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Policy report

November 2017

The graduate
employment gap:
expectations
versus reality
The CIPD is the professional body for HR and people
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working in HR and learning and development.
The graduate employment gap:
expectations versus reality

Students in England are leaving


university in considerable debt
The UK has a high proportion
of graduates compared with
The combination
because of high fees and reliance on other countries; however, this of high fees and
maintenance loans. The IFS (2017) has not translated into higher
has recently estimated that the workforce productivity large maintenance
average student will graduate with According to the latest OECD
an estimated 50,000 debt and figures,3 the UK has the fifth loans contributes to
students from more disadvantaged
backgrounds, with more loans
highest proportion of residents
educated to degree level4 (36%),
English graduates
available to them, will build up debts slightly ahead of the USA (35%) having the highest
of 57,000.2 Under the new loans but behind Switzerland (41%),
repayment system, it is estimated Luxembourg (38%), Iceland (38%) student debts in the
that the majority of graduates will and Belgium (37%). However,
never earn enough to fully repay this has not translated into developed world
their debts with the IFS estimating
that 77% will have some of their
higher productivity, with the UK
languishing at sixteenth place in
(IFS 2017).1
debt written off after the end of the terms of GDP per hour worked
30-year repayment period. in 2015 ($52.50 GDP per hour
worked) just marginally above
A graduates initial experience of the OECD average ($51.10) and
the labour market is an important considerably below countries such
milestone and plays a role in as Germany ($66.60) and France
shaping their future labour market ($66.30).
experience. Against this stark
backdrop of high fees and rising Previous CIPD research has
debt, it is worth considering the highlighted the challenge of
experience of recent graduates in graduate over-qualification
the labour market: how well do In recent decades the UK has
they do, what types of jobs do rapidly expanded its higher
they manage to get, and what education sector. However,
salaries do they command? To do previous CIPD research has shown
this we draw on the latest data that the growth in graduate-level
on graduate destinations from the jobs has not kept pace with this
Higher Education Statistics Agency expansion. The most recent report
for 2015/16, which looks at graduate published in 2016 Alternative
outcomes roughly six months after Pathways into the Labour Market 5
graduation. The rest of this short looked at 29 occupations, which
report considers, six months on: account for almost a third of total
employment, and found that
What proportion of recent while for many of these jobs the
graduates fail to find work? number of graduates has increased
How many graduates find sharply over the last 30 years, the
graduate level jobs, and what skills required for the job have not
salaries do they receive? appreciably changed. For instance,
How do outcomes differ by 41% of new recruits in property,
subject studied, gender and housing and estate management
ethnicity? are graduates, compared with

1 The graduate employment gap: expectations versus reality


3.6% in 1979, and 35% of new bank Interestingly given the apparent relative to other countries (see
and post office clerks are now prevalence of skills shortages7 in Box 1): the UKs share of natural
graduates, compared with 1979 this area it is computer science sciences, maths and statistics
when just 3.5% of bank and post graduates who are most likely to graduates is more than double that
office clerks held degrees. fail to secure a job six months after of the OECD average.
graduation, with almost one in ten
New data analysis shows ending up unemployed. In fact, The Governments definition
that although only a small given the importance placed by of a graduate job disguises
proportion of graduates the Government on increasing the the extent of graduate over-
are unemployed, rates vary number of people with STEM skills,8 qualification
considerably by subject of it appears that individuals with those On the Governments preferred
study skills are not doing particularly well measure, recent graduates appear
Just 5% of recent graduates as they account for all but one of to do very well in todays labour
fail to find a job; this compares the subject areas with the highest market, with just 5% ending up
with a national unemployment proportion of unemployed graduates unemployed six months after
rate of 4.9%6 and represents six months after graduation. graduation (slightly above the
an improvement on graduate Previous research9 has suggested current national average of 4.9%)
unemployment (six months after that many STEM graduates lack the and 77% achieving a graduate job.
graduation) in 2011/12, when the experience and soft skills employers
figure stood at 7%. However, are looking for. Yet, as highlighted in the Edge
this figure masks substantial Foundation report published
differences, by subject studied, in Interestingly, it seems that by in 2015,11 the Higher Education
recent graduates performance in international standards the UK has Funding Council for Englands
the labour market. a healthy supply of STEM graduates (HEFCE) definition of a graduate

Figure 1: Proportion of recent graduates who are unemployed, by subject of study, 2015/16 (%)

Computer science
Mass communications and documentation
Physical sciences
Mathematical sciences
Engineering and technology
Creative arts and design
Historical and philosophical studies
Languages
Business and administrative studies
Social studies
Biological sciences
Combined
Law
Architecture, building and planning
Agriculture and related subjects
Subjects allied to medicine
Education
Medicine and dentistry
Veterinary sciences

0 1 2 3 4 5 6 7 8 9 10
% of total graduates 2015/16

Source: Destinations of Leavers from Higher Education 2015/16 (HESA 2017)10

2 The graduate employment gap: expectations versus reality


Box 1: Graduates by field of study in selected OECD countries

Data from the OECDs Education at a Glance 2017 suggests that the UK has an unusually high share of
graduates in natural sciences, maths and statistics (13% of graduates), more than double the OECD
average (6% of graduates). We have about average levels of graduates in information and communication
technologies (4%) but are below the OECD average in the category of engineering, manufacturing and
construction (9% vs 14%). Overall across the three categories, the UK has 26% of graduates compared with
an OECD average of 24%, while Germany has 37% of graduates, the USA has 18%, and France has 25%.

Table 1: Distribution of tertiary graduates, by field of study (2015) (%)

United United OECD


France Germany Spain States Kingdom average
Education 3 10 16 7 10 10
Arts and humanities 9 12 9 20 15 10
Social sciences, journalism and
8 7 7 12 12 10
information
Business, administration and law 34 23 19 20 22 24
Natural sciences, maths and
7 10 5 7 13 6
statistics
Information and communication
3 5 4 4 4 4
technologies
Engineering, manufacturing and
15 22 16 7 9 14
construction
Agriculture, forestry, fisheries
2 2 1 1 1 2
and veterinary
Health and welfare 16 7 15 17 13 15
Services 3 3 7 7 0 5
Note: Columns may not sum because of individual rounding.
Source: OECD. (2017) Education at a glance 2017: OECD indicators. Paris: OECD Publishing.

job includes not just professional Moreover, there is considerable


and managerial occupations variation by subject area, as
but also associate professional demonstrated by Figure 2. For
and technical occupations. example, just 15% of creative
Associate professional and arts and design graduates are
technical occupations, according in managerial or professional
to the Office for National Statistics occupations six months after
(ONS), do not require a degree graduation, compared with almost
and include jobs such as dancers all graduates in medicine and
and choreographers, fitness dentistry and veterinary sciences.
instructors, youth and community The variation by institution is
workers, and IT user support just as, if not more, pronounced,
technicians. Currently, a third of with students who attend a top
recent graduates are in associate institution being more than three
professional and technical roles; times more likely to enter a
if these are removed from the graduate-level job.
calculation, the proportion in a
graduate job falls to just slightly
over half (52%).

3 The graduate employment gap: expectations versus reality


Figure 2: Recent graduates in professional and managerial occupations (%)

Medicine and dentistry 95


Veterinary sciences 95
Subjects allied to medicine 84
Education 82
Engineering and technology 66
Computer science 63
Architecture, building and planning 60
Mathematical sciences 52
Physical sciences 47
Social studies 41
Combined 39
Business and administrative studies 36
Law 35
Agriculture and related subjects 34
Historical and philosophical studies 33
Biological sciences 33
Languages 31
Mass communications and documentation 27
Creative arts and design 15

0 10 20 30 40 50 60 70 80 90 100
% of total graduates 2015/16
Source: Destinations of Leavers from Higher Education 2015/16 (HESA 2017)12

Almost a third of recent There is a substantial gender band of 70,000 or more (14%
graduates end up in jobs pay gap for female graduates of men compared with just 6% of
that pay less than 20,000 across occupational outcomes women). This pattern is repeated
a year, with two-thirds of and by broad subject area across professional occupations,
law graduates falling in this The average (mean) annual salary with over a third of men earning
category for recent graduates by gender is more than 30,000 compared with
It is clear from salary data that 21,500 for females compared with under a fifth of women (23%).
many graduates fail to secure a 24,000 for males. On average,
well-paid job within six months of female graduates are over- While this pattern has been
graduating. Almost a third (29%) represented in lower salary bands previously explained by the
of recent graduates are on salaries and under-represented in higher gendered pattern of graduate
of less than 20,000, which is salary bands. Women are more subject area choice, analysis by
considerably below the current likely to earn less than 30,000 subject of study reveals that the
national average of 28,30013 per year 83% of recent female gender pay gaps exists regardless
(median gross annual salary), graduates are in this category of subject area studied at university.
while 78% of recent graduates earn compared with 71% of men. The gap is particularly wide in
less than 30,000. Again, there is combined degrees (76% of women
huge variation by subject of study, Analysing the data by occupation earn less than 30,000 compared
as shown by Figure 3. Language reveals a stark gender divide in pay with just 51% of men) and
and law graduates are the lowest outcomes. Female graduates who veterinary studies (61% compared
earners, with 93% earning less than managed to secure a job in the top with 46%). The gender pay gap
30,000 a year. occupational band (managers and is smallest for graduates from
senior officials) are almost twice as computer science degrees (73%
likely to be paid less than 20,000 compared with 71%), biological
as their male counterparts (25% of sciences (86% compared with
women in this category compared 82%), and mass communications
with 15% of men) and are much less and documentation (95% compared
likely to fall into the highest salary with 91%).

4 The graduate employment gap: expectations versus reality


Figure 3: Recent graduate salary bands, by subject area, 2015/16 (%)

Law 64 28 5 3
Languages 59 34 52
Combined 52 38 7 3
Subjects allied to medicine 52 33 11 4
Historical and philosophical studies 50 37 8 6
Creative arts and design 49 32 9 10
Engineering and technology 44 45 8 3
Mathematical sciences 35 45 14 5
Agriculture and related subjects 33 32 17 18
Physical sciences 32 45 16 7
Social studies 30 39 13 17
Business and administrative studies 23 48 18 10
Computer science 22 52 18 8
Mass communications and documentation 19 53 19 9
Biological sciences 16 69 9 7
Veterinary sciences 13 69 11 7
Architecture, building and planning 13 51 23 13
Education 5 52 39 4
Medicine and dentistry 2 32 52 14

0 10 20 30 40 50 60 70 80 90 100
% of total graduates 2015/16

Under 20k 20k to 30k 30k to 40k 40k and over

Source: Destinations of Leavers from Higher Education 2015/16 (HESA 2017)14

Figure 4: Recent graduates earning less than 30,000, by gender and subject (%)

Combined
Veterinary sciences
Law
Agriculture and related subjects
Architecture, building and planning
Education
Business and administrative studies
Social studies
Subjects allied to medicine
Medicine and dentistry
Historical and philosophical studies
Engineering and technology
Physical sciences
Mathematical sciences
Languages
Creative arts and design
Mass communications and documentation
Biological sciences
Computer science

0 10 20 30 40 50 60 70 80 90 100
Male Female % of total graduates 2015/16

Source: Destinations of Leavers from Higher Education 2015/16 (HESA 2017)15

5 The graduate employment gap: expectations versus reality


This pay penalty exists even Figure 5 shows that for all but There are smaller differences
for female graduates from the three subject areas (computer between salary outcomes of
UKs top ten institutions science, mathematical science, and graduates by ethnic group
We have combined the salary engineering and technology), a Compared with gender differences
band data by broad subject much bigger proportion of women in salary outcomes, differences
area for females and males who are concentrated in the lowest between broad ethnic groups are
graduated from the UKs top ten salary bands compared with men. much smaller. Graduates of Asian
institutions. The data shows that The gender pay gap is widest and white ethnicity are slightly
even if a women achieves a degree amongst graduates from law (80% more concentrated in higher
from one of the UKs top higher of women earn less than 30,000 salary bands with 23% and 22%
education institutions (HEIs), there compared with just 60% of men) respectively earning 30,000 or
is still a considerable gender pay and business and administrative more six months after graduating
penalty on entering the labour studies (56% of women compared this compares with a figure of 20%
market.16 with 34% of men). for those from black and other/
mixed ethnic backgrounds.

Figure 5: Proportion earning less than 30,000 at top ten UK HEIs (%)

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Source: Destinations of Leavers from Higher Education 2015/16 (HESA 2017)17

6 The graduate employment gap: expectations versus reality


Figure 6: Salary bands for recent graduates, by ethnic group (%)

White 29 49 13 4 2 11

Black 29 51 13 4 11 1

Asian 31 46 15 4 2 1 2

Other (including mixed) 32 48 13 4 1 11

0 10 20 30 40 50 60 70 80 90 100
% of graduates 2015/16

Under 20,000 20,000 to 29,999 30,000 to 39,999 40,000 to 49,999

Under 50,000 to 59,999 60,000 to 69,999 70,000 and over

Source: Destinations of Leavers from Higher Education 2015/16 (HESA 2017)18

Final thoughts more equitably share the costs of apprenticeships rather than
Rising debt, fuelled by high fees delivering the skills the UK needs. increasing the quantity in
and maintenance grants, coupled Alongside this, there is a need to order to create a meaningful
with huge disparities and poor provide better information, advice alternative route to university for
outcomes for some graduates in and guidance to inform learner young people and employers.
the labour market post-university choice and action to understand A focus on the workplace,
begs the question: is getting a and tackle gender pay disparities. and in particular on improving
degree still worth it? management and leadership
Recommendations quality, must be a key plank
For many the answer is The Government should of the forthcoming industrial
undoubtedly yes. Graduates undertake a review to develop strategy to ensure better job
from vocational subjects such solutions to tackle the gender design and skills utilisation.
as medicine, dentistry, and pay gap.
veterinary studies command high The Government should
salaries and almost all end up in consider linking tuition fees
professional-level occupations to graduate destinations data.
on leaving education. And Far too many higher education
although those studying STEM- institutions are charging the
related subjects are more likely top rate but are delivering poor
to end up unemployed in the outcomes for students.
first six months, those who are The upcoming careers strategy
working get paid more than other should include measures to
graduates and are more likely to improve longitudinal data on
be in a graduate job. However, graduate outcomes by subject
for many others the answer is far studied and institution.
less certain and it is questionable Employers should review
whether the benefits of getting their recruitment strategies
a degree outweigh the costs that to open up opportunities for
high debts alongside delayed non-graduates while ensuring
labour market entry bring. that skills are better utilised
for those roles that do require
It is clear that a more balanced graduate skills.
offer of a high-quality academic The Government must focus
pathway alongside a high-quality more on improving the
vocational offer is needed to quality and progression of

7 The graduate employment gap: expectations versus reality


Endnotes

1
INSTITUTE FOR FISCAL STUDIES. 7
BENNETT, M. (2016) What is the EDGE FOUNDATION. (2015) The
11

(2017) Higher education funding UK doing about its STEM skills graduate labour market: an
in England: past present and shortfall? Telegraph. 28 uncomfortable truth. London:
options for the future. IFS November. Available at: www. The Edge Foundation. Available
Briefing Note BN211. London: IFS. telegraph.co.uk/business/ready- at: www.edge.co.uk/sites/default/
Available at: www.ifs.org.uk/ and-enabled/stem-skills- files/documents/graduate_
uploads/publications/bns/BN211. shortfall/ [Accessed 19 employment_an_uncomfortable_
pdf [Accessed 19 September September 2017]. truth.pdf [Accessed 19
2017]. September 2017].
8
DAWOOD, S. (2017) Theresa May
2
INSTITUTE FOR FISCAL STUDIES focuses on STEM subjects in 12
HESA (2017). See note 10.
(2017). See note 1. Governments industrial strategy.
Design Week. 23 January. 13
Annual Survey of Hours and
3
OECD. (2016) Education at a Available at: www.designweek. Earnings (ASHE) 2016, Office for
glance 2016: OECD indicators. co.uk/issues/23-29-january-2017/ National Statistics. (2017).
Paris: OECD Publishing. Available theresa-may-focuses-stem-
at: http://dx.doi.org/10.1787/eag- subjects-government-industrial- 14
HESA (2017). See note 10.
2016-en [Accessed 19 September strategy/ [Accessed 19
2017]. September 2017]. 15
HESA (2017). See note 10.

4
Includes bachelor, masters and 9
CBI. (2012) Learning to grow: 16
Drawing on the Complete
doctoral tertiary education. what employers need from University Guides 2018 league
education and skills: education tables. Available at: www.
5
CIPD. (2016) Alternative and skills survey 2012. London: thecompleteuniversityguide.
pathways into the labour market. Confederation of British Industry. co.uk/league-tables/rankings
London: Chartered Institute of Available at: www.ucml.ac.uk/ [Accessed 19 September 2017].
Personnel and Development. sites/default/files/
Available at: www.cipd.co.uk/ shapingthefuture/101/cbi_ 17
HESA (2017). See note 10.
knowledge/work/trends/ education_and_skills_
alternative-labour-market- survey_2012.pdf [Accessed 19
pathways [Accessed 19 September 2017].
September 2017].
10
HESA. (2017) Destinations of
6
Annual Population Survey (APS) leavers from higher education
April 2016 March 2017, Office 2015/16. Cheltenham: Higher
for National Statistics. Education Statistics Agency.
Bespoke data request, data
analysis by the CIPD.

8 The graduate employment gap: expectations versus reality


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Issued: November 2017 Reference: 7603 CIPD 2017