The graduate labour market

World events since September 2001 have had a negative impact on the world economy, and this has inevitably filtered through to the graduate labour market. Recent surveys have shown that although salaries still remain buoyant, the number of graduate vacancies has dropped in the last few months. However, despite this mixed picture of the graduate job market, our research has consistently shown that graduates fare better in the labour market than non-graduates, and many employers still report difficulties in filling their vacancies.

Research from the Higher Education Careers Services Unit (CSU), based on analysis of advertisements in CSU’s graduate vacancy publication Prospects Today and reported in Graduate Market Trends, has found a large decrease in vacancies in the year to March 2002 compared with the same period a year previously. Much of the drop was due to decreases in opportunities in finance, IT, engineering & technology services, and management consultancy. London and the South East, where many of the vacancies were concentrated, were the two hardest hit regions.

However, despite the economic and recruitment slowdown, the situation may not be as gloomy as first appears. According to the latest annual survey on recruitment from the Chartered Institute of Personnel and Development (CIPD), some recruiters are experiencing problems filling all their graduate vacancies. Although the study is not aimed specifically at graduate employers, three-quarters of the 747 organisations surveyed are experiencing difficulties in recruiting, compared with just over half in 2000. This figure rises to a staggering 89% in the public sector.

Graduate Employment and Unemployment

Table 1 shows the graduate employment and unemployment rates between 1993 and 2001.

The unemployment rate amongst graduates six months after graduation in 2001 was 6.3%, slightly higher than the 5.5% figure for 2000. The employment and further study (not shown in Table) rates were both lower for 2001 graduates at 67.7% and 18.4% respectively, compared with 68.4% and 19.1% for the previous year.

CSU’s own analysis of the Government’s Labour Force Survey (LFS) has shown that graduates’ unemployment rates decrease significantly between age 20-24 and 25-29. Between the age of 20 and 34, the unemployment rate for respondents with GCSE and lower qualifications is more than three times higher than those with degree qualifications - one of the indications that graduates fare better in the job market.

Table 2 shows the ‘top 10’ of those subject areas covered in What Do Graduates Do?* by highest employment rate, lowest unemployment rate and highest rate of further study.

• Accountancy, building and civil engineering appear in both the lowest unemployment rate and highest employment rate top 10s.
• HND diplomates had the highest rate of further study, as many of them went on to do a first degree.
• Similarly, law had low unemployment due to the high percentage who undertook further study, typically for professional law qualifications.

*If all subjects are included, graduates from medicine, dentistry, pharmacy, nursing, ophthalmics and teacher training had some of the highest employment and lowest unemployment rates six months after graduation. Pre-clinical medicine had the second highest further study rate at 61.2%, after HND.

Graduate Salaries

Figure 1 below shows average graduate salaries from Prospects Today, in the year to March 2002, broken down by different occupations.

• In the year to March 2002, the average graduate salary offered in the UK was £17,722, virtually unchanged from the same period a year earlier. The median salary stayed at £17,500 for the two periods.
• The highest average salaries by type of work were in management consultancy (£19,726), IT (£18,835), and engineering & technology services (£18,717).
• The highest average salary was offered to graduates of computer studies (£19,730). Employers who required graduates from ‘any science’, ‘any numerate discipline’, ‘any computer related subject’ and electronic engineering also offered mean salaries of more than £19,000.
• CSU’s own analysis of the LFS has shown that graduates aged 20-24 earned on average over 25% more than those with A-level or equivalent qualifications.
• Figures from the LFS have also shown that between age 20 and 54, graduates in the private sector have higher average earnings than those employed in the public sector. Graduate earnings in the private sector increase sharply between age 20 and 39 and generally flatten out thereafter, whereas earnings in the public sector tend to rise more slowly but steadily across age 20-54.
• Studies on salary progression from the Incomes Data Services have found that graduate recruits from 1998 working for the same company for the last three years earn on average almost 45% more than new recruits. The figure for 1996 graduates, ie those having been employed by the same company for five years, is almost 70%.

Graduate salaries reported in the press need to be interpreted with caution. On target earnings (OTEs) may exaggerate the average salary paid, whilst some salaries may be basic salaries, which do not include commission, bonus payments or other perks. Salaries also vary across regions, the obvious example being the generally higher salaries offered in London to counterbalance the higher cost of living.

It should also be noted that surveys focusing on jobs specifically for graduates, such as the Prospects Today salary and vacancy survey mentioned here, and those from the Association of Graduate Recruiters, are likely to report higher average salaries than those which surveyed the earnings of a representative sample of the graduate population. The latter are likely to include graduates in lower paid, ‘non-graduate’ jobs.

Graduate Occupations

According to Graduating into Employment from the Institute for Employment Studies, graduates can now be thought of entering employment through one of six broad streams which characterise the qualities sought and potential early career paths. These include:

• fast track training schemes (degrees essential);
• professional and functional careers (degrees essential);
• 'graduate level' administrative jobs (degrees probably useful);
• lower level jobs where graduates can 'add value' (degrees may be useful);
• self-employment (degrees may be useful);
• wider labour market (degrees not required).

Analysis of the LFS shows that the percentages of graduates in non-professional occupations decrease with age, as many graduates start their careers in non-graduate occupations, but as they gain experience, they move on to more demanding jobs in which their skills and knowledge acquired in higher education are better utilised. At age 25-34, the vast majority of graduates (over 85%) are either in professional occupations, associate professional & technical occupations, or working as managers and senior officials.

Early Job Satisfaction

According to another CIPD report, Career Tracking 2001: Graduate Workplace Attitudes, which studied graduates’ first year experience in the workplace, work is a positive experience for the majority. For 90% of the respondents, the experience was either better (39%) or about the same (51%) as they had expected. Most (80%) respondents were still in their first job at the time of the survey, whilst a quarter had no intention to leave for at least five years.

References

Prospects Today, CSU, Weekly.

Graduate Market Trends, CSU, Quarterly.

Recruitment and Retention 2002, Chartered Institute of Personnel and Development (CIPD)

Pay and Progression for Graduates 2002, Incomes Data Services Ltd

Graduate Salaries and Vacancies Review, Association of Graduate Recruiters (AGR). Twice annually.

Graduating into Employment: The IES Annual Graduate Review, 2001 update, part 2, Institute for Employment Studies.

Career Tracking 2001: Graduate Workplace Attitudes, Chartered Institute of Personnel and Development. Website as above.