New graduates are part of that much-researched demographic, gen Y, and as a result there is a great deal of data out there that gives us some indication to their lifestyle preferences when they enter the workforce. But what is clear, is that the current intake of graduates are unlike any generation that has gone before.
For a start, they are likely to be more comfortable with debt than any previous generation – most, if not all, will have a significant level of student debt. The Institute for Fiscal Studies (IFS) recently produced a report entitled ‘Payback Time?’ which estimated that students graduating in 2015 will leave university with average debt levels of £44,035. The report goes on to estimate that graduates will repay a total of more than £66,000 against that debt during their working life.
Employers are faced with an enormous test to encourage new graduates to save, when their focus is undoubtedly going to be on the level of student loan deduction in their pay packets. Some new graduates will also struggle with the cost of living itself before they even begin to factor saving into that equation. How challenging is it, therefore, to engage these young people with the idea that some 40 to 50 years from now, they’ll need to provide themselves with an income in retirement. That’s before you can start to explain the power of compound interest and the benefit of starting to save early.
To rise to the challenge HRD’s need to use the right channels of communication to reach out to this younger generation – the current influx of graduates are ‘old hands’ in the online space, they don’t remember a world without broadband. They take their instruction from You Tube, not Google – they want to see things evolve in 3-D, in full colour with a soundtrack. If HRDs want to communicate effectively with their new influx of graduates, they have to evolve a strategy for communications that goes beyond putting word on a website. It’s probably not face-to-face either, but is something that can be delivered and shared via social media – including videos on You Tube.
Those of us who have been in the workforce for some time can be blind to the things we already know. We’re blessed with the curse of knowledge – a phenomena identified by a researcher, Elizabeth Newton from some work carried out at Stanford University in the 1990s, where her experiments with ‘tappers’ and ‘listeners’ revealed the difficulty of sharing knowledge when we have the full song in our head. It’s even more the case with communication in organisations that suffer from enormous information imbalances between the communicator and the audience – as is often the case with pensions saving.
What is required is the ability to see the other perspective and to ‘walk in graduates’ shoes’ for a while. What do they want out of life, and does that help us to get them to engage with the concept of saving? If we can get them to save for one thing, it’s the start of a savings habit that, all things being equal, may lead to saving for the longer term. The pensions freedoms have the potential to encourage, but only at the point at which the importance of saving becomes apparent. We need to engage new graduates with saving for those things they can see the benefit of – whether that’s for a deposit for a house, or a travelling fund for the near future. Corporate ISAs are a useful tool in this space, and here’s an idea, why not link them to the pensions arrangement with incentive-based company contributions to participate in both. It’s a win-win.
Yet, most young people entering the workforce will not see their first job as the start of a career, but the start of their first career. They will, however, be in the workforce far longer than any previous generation. Although the provision of good pensions can no longer be seen as a retention strategy for the business, it is important for all UK businesses in the future (including our own), that we recognise the need to encourage employees to save so that they can retire when they need to. Otherwise, in the not too distant future, the question for HRDs will be not ‘how to engage new graduates’, but ‘how do we dis-engage our octogenarian workforce?’