Myth Busted – We have too many graduates in the UK

There are a number of common myths currently circulating about UK graduates and the UK graduate labour market, and some of them are particularly hoary and pernicious. The current state of the UK graduate labour market is a little murky in the post-EU-referendum economy, but the broad trends and themes are still current and so we will touch on those questions as we go.

Over the next few posts I will examine some of the key misconceptions that circulate  in media and civil discussion and occasionally even in universities and policy, about graduates and the graduate labour market. In response, I will try to demonstrate a balanced picture of what is taking place.

First up is one of the oldest. It’s one that underpins many of the other misconceptions about graduates. I’m doing this one first as some of the data also comes up when we look at other myths.

This is going to be quite long, so bear with me. I promise most of the subsequent posts will be shorter!

We have too many graduates

As long as people in the UK have been going to university, some other people have complained that too many people have been getting degrees. These arguments are usually reheated every time the university sector expands – many of the discussion points raised after the 1992 expansion had come up after Robbins in the 60s or even in the Victorian era with the creation of the redbricks – often with the proviso from more historically-aware commentators that, yes, of course it turned out that these objections turned out to be wrong in the past, but this time, things are different.

They’re usually not that different.

What do we mean by ‘too many graduates?’ Hardly anyone seriously suggests that one of the most pressing issues for the UK is that too many young people are getting a good education. So we interpret it as ‘there is not sufficient labour market demand for the number of graduates we produce’. That makes this myth relatively easy to check from a number of angles.

Let’s start with early graduate outcomes.

When we’re not in recessions, over the last 40 years, the early unemployment rate of graduates – just six months after graduation – runs at around 6%. It was around there in 2014 and 2015. Obviously, it gets higher in recessions, but hasn’t gone over 9% for 20 years. That doesn’t look like a labour market with little – or even reduced – graduate demand.

It’s likely that we’ll see that base rate tick up again with the uncertainty caused by Brexit (and again when we actually leave the EU) though, but that doesn’t dent the basic point. Graduate unemployment remains relatively low. (There is also a debate to be had about what we should expect the graduate unemployment rate to be, but that’s one for another day).

A 6% unemployment rate – how does that compare with non-graduates? Let’s take a look at Labour Force Survey data courtesy of the annual publication, ‘Graduate Labour Market Statistics’.

Over the whole population, the unemployment rate for graduates runs at half the non-graduate rate, and only just climbed over 4% in the last recession. Even young graduates between 21 and 30 are less likely to be unemployed than someone without a degree. When degree holders are much less likely to be out of work than non-degree holders, and the unemployment rate for degree holders seems to be back to where it was before the recession even though there are a lot more people with degrees now, it’s hard to argue that we need fewer degree holders and more non-degree holders.

But with more people holding degrees, and people with degrees less likely to be out of work, what does this mean for the labour market? The Annual Population Survey has some data that helps show how things have changed in recent years.

Since 2004, the proportion of UK workers with NVQ4+, or degree and equivalent qualifications, has risen very significantly from just over 30% to well over 40%. Progress accelerated, if anything, during the recession. NVQ3 – equivalent to 2 or more A levels – has also gone up a little, but other qualifications, especially at the lower end of the ladder, have fallen in their share of employment. It’s clear that the economy has a powerful appetite for graduates – and this is one trend that is unlikely to be affected by Brexit unless the Government takes active and unusual steps to intervene in the labour market.

But, of course, this data could simply mean that graduates are all going to work in shops and call-centres. So let’s take a look at the UK’s occupational breakdown over the same time period.

In the 11 years from 2004, data from the Annual Population Survey shows that the UK economy added over 2.5m new jobs in managerial, professional and associate professional jobs – those roles most commonly seen as ‘graduate’ and those which are increasingly difficult  for people without degrees to get access to. It comes to over 233,000 new jobs at ‘graduate level’ (of course, these jobs are not all at ‘graduate level’ and nor do none of the jobs in other categories require a degree, but it’s a not-unreasonable shorthand) every year – and that’s before we even start to consider replacement demand, the job vacancies opened up by people leaving the jobs market due to retirement and so on.

Indeed, if you look deeper into the data, every single sub-category of graduate employment saw an increase in the total number of jobs in the UK over that period – even during the recession (and so that’s also likely to continue as we leave the EU and then afterwards). That’s why many parts of the graduate economy, especially in nursing, medicine, teaching, engineering and parts of the business services and finance industries, report serious shortages of graduates as demand starts to outstrip supply.

By contrast, the rest of the economy in SOC categories 4 to 9 created a net of 277,000 jobs in those 11 years – just over 25,000 a year. Many areas shrunk, including relatively well-paid and secure jobs in skilled trades and in office jobs. They were replaced mainly by roles in care work and at the very elementary level, often in insecure, poorly paid jobs with long hours. It is no wonder that people who didn’t go to university often say that they don’t feel that there has been any improvement in the economy. For many, their circumstances have only worsened year on year and they cannot get access to those sections of the economy that are improving.

These figures do not speak of an economy oversupplied with degrees at the expense of other qualifications. They show an economy with an ever-increasing demand for higher levels of education.

It is fair to say that we might better balance some aspects of graduate supply against demand by taking more account of which occupations and skills are in genuine shortage, and where we might currently need graduates (in terms of occupation, and in terms of industry and location).

There are also arguments about earnings (although it’s possible for graduate earnings to fall and for that to potentially be good for the national graduate economy – such as if many more graduates got jobs outside London) and very tricky ones about underemployment, that are very difficult to resolve without a clearer understanding of what a ‘graduate job’ might be than we currently possess. These arguments sometimes suggest that we may not be making the best use of our graduates or that some of them are mismatched in the economy.

But these raw figures on numbers of graduates and the basics of how the economy uses them do not speak of a serious, obvious oversupply of graduates in the UK.

It is not clear what benefits might accrue from reducing the number of people going to university, but the level of occupational shortage reported in the Employer Skills Surveydata (more on that in later posts) suggests that a significant reduction in the number of people going to university might exacerbate some of our current crucial skills shortages.

And a significant reduction in the number of people going to university is what we may well get anyway.

Note future employment projections – that this trend towards higher skilled work is only set to continue and that it may not be long before more than half the jobs in the economy will need a degree or equivalent. But then observe the demographic trends that point to fewer 18 year olds year on year until the 2020s. 2015 saw fewer graduates than 2014 and that looks to be repeated this year, and possibly every year for most of the next decade. How will that work in an economy that seems to need more graduates? The idea that we obviously have too many graduates is one myth that might not survive the next few years.