The graduate labour market

Summary

This year’s first destination data for 2002 first degree qualifiers six months after graduation show that the employment rate has decreased and unemployment has increased compared with the previous year. This is in contrast to the general UK labour market trend which has seen employment at a record high in the last year. This article explores some of the possible reasons for this phenomenon and gives an overview of the current situation, as well as a forecast of the graduate labour market for 2004.

Introduction

In the last year, the UK has experienced crashing share prices and other economic uncertainties brought on by the threat of war with Iraq. These economic adversities, however, have not been reflected in the overall performance of the UK labour market which shows that the employment rate has been rising and unemployment decreasing in the last year. In fact, for the three months ending in June 2003, the employment level was estimated to be 27.92 million, the highest level since records began in 1984.

Table 1 shows the percentage year-to-year change in workforce jobs by industry between March 2002 and March 2003. The figures show that labour market performance varies widely between industries. Much of the rise in employment over the year could be seen in the construction and public administration, education & health sectors, reflecting the buoyancy of the housing market and the government’s rising spending to modernise public services. On the other hand, the UK’s ailing manufacturing industry has experienced continuous job cuts, and finance and business services have been hit hard by the poor performance of the stock market.

Graduate employment and unemployment

Understanding the distribution of graduates amongst different types of employer could help to explain why unemployment has gone up for 2002 graduates. Whilst vacancies in the public sector have been increasing in the last year, Graduate Prospects’ research has found that only 27% of young graduates aged 21-25 are employed in the public sector compared with 73% in the private sector. In addition, although the construction industry is enjoying a period of boom, the percentage of graduates entering the sector is relatively small - 1.7% of employed graduates from 2002. In contrast, finance & business services and manufacturing, two major employment sectors of graduates, have seen vacancies decrease over the year. These factors help to explain why the overall trend of increasing employment in the UK has not been seen in the 2002 graduate cohort.

Table 2 shows graduate employment and unemployment rates between 1994 and 2002, whilst table 3 shows the ‘top ten’ of those subject areas covered in What Do Graduates Do? by highest employment rate, lowest unemployment rate and highest rate of further study. This year’s figures show that:

• The unemployment rate amongst graduates six months after graduation in 2002 was 6.9%, a rise of 0.6 percentage points from 2001. Meanwhile, the employment rate has declined from 67.7% in 2001 to 66.9% in 2002, and the proportion of graduates opting for further study has gone up slightly from 18.4% in 2001 to 18.7% in 2002 (not shown in tables).
• Civil engineering and building graduates represent some of the lowest unemployment and highest employment rates, reflecting the buoyancy in the construction sector. In contrast, IT, which shows the highest unemployment rate at 14.6%, reflects the slowdown of the IT market which began over two years ago.
• 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.

According to a survey of 195 members of the Association of Graduate Recruiters (AGR), graduate vacancies have decreased by 3.4% in 2003 compared to the numbers recruited in 2002. Figure 1 shows how some of the vacancies have changed in 2003 by type of organisation. Over half the total number of vacancies cut were from the engineering, accountancy and banking sectors. In addition, analysis by occupational areas shows that whilst the number of positions in IT, marketing and investment banking fell by up to a third, vacancies for general management increased by almost a sixth.

Graduate Salaries

Despite a drop in graduate vacancies in the last year, surveys have shown that graduate starting salaries are still buoyant.*

• In the year to 30 April 2003, the average salary offered by advertisers in the Graduate Prospects’ vacancy bulletin Prospects Today was £18,343 with a median of £18,000, up 4.5% and 2.9% respectively from a year ago.
• According to the AGR survey, the median graduate starting salary for 2003 was £20,300, a rise of over 4% from £19,500 in 2002. The highest salaries were paid to graduates starting work in investment banking (£35,000), and the lowest to graduates in science, research & development (£18,500).
• London, the most popular destination of UK graduates, also offered the highest median salary (£24,000), whilst graduates working in Northern Ireland were offered the lowest (£18,000).

*It should be noted that salaries from Prospects Today and the AGR survey are mainly from vacancies specifically aimed at graduates offered by large employers. A substantial number of graduates, however, obtain posts which are not specifically targeted at degree holders. As a result, the average/median salaries reported here are likely to be higher, as there is a bias towards larger firms and specific graduate jobs.

Outlook for 2004

Over two-thirds of the employers surveyed in the AGR report indicated that they expect to maintain or increase their graduate vacancies for 2004, but 12% warned that they were likely to reduce their recruitment next year. In addition, over half expected graduate starting salaries will increase in 2004, but only by the ‘cost-of-living’, whilst a third predicted salaries will be frozen at 2003 levels.

Although not specifically targeted at graduate recruitment, a forecast from the Centre for Economics and Business Research (CEBR) shows that recovery could be in sight for some sluggish sectors. Their recent research suggests that the fastest growing sectors in 2004 would be IT (with 5.3% annual jobs growth); advertising (4.1%) and law (3.3%). Robert Walters, chief executive of financial recruiter Robert Walters, also predicted recently that there could be a shortage of skilled candidates for finance, legal and IT jobs in the next few years. He suggested that recruiters will witness a similar trend to the post-recession period in the early 1990s, when fewer graduates undertook professional training courses which led to a number of sectors facing skills shortages as a result.

Contacts and resources

Websites

Resources on this site

How much could I earn?, including What Do Graduates Do?, a searchable salary database, and other information on the graduate labour market.

General links

• Public and Voluntary Sector Community - for jobs in the public sector.
• Labour Market Statistics Briefing – 13 August 2003, Office for National Statistics (ONS)
• Labour Market Statistics – August 2003, Office for National Statistics (ONS)

Publications

Graduate Prospects publications

Graduate Prospects and AGCAS publications should be available in your university careers service. You can also order publications from us.

• Graduate Employment from the Labour Force Survey, Graduate Market Trends, Spring 2003.
• Prospects Today Salary and Vacancy Survey, Graduate Market Trends, Summer 2003.

Others

• First Destinations of Students Leaving Higher Education Institutions 2001/02, Higher Education Statistics Agency (HESA)
• The AGR Graduate Recruitment Survey 2003: Summer Review, conducted for the Association of Graduate Recruiters (AGR) by High Fliers Research.
• The CEBR Forecasting Eye, 11 August 2003. e-mail: feye@cebr.com
• Walters in Staff Warning, Jo Faragher, Recruiter, 1 July 2003.