Apprenticeships versus graduate, who commands the greater earning power?

23 September 2016 | Focus | Guest Author

“I work all night, I work all day, to pay the bills I have to pay. Ain't it sad. And still there never seems to be a single penny left for me. That's too bad. In my dreams I have a plan…” ABBA.

So what is your plan to earn post school or college? You are an able student and have the option of applying to university or for a Higher or Degree Apprenticeship scheme with a major employer. In terms of how much you can earn now and in three years’ time, you need to decide; university or jumping on the apprenticeship train.

On the face of things this might appear to be a straight forward decision. After all, as an apprentice you will be paid whilst as an undergraduate you will be chalking up debt that could reach £40,000. We also need a reality check, as experienced in the novel Animal Farm, not all apprenticeships (level and sponsoring company) yield the same. Similarly, not all degrees (university and subject) produce the same prospects.

There are four levels of apprenticeship: Intermediate, requiring two or more GCSEs; Advanced, five GCSEs each at a minimum grade C; Higher Apprenticeship, needing at least two A-levels or equivalent; Degree Apprenticeship, requiring good A-levels. In this later case you can work towards gaining a degree. Since entry to university is based on gaining A-levels or the equivalent, sense dictates that a proper comparison of earning potential should be between you as a graduate from university and you after completing a Higher or Degree Apprenticeship.

Apprenticeships are increasingly popular, with the government promising up-to 400,000 overall apprenticeships by 2020. Despite this drive the reality is that pay rates for the first year can be significantly less than the minimum wage. The minimum wage sits presently below £6.00 per hour for 18 year olds. Some technical apprenticeship schemes do offer better salaries, specifically those being offered by BAE Systems, Jaguar Land Rover, The Network Rail and Rolls-Royce, to name a few. Outside technology based employers, the likes of Aldi (retail), Grant Thornton (accountancy) and GSK (pharmaceuticals) offer outstanding schemes. In many of these examples school leavers will be expected to have a sprinkle of good GCSEs and a pair of A-levels.

The 2014 Apprenticeship Pay Survey found that across a range of schemes the mean total weekly earnings, which includes overtime, tips and bonuses was £257. This equates to an approximate annual salary of £13,000. In comparison, as a first year apprentice at companies such as Barclays, Santander, Boots, Grant Thornton, The National Grid (engineering) and Unilever, basic salaries between £13,000 and £15,500, rising to as much as £24,000 at the end of the three-year programme are on offer.

At this stage a second reality check is needed. Gaining a place on these top end apprenticeship schemes is extremely competitive, requiring sound A-levels and applicants walking the gauntlet of a rigorous selection process. In these cases, the rejection rates hover between 95 and 99 percent. However, if successful the result is that by the age of 21 these high flying young adults can earn between £20,000 and £24,000 per annum.

Turning now to you as a graduate from university. The open literature is littered with reports of earning potential. Headlines such as, “Graduates earn £500,000 more than non-graduates” are not uncommon. The reality is that graduate employability and thus earnings is dependent on the industry, the degree studied and the university attended. By way of example graduates working in accountancy and professional services can receive between £16,000 and £42,000 (with a median of about £30,000), consulting offers £28,500 to £50,000 (median £31,500) whilst engineers receive £23,000 - £31,000 (median £26,000).

Rated by pay it is widely accepted that the degrees that tend to command the highest salary include engineering, mathematics, medicine (including dentistry), veterinary science and computer science. In these cases, the typical salary is in excess of £35,000. In contrast, graduates working in the public sector typically earn between £19,000 and £41,000, with a median of £21,000 skewed towards the lower end. Studying the creative arts and communication record earnings, that on average, was no more than non-graduates.

Regarding the influence of the university attended, the usual suspects prevail. Graduating from the likes of Manchester, Warwick, Leeds, UCL and of course Oxford and Cambridge increases your chance of employment and thus earnings.

Therefore, comparing earnings between apprenticeship students and graduates can realistically only be tackled by looking at the top-end apprentices, viz those young adults who have completed a coveted apprenticeship scheme. In these cases, a graduating apprentice can command a salary in the order of £25,000. This does not however compete with that earned by a top-end graduate.

It would appear that whilst gaining a position on an employer top-end Higher and Degree Apprenticeship scheme is extremely competitive, employers continue to reward graduates above those who have completed an apprenticeship. Such schemes do however provide the opportunity for high-flyers who, do not immediately want to study full-time after completing their A-levels, to gain a sound footing in their career of choice.

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