What’s going on in the graduate labour market?

It’s been a busy old summer.

This isn’t another blog about the Green Paper – much ink has been spilled on that subject already and more will be in the future, I am sure. But it is about some of the issues that are brought up in the Paper and will arise in the course of debate and implementation.

First, what is the current state of the labour market for graduates? The answer is reasonably simple – the recession, at least for graduates, is over, we are in recovery and prospects for new graduates are what we’d expect from a reasonably healthy graduate jobs recovery. The evidence is manifold, but perhaps the simplest comes here, from historic early unemployment rates for graduates as shown in the graph below.

historic unemployment rates for UK domiciled first degree graduates since 1976
That’s a lot of recessions.

We’re clearly in a state of falling graduate unemployment (note how often we end up in graduate recession, though). The early part of 2015 had a great deal of positive news, but the second half suggests that the rate of recovery has slowed and we can see that hiring intentions are slowing, especially in manufacturing. I would expect things to improve marginally this year and then flatten out in 2016 – but as we can see from the graph, we’re getting close to historic lows in the early graduate unemployment rate anyway.

This has a number of effects, but probably the most crucial is in skills shortages. This is where the Green Paper can come across as a little misleading. The Paper acknowledges that employers are now struggling to find the graduate skills they need, but the section, ‘The Productivity Challenge’ says the following

However, at least 20% of graduates are not working in high skilled employment three and a half years after graduation, and most employers of STEM graduates are concerned about shortages of high quality applicants

and then follows with

Too many organisations find it hard to recruit the skilled people they need; this poses serious risks to the competitiveness, financial health and even survival of many businesses. Surveys by the UK Commission for Employment and Skills (UKCES) reveal a sharp rise in skills shortages. Such deficiencies are longstanding in some sectors, preventing us from rebalancing the economy and underlining the need for decisive action.

So, what’s happening? Let’s look at the second point first, ‘most employers of STEM graduates are concerned about shortages of high quality applicants’. This comes from a new paper by the Institute of Employment Studies and HECSU for BIS, “Understanding employers’ graduate recruitment and selection practices”, of which, happily, I am a co-author. What’s actually going on is, as the UKCES Employer Skills Survey also shows (and I spent most of the summer looking at this data), we just don’t have enough graduates applying for jobs in a whole swathe of graduate roles across the economy. Not just in STEM, although engineering in particular is affected, but across most sectors, including health (we are so short of nurses), manufacturing, finance and business services. As the Bank of England wrote in July.

Recruitment difficulties had edged up and were at levels last seen during 2007, having broadened recently across a wide range of skills, levels of experience and occupations. For example, reports of a scarcity of experienced middle and senior managers had become fairly common. … In consequence … apprenticeship, graduate and school-leaver recruitment programmes had been either maintained or increased.

Recruiters are concerned with getting enough talent, and with retaining that talent when they have it, and there’s little evidence of those issues easing at the moment.

Let’s now turn to the first point, “However, at least 20% of graduates are not working in high skilled employment three and a half years after graduation”. As we address in great length in Chapter 2 of the new report, there is no consensus on what a graduate job is, nor are we actually sure what a high-skilled job is, but there seems to be a lot of evidence mounting that even were you to identify what these terms might mean today, the nature of industrial change is such that a job that might be ‘non-graduate’ or ‘low skilled’ this year may no longer be in three years time. Just today we had news that exactly these forces seem to leading the College of Policing to conclude that police officers should now have degrees. At present, we are using definitions of ‘graduate job’ and ‘high-skilled employment’ that are based on an occupational classification system developed before the recession and not designed for that purpose, and so it is difficult to be clear what these measures really mean.

So, where are we now? The market has recovered, most graduates will get jobs quickly (although that’s always been the case) and there are several areas where there are not enough to meet employer demand. These are the current challenges in graduate recruitment. We are not in a situation where, broadly, we have too many graduates chasing too few jobs, although we might in individual industries. We do have a mismatch between supply and demand but that is often not because graduates are not good enough but because in a time of relatively healthy graduate prospects, many employers are now finding that their offer is not attracting the graduates that they want. Are the graduates there at all? Do they need to refine their offers? Whatever the answer, the labour market for graduates is not the one we had started to get used to from 2008, and we all need to adjust.

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3 thoughts on “What’s going on in the graduate labour market?”

  1. Great post. It’s evident for both DLHE and when discussing skills (and shortages) that we really need to pin down what is a graduate job and then constantly update this. Job titles just aren’t helpful anymore.

    1. I agree Leigh. Job titles just don’t cut it in many cases.

      I’ll talk about this at significantly more length over the next few months. Obviously this is a critical area of focus of the upcomings changes to outcomes data measurement and we will be looking to see if there’s a way we can address it, but there are a number of interesting challenges to overcome.

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