A lot of people are writing about their personal journeys towards their referendum vote tomorrow, but I’m going to assume that anyone who pays attention to anything I say does so largely to hear what I have to say about the graduate labour market.
Over the long term neither vote is likely to change the economic or social makeup of the country very greatly – there are far greater forces in play than the EU. The UK is a relatively rich nation and is likely to remain so. As a consequence it is also likely to continue to require significant immigration to fill labour needs and thus for net migration to the UK to continue regardless of the result. It does seem likely that were we to leave the EU, the nation is more likely than not to end up less wealthy than it would were we to remain but we wouldn’t know either way and we’d still be an affluent Western nation and so that question is more theoretical than practical. There are lots of things we might do that could affect our long-term prosperity that we don’t put to a referendum.
It is not an easy matter to work out exactly what Brexit would entail for the labour market over the long term. I am not going to try. We would need detail about trade deals and future economics that simply does not exist.
The short term is a different matter. Almost all those with an informed view agree that the economy would experience a shock and most likely enter a recession if we vote to Leave. Much of this is due to uncertainty about future business conditions, that great foe of business planning.
Indeed, as anyone who is involved in the labour market will tell you, businesses seemed to become much less certain about the UK’s post-referendum future earlier this year (probably around February/March for most), and as a consequence recruitment, particularly into new positions, appears to have slowed down considerably since then. Again, it’s not clear exactly what will happen if we vote to Leave tomorrow, but this Pathmotion survey, although relatively small in size, found that half the employers surveyed would reduce recruitment and the other half would leave it the same. Nobody surveyed expects that leaving the EU would allow or require them to hire more people. So this reinforces the idea that there would be a short term, negative impact on graduate recruitment. It may well be that simply having had the referendum in the first place might reduce the number of opportunities for new graduates this summer, simply because of the inhibiting effect that uncertainty has had on the labour market, but if Remain wins tomorrow, pent-up demand may well be released and graduates may not experience much overall difference with last year once the dust settles.
If we vote Leave? As is always the case, on any kind of economic shock, the first people to be affected are new entrants to the labour market. In the case of new graduates, a shock sufficient to cause a recession – as most authorities expect – would be expected to cause an increase in early graduate unemployment after six months, from the present level of 6.3% to around 8% or higher (it’s usually higher in a recession). Approximately 350,000 first degree graduates are expected to complete this summer, and a 1.7% rise in the rate of unemployment equates to just under 6,000 fewer of them getting work.
Next we try to gauge the effect on the employment rate in professional occupations. Ordinarily, economic shocks hit lower skilled workers first, but Brexit is expected to hit sectors such as financial services and HE particularly strongly – indeed some financial services firms, such as JP Morgan and Goldman Sachs have stated that leaving the EU will probably affect where jobs go in their companies in the future and that it is likely that fewer will be in the UK.
So we’ll assume that we have an ‘average’ recession for one year, and that the proportion of graduates in well-paid professional roles at the start of their career will fall from approximately 68% of the cohort as it is now to 63% – about what we saw in the last recession. Around 245,000 graduates will enter the workforce this year, so a decrease in the professional employment rate of 5 percentage points comes to 12,250 fewer graduates in professional level jobs. This is a price to be paid by the individuals whose careers could be set back and by society, by having underemployed, able young people contributing less in tax to the Exchequer than they otherwise might.
I’m not saying if we vote to Leave the EU, exactly the scenario outlined will take place. Like all predictions about the future, my prediction is wrong and all we will find out later is quite how wrong I was. I don’t think it’s significantly wrong and if anything underestimates potential impacts. The figures outlined – 6,000 fewer graduates in work, 12,000 + fewer graduates in professional employment – is about what you’d expect if we suddenly fell into recession from the position we’re in now. It gives you some idea of the immediate effect that thousands of this year’s young university leavers might experience in the event of a Leave vote and likely subsequent recession.
We will have recessions in the future. We’ll probably have one within the next decade. None of them will be much fun. I’d rather we didn’t have an avoidable one right now.
I’m going to vote Remain. This is less about the labour market and more because of my long-held and deep-rooted belief in national and international co-operation. The campaign from both sides of the argument has rarely been edifying, and has too often showcased much that is bad about public discourse, political thinking and the UK media. But the Leave campaign has been especially grim and they have failed to give anything resembling a clear view of exactly how the UK will leave the EU, what will happen afterwards, or how they expect the country to look when the process is complete.
Ultimately, I feel the nation is strengthened, not weakened, by a close bond with our neighbours. The EU is a deeply imperfect set of institutions with many serious faults, but I do not see that in an increasingly interconnected world, isolating the nation from our existing bonds and agreements strengthens us. We’re all part of an international community, facing the same challenges on issues climate and population, and I feel we’ll achieve more as an enthusiastic agent to improve the EU than by withdrawing from a group we’ll nevertheless still have to work with, but with less say on the rules we will have to abide by. That’s why I will vote to Remain in the EU.