live in the area, I just picked it up because you were referring to London)
So total net income (and I have not taken into consideration repaying the student loan) £1882.33 / month including the £29 / Month Universal Credit – then you have to pay the rent, your bills, transport, food…. etc.
Forget having a one-bedroom or even a studio flat because the rents will be too high. So until you reach 35 years old, when you become eligible for the one bedroom Local Housing Allowance rate for your Housing Element, you live in a shared house, realistically and almost half your net income goes out to pay the rent if you want a decent room, I think.
That’s it.
And thanks for demonstrating it.
We are approaching a merger in the after tax remuneration of full-time minimum wage earners, workless universal credit claimants getting a disability element, and entry level graduate earnings.
We could call this the triple point of statism, where three different but common forms of human experience are in the same state. We truly have achieved civilisational peak after all the tribulations and trials of the two centuries that gave us the industrial revolution and communism.
Your readings baffles me. Maybe my troll alert is not working.