Graduate employment and salaries review

The destinations of 2006 first degree graduates, as reported in the latest 2005/06 DLHE survey, show little difference to the two previous graduating cohorts - indicating that the graduate recruitment market remains strong. For example, six months following graduation, 6.0% of the first degree graduates from the 2006 cohort were believed to be unemployed, compared with 6.2% for 2005 and 6.1% for 2004. The employment rate, including those who were working and studying, has also remained stable at around 72% for the last three years.

Measures of unemployment and employment only give a partial view of the recruitment picture, however. In recent years, with the expansion of higher education, many have raised issues about the quality of the jobs graduates are entering into. With the introduction of variable tuition fees in 2006 and increasing student debt, this has led to debates about the value of a higher education qualification. Using the graduate job classifications developed by Professors Peter Elias and Kate Purcell for their study Seven Years On, the types of work that new graduates went into, as reported in the DLHE surveys for the last three years, were analysed to see whether there have been any changes in the percentages of graduates going into graduate-level occupations. The results, shown in Table 1, reveal that not only have employment and unemployment rates stayed virtually unchanged over the past three years, but there has also been a steady increase in the percentages of graduates entering graduate-level occupations – an indication that the graduate labour market, at least in 2005/06, has not yet reached saturation.

According to the DLHE survey for 2006 graduates, the average salary for full-time, first degree leavers entering full-time employment in the UK was £18,501, an increase of 4.4% from the previous year’s figure of £17,715 (see footnote). Male graduates’ earnings averaged at £19,465, compared with £17,845 for females. Unsurprisingly, graduates working in London reported the highest mean salary at £21,609, whilst the lowest figures were reported by those working in Northern Ireland (£16,334), Yorkshire and the Humber (£16,837) and Wales (£16,871). When interpreting these figures, however, it is important to bear in mind the high cost of living in the capital and the much lower costs associated with the latter three regions.

As with last year, graduates who studied clinical medicine reported the highest average salary, at £30,484. This was followed by pre-clinical medicine (£29,177) and clinical dentistry (£28,030). Table 2 shows some of the salaries by occupations reported in the DLHE survey, which gives an insight into the levels of pay for some of the work categories covered in What Do Graduates Do?. For all types of work (including those not reported in Table 2), health professionals commanded the highest average salary, at £25,365, which ties in with the degree subject findings above.

Occupations with salaries at the lower end include administrative work (not included in Table 2), with pay typically at around £15,000. Many graduates take on these types of work soon after graduation to get experience and a foot into the job market. Research, such as that carried out by Purcell and Elias in Class Of '99, however, has consistently found that many of these graduates will gradually move into higher level occupations in months to come.

According to a report from the Association of Graduate Recruiters (AGR) published in July 2007, graduate vacancies are forecast to see a year-on-year rise of 12.7% in 2007 - more than double the year-on-year increase of 5.2% reported for the 2005-06 recruitment season, signifying that the graduate recruitment market is going strong. Amongst the 219 employers surveyed, a total of 20,413 graduates are expected to be recruited. The median graduate starting salary is forecast to be £23,500, up 2.4% on the 2006 figure of £22,953.

No company/business sectors in the AGR study are anticipating a decline in vacancies in 2007, and most are looking forward to a healthy growth. The banking and financial services sector is reported to be offering 465 more vacancies in 2007 compared with the previous year - the highest increase in the absolute number of vacancies amongst all sectors, and corresponding to a year-on-year percentage increase of 22.9%. The survey of AGR employers, however, was carried out in May/June 2007, before the turmoil of the financial market in August as a result of the US mortgage losses. Since then, the Centre for Economics and Business Research has predicted that thousands of jobs may be lost in the City of London in months to come. What effects (if any) this will have on graduate recruitment remains to be seen.

There is little sign of the graduate recruitment market slowing down in 2008, according to the AGR survey, although again, this has to be interpreted in light of the financial market changes in August. Half of the employers (49%) surveyed by the AGR expect graduate recruitment levels to be similar to 2007, just under three in ten (28.9%) expect to recruit slightly more graduates, and one in eight (12.3%) anticipate recruiting many more.

Employers’ predictions on 2008 salary levels are more cautious, however. At the time of the survey, a quarter of the employers (24.9%) have not yet decided on salaries for the next year, but for the rest: two in five (39.8%) are expecting only a cost-of-living rise, another one in five (19.4%) anticipate salaries to increase above this level, and one in six (15.9%) are predicting no change from the 2007 rates.

Several reasons have been identified by AGR employers for the relatively modest increase in recent salary levels:

• Salaries are fine as they are; ‘competitive enough’.
• Salaries have been increasing (too) fast and the slowdown is inevitable. Many employers have raised the issue of consistency with salaries paid to previous years’ graduate recruits and to other employees within the organisation. There is also a concern that graduate salaries could become out of line with the ‘real jobs’ graduates are recruited for.
• Salaries are fine as they are, for what graduates are bringing into the organisation.
• There are plenty of graduates on the market, despite the rise in demand.

A ‘mirror survey’ of 1,633 UK university students approaching the end of their course by the AGR reveals that students are indeed realistic in view of their limited experience. They are conscious of the ‘lessening exclusivity of a university education’ and ‘certainly agree with employers that the rapidly rising numbers of graduates on the market mean that salaries have no need to increase as rapidly as vacancy levels.’

The AGR study, being based on a survey of a finite number of employers, can only give a partial picture of the graduate employment market. AGR employers are also mainly large organisations offering vacancies specifically aimed at degree holders. As a result, salary figures reported by the AGR are often higher than those sourced from student surveys such as the DLHE survey, as there is a bias towards larger firms and specific graduate jobs.

As revealed in the DLHE survey, many graduates did not obtain a permanent graduate-level job or graduate training position immediately after graduating. This ‘hidden graduate pool’, as called by the AGR, includes those who are in a temporary job not related to their career and those who are in a permanent job that is not part of a graduate training scheme. An AGR study comparing these graduates with those on formal graduate training schemes has revealed that, perhaps surprisingly, those from the ‘hidden graduate pool’ are more likely to have been promoted to junior manager positions, developing faster and being assigned more responsibility. The AGR suggested that this ‘hidden graduate pool’ is ‘a high-quality source of talent but notoriously difficult to access’ and has called on employers to change their marketing strategies to focus less on on-campus campaigning in order to reach those graduates who are already in the workplace.

Footnote

Not all DLHE survey respondents who were in employment have disclosed their salaries. Of first degree graduates (both full- and part-time) who were in full-time employment in the UK, just under half (49%) disclosed their pay.