At a time when salaries aren't rising in line with costs of living, young professionals are already struggling and turning to side hustles to make ends meet. Amidst such a scenario, college students have "unrealistic expectations” when it comes to wages in the future, according to a 2023 survey by Real Estate Witch. Gen Z undergrads surveyed expect to make nearly $85,000 within a year after graduation and say they would refuse to work for less than $72,000. However, according to the study, their estimation was off by $30,000 as the average starting salary in the U.S. at the time was about $56,000.
Out of Touch With Reality?
While as many as 97% of those surveyed said that they would consider lowering their salary expectations, they stated that they wouldn't settle for anything below $72,580, on average. While this was considerably higher than the average starting salary at the time, it is way higher than $47,749 a year, which is the current average annual pay for a Graduate in the U.S. as per ZipRecruiter.
Furthermore, a decade into their careers, the students surveyed hoped to make more than $204,560. This was also well over the average mid-career salary of $98,647, at the time, according to Glassdoor.
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Seasoned workers may find the expectations laughable, but it turns out that the numbers were more realistic than in 2022. Back then, college grads expected to earn a whopping $103,880 from their first job.
Despite 2023's expectation being lower by $19,000, the new number $85,000 is still far from reasonable for most students entering the workforce.
What Explains This?
Similar trends were observed in another survey conducted by online polling software Pollfish for Clever Real Estate. Speaking to Yahoo Finance, the author, Tommy O'Shaughnessy explained that the disconnect between expectation and reality was "due to a lack of information."
The analyst added that there's also a phenomenon known as ‘illusory superiority,’ which is "the tendency for people to overestimate their qualities and abilities." The expert observed that this tendency was evident in their study.
The Yahoo Finance report further added that the overestimation could also be stemming from the mounting student debt that new graduates need to pay. The cost of college education has been rising steadily over the last 30 years and the wages have hardly matched up to it.
A Gloomy Job Market
Securing that first job out of college is a milestone in life, but it may be a rather nerve-racking experience for young adults who need to tackle the rising costs of groceries and rent. According to data from the Federal Reserve Bank of St.Louis, 4 in 10 college grads are currently "underemployed," which means they are working jobs that don't require a college degree.
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The outlook gets worse as hiring of fresh college grads is expected to go down by 6%, according to a 2024 survey conducted by the National Association of Colleges and Employers.
Furthermore, recent data from payroll services provider Gusto indicated that the new grad hiring rate (share of recent graduates hired in a given month) is already down by 6%, from the peak of 10% in 2021. However, the hiring rate is still above last year's numbers and the firm's principal economist Liz Wilke told CBS MoneyWatch that the job market for new grads is relatively stable.
