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What a difference a year can make! The first class of Generation Z-ers entered the workforce in 2020, during a time of great uncertainty and businesses were still trying to figure out how the US economic recovery would play out. Just one year later, in 2021, the labor market is steadily growing as companies attempt to return to full employment.
Across the board, employers are re-evaluating their employee value propositions (EVPs) to attract and retain talent with higher pay, more flexible hours, enhanced benefits, and better engagement. But what about new hires with little to no experience – should they be offered the same pay and perks?
Mercer's US New Graduate Pay and Gen Z Compensation report published data for annual starting salaries for new graduate hires and hourly pay rates for coop students and summer interns across many industries. Just as they did pre-COVID, organizations continue to see the benefit of bringing in younger talent. Nine of 10 organizations are offering new graduate hiring programs and summer internship programs. Coop education programs, however, are much less prevalent, with 38% of participants providing them in 2021.
Gen Z is composed of individuals born during and after 1997, and as of 2021, they are 24 years old or younger.
Organizations may have kept new graduate hiring programs and summer internship programs in place, but what they offer and deliver require an update as the expectations of recent graduate and student employees have changed. Gen Z's priorities don't look like those of any generation before.
The US New Graduate Pay and Gen Z Compensation report finds that the perks considered most important to Gen Z are different from those of previous generations. The most important perks are cultural, personal (like personal appearance and maternity/paternity leave), and social perks (such as community service and paid volunteer leave).
Challenging and rewarding work was found to be as important to new graduates as pay. So what does that mean? Having grown up in a digitally enabled and socially connected society, Gen Z is both idealistic and disenchanted. To engage this generation, career development programs for new graduates should be truly talent led. Unlocking human potential demands a holistic approach if individuals and businesses are to thrive. Ultimately, this requires companies to rethink the purpose of work, the well-being of workers, and the role of organizations in societal happiness.
According to SHRM, an “intern's work complements rather than displaces the work of paid employees while providing significant educational benefits.” A co-op job “is like a paid internship, where students earn a salary as they work with professionals in their fields of study. Some are then hired by their co-op employers.”
More than three quarters of participating organizations have a separate pay structure for their coop students (76%) and summer intern programs (78%), but only 18% of organizations have a unique pay structure for new graduates.
The US New Graduate Pay and Gen Z Compensation report shows that recent graduates with certain bachelor's degrees are in greater demand and by more organizations than their peers. While all of the top-recruited degree salaries have increased over the last few years, the prevalence order has reshuffled as engineering has ascended in ranking and Bachelor of Business Administration ranks lower than before:
Coop program participants typically do not receive tuition reimbursement or premiums for working multiple terms in a single academic year. Companies usually do not hire freshman-year students as part of their coop programs. For the remaining years of study, the highest percentage of organizations hire third-year students working toward a Bachelor of Engineering.
The percentages of companies across all industries who hired coops by degree and year of study are:
Summer interns are typically compensated monetarily, irrespective of the industry sector, and typical pay rates vary by degree program and region. The latest data shows that students with a STEM discipline are the most frequently hired interns, especially those in the third or fourth program years.
Students in Bachelors of Science and engineering programs are hired as interns at approximately 66% of companies in the third year and over 50% in the fourth year. Meanwhile, 52% of companies hire third-year students seeking a Bachelor of Business Administration for summer internships and 49% employ third-year students pursuing a Bachelor of Arts for internships.
As you prepare for 2022 and beyond, consider how new graduates and Gen Z talent desire different things than generations before. Use Mercer's US New Graduate Pay and Gen Z Compensation report to re-evaluate your employee value propositions (EVPs) to attract and retain the best employees.