Each week* I will be tackling a common myth about university, graduates and the labour market and showing the data and research surrounding them so you can judge how valid those statements are. I started with the big one – that there are too many people getting degrees.
Next up, a related myth – that ‘everyone gets a degree nowadays’.
*may not be, strictly speaking, one post every week.
The development of the Teaching Excellence Framework and the way that it will use measure of graduate employment as a metric to judge institutions makes it all the more important that we get a real grip on how the graduate labour market works.
Graduate migration – see my most recent piece for the latest data – is a phenomenon that has subtle but profound effects on the way we can and should think about graduate employment.
To help understand the migration groups, here is a graphic developed by my excellent colleague Ellen Logan.
There are some differences – most notably, Loyals have increased for all regions except London (and, interestingly, Northern Ireland), Incomers are also up in most places, and Stayers are down, quite a bit, in some places (especially Scotland).
But the basic patterns have not moved in over a decade. We may find that, in the future, regions retain slightly fewer people who moved to the area to study, but more people will not move far to study or work but these patterns are what graduates do to find work, and we can assume that this will continue. .
This shows that graduates are not as mobile as a lot of thinking has them and that many can’t or won’t move far or to locations that they do not have a connection with for work. There are practical implications – most graduates who go to work in London, for example, are either originally from the region or studied there. And the same effect is intensified for every labour market outside London.
If you’re a recruiter, this ought to make you think about how you source your talent. If you recruit in Leeds, your new recruits will largely have lived or studied nearby. If you a London-based recruiter with a diversity agenda, even if you see yourself as attracting talent from all over the country, in reality many of those attracted to your offer will have existing ties to the capital, with implications for your ability to recruit BME graduates and graduates from less affluent backgrounds.
If we are to have metrics based on salary, therefore, we have to understand that they are at least to some degree a measure of where an institution is sited and where they draw their graduates from.
Much has been made of the IFS finding that a group of institutions have graduates who earn under the national average for all workers; anyone familiar with the graduate labour market can probably have a good stab at the identities of those institutions, predominantly universities in less affluent parts of the country, serving labour markets with low wages. We should not allow a situation to develop where institutions with a valuable function in developing local economies feel incentives to send their talented graduates outside those economies to ensure metrics are met.
For institutions, it makes it clear that you will need to be absolutely on point about your local labour markets and to understand where your student cohort comes from. There’s a lot more to understand about how and why graduates move to find work, and what this means for the UK. Is it right to think of the ‘UK graduate labour market’ at all as anything but an abstract, or is it really a series of overlapping markets with their own character and needs? And, crucially, how do we ensure that a framework develops that does not effectively penalise universities for not being near London? We have work to do.
This is an unabridged version of a section from my recent article in Graduate Market Trends about the Masters labour market in the UK. The first section, on Masters employment, is reproduced in unabridged form here.
There is a lively ongoing debate about the ‘graduate job’ and the question of which jobs require degrees. There is, however, consensus that a jobs market does exist for which first degrees are the main qualification and which is not always accessible for workers without this level of qualification.
There has been a lot of excited comment about Penguin’s decision to open out their recruitment process to people who have not been to university. Some people have seen it as a sign that a degree is not as valuable in the workplace, and some links have been made to other companies broadening their talent searches. But to me, it seems like a perfectly reasonable move, and nothing to get too excited about. Why is that?
Firstly, publishing, as an industry, is not as diverse as it could be. In 2014, 86% of graduate entrants to the industry were white (as opposed to 79% of graduates), 85% had 2:1 or above (as opposed to 68% of graduates) and 61% came from a area of high participation in university, as opposed to 54% of all graduates. The book publishing industry is normally even more socially selective than the industry as a whole. Any measure that addresses this is to be applauded, although, I don’t think it’s too cynical to suggest that Penguin are probably still going to recruit a lot of white, middle-class graduates.
Secondly, it’s clear from even a cursory glance at employment data for the industry, or vacancies, that some of the jobs that will be on offer don’t need a degree, and that’s fine. Just like every other industry, publishing needs office clerks, sales administrators, goods packers, receptionists and other roles which are vital to keep the company running, but don’t need a degree. Last year, just 38% of new graduate recruits to the publishing industry said they absolutely needed their degree for their new job (another 35% said it wasn’t an absolute requirement, but it did help). Graduates have options in the current market, and it does them little harm for employers not to ask for degrees for jobs that don’t need them.
Thirdly, I keep talking about skills shortages, and publishing is not immune. This year the Higher Education Statistics Agency, HESA, are projecting that, for the first year in some time, we will have fewer graduates than in 2015. Yes, that’s right. We already have shortages, we’re likely to have more vacancies this year, and we’re likely to have fewer graduates, in total, than last year. Publishing is a popular industry, but it’s very London-centric, it doesn’t always pay the best wages, and London will be a battleground for a shrinking pool of graduate talent this year. And we know that graduates are declining job offers because of the strong position they find themselves in. Smart companies will acknowledge that in a market where graduate talent is in demand, it makes sense to broaden their options. Graduates have no need to lose sleep over it.
And finally, last year, Penguin did this to recruit new marketing talent. ‘The Scheme’. Open to anyone, regardless of qualifications. Yes, they already did this last year. But it got a lot more column inches in 2016. Penguin have some savvy marketers.
This morning, RICS, the Royal Institute of Chartered Surveyors, released their Q4 Construction Market Survey. 66% of construction professionals reported recruitment difficulties to be the most significant barrier to growth in the last quarter of 2015. 60% of survey respondents had difficulties finding quantity surveyors.
At the same time, HESA’s new figures on student numbers showed that the number of students enrolled in UK higher education fell 1% last year.
The RICS data follows a pattern emerging from many sources in recent months. The British Chambers of Commerce noted in their Q4 Quarterly Economic Survey that 79% of manufacturing companies and 64% of service companies had trouble recruiting last quarter (more data on their excellent web site). The image below, taken from their site, puts those difficulties into context.
Some of the most serious are in engineering, where we simply don’t have enough graduates in most disciplines, and in IT, where there are not enough graduates with the skills to meet demand. The RICS report shows that allied professions particularly surveyors, but also planners and related roles, are in short supply. But the focus on STEM skills does tends to distract from the fact that we also have widespread graduate recruitment difficulties across many service industries.
There are two main ways we can address this issue wrongly. The first is to assume that the problem is that graduates are not good enough and berate the education system. Although not all graduates will be as ready to enter the workplace as they could be, this only applies to a minority. The 2013 ESS found that the large majority – well over 80% – of recruiters felt that graduates were well-prepared for work. The second is to blame graduates for their career choices. Now we charge students £9,000 a year to take a higher education degree, explicitly on the grounds that they will personally benefit from their study, they quite reasonably feel they can then do as they choose with that qualification.
The issue is that there are not enough graduates, and that those we do have are not always easily convinced or trained to enter the professions where we most need them, and that this undersupply of graduates is an active barrier to growth in some industries.
This can be frustrating. A majority of graduate occupations are, at least in theory, open to graduates from any discipline, and this goes particularly for occupations in business service industries. We see this most starkly in marketing, an expanding occupation with significant demand for graduates and where marketing graduates made up a relatively small minority of entrants in 2014 because there were simply not enough to meet demand.
But it’s not always that easy. For many graduates in less vocational degrees that allow significant career flexibility, the sheer range of options can itself be paralysing. It becomes very difficult to choose from the dizzying range of career options available, especially when a student is not really familiar with what they all entail. And whilst there is more some sections of the economy can do to persuade workers with the right skills to join their industries, the same is not true everywhere. If we want to fill mechanical engineering vacancies, we need suitably qualified people.
But are we doing enough to help that process along? Do we make it easy enough for graduates with appropriate qualifications to convert to professions like engineering or surveying where the lack of qualified staff actively harms economic growth?
As we go into 2016 with recruitment difficulties towards the top of the agenda, these are some of the questions we need to wrestle with.
For institutions, we need to ensure that students get the right support and guidance and to build their confidence so that they feel equipped to make decisions. Just because the market is rather better for graduates in 2016 than it was in 2012 doesn’t mean that the decision making process is any easier.
For employers, this year will see more recruitment and retention difficulties. It will mean being more innovative about addressing them, looking more widely at the likely supply of graduates in their business areas, examining reward packages and ensuring that they remain competitive and about developing new strategies to cope. These issues are not likely to go away until we have another recession, and even then they will be only temporarily put on hold before they return.
For students, this means recognising that good graduates will be in demand from multiple sectors, but only those who keep their options open. Good advice and guidance can help make those difficult decisions – but they should never forget that they have a long working life ahead of them, and it’s ok if they don’t quite know what they want to do, or even if they spend a little while doing something that they later conclude isn’t for them. Better to make career mistakes early.
As recent economic news, and the worries expressed from some quarters shows, there is a lot that can happen in 2016. But the most likely outcome at the moment is that in 2017 we’ll have more shortages of graduates over more areas. Let’s try to mitigate that as much as we can.
2015 turned out to be quite a positive year for the UK graduate labour market, so let’s take a look at what the new year might hold. As always, we will come back in 12 months to see how these predications fared.
And the first prediction carries on where we left off in 2015.
Getting used to skills shortages and recruitment difficulties
Recruitment difficulties and skills shortages were a feature of 2015 and they will be, if anything, even more central to the UK graduate labour market in 2016. We now have widespread graduate shortages across a range of key sectors, in engineering, in building and construction, in teaching, in health, in IT, in business services and in niches throughout the economy. Shortage of available graduates is affecting the ability of a minority of businesses and sectors to meet demand, and we should probably expect these difficulties to spread to other parts of the economy. 2016 will be about businesses learning to live with not always being able to find graduates when they need them and making plans to mitigate or avoid shortage. We’re not in 2011 any more.
Broadly positive employment outlook
Employment intentions are still up, but the rate of increase is slowing. Some employers, especially those in professional or IT services who had recruited strongly in the last year, may get more cautious on hiring as skills shortages make it harder to recruit, but overall we will likely see modest improvements in the graduate employment market and an increasingly benign jobs market for new graduates – although that doesn’t mean we can or should expect every new graduate to find work easily, or that those who don’t are failing.
But we do need to be careful. The outlook for manufacturing employment is not as positive, affected by weak export markets, by the continuing downturns in steel and in oil and gas, and by skills shortages. There are other factors at play that affect confidence as well….
An uncertain Euro referendum
I can’t bring myself to use the phrase ‘Brexit’, but 2016 looks likely to see a referendum on membership of the EU at some undeclared point, there will be a vicious media campaign, and leaving the EU is not considered likely to be positive for the economy in the short term. Business confidence is likely to be affected if it looks as if there is the prospect of a Brexit (now look what I’ve done), and a reduction in confidence means a weakening of the economy, and a weakening of employment intentions. A portion of the political skirmishing is likely to feature more rhetoric – and possible action – on curbs on immigration, which will exacerbate skills shortages.
Keep an eye on wages
Low inflation is keeping a lid on wage rises in many sectors, but skills shortages mean that some in-demand professions (especially in engineering, IT and professional services) are seeing much stronger wage pressures. The big question is about the salary expectations of the new cohort of graduates – the first to have paid the full £9,000 a year for the duration of their degrees. The repayment threshold of £21,000 means that many graduates in professional employment will start repaying from day 1 – will we see wages rises (as employers were predicting in 2011)? Will we see the rise of jobs paying £20,995 rather than £21,000? 2016 will be an interesting year for graduate wages.
The urbanisation of graduate work
Graduate employment is concentrated in cities, and that shows no sign of of changing soon. Over 40% of the working population in Newcastle, Manchester, York, Sheffield, Leeds, Bristol, Bath, Oxford, Cambridge, Cardiff, Swansea, Newport, Aberdeen, Dundee, Edinburgh and Glasgow had a degree or equivalent at the end of 2014, and when we get figures for 2015, Liverpool, Nottingham, Leicester, Birmingham, Coventry, Norwich, Ipswich and Southampton could all have joined the list. For graduates looking for work – look to the cities. Smaller urban areas, and rural areas, will have some roles, but mainly in a public sector which is likely to continue to lose jobs.
For policy – graduates will play an increasingly important role in urban economies, and we need to get to grips with a future where the largest group of employees in many of our cities – in some cases a majority, and not just in London – will have degrees.
There are undoubtedly more themes that will emerge in 2016 for the graduate labour market, and I’ll keep you posted if and as they do. Happy New Year everyone.
It’s the most wonderful time of the year – a time when I get to look at what I said 12 months ago and see whether it turned out to be right. Or, alternatively, the bit where I mark my own homework and declare myself a genius.
This time last year I made five predictions about the graduate labour market. Let’s go through them one by one.
Once again, today is the day where we see the first release of the new DLHE data for 2013/14. DLHE looks at the outcomes of university leavers from 2013/14 six months after they graduated – so at the start of this year. The first release I linked to primarily examines full time graduates though.