Image: JJ Ellison [CC BY-SA 3.0] via Wikimedia Commons
A spate of reports predict a difficult future for the class of 2020
In any other year, mid- to late-Spring marks the start of the UK’s graduation season, with thousands of hopeful students leaving the university system to enter the world of work.
This year, most of those ceremonies will take place online as a result of the fallout from the coronavirus outbreak. But what of the prospects for this year’s crop of graduates? On the face of it, things do not look good.
According to an April study by the National Institute of Economic and Social Research, unemployment will rise by around 5 million—from 1.34 million to more than 6 million—by the end of May, taking the unemployment rate to around 20 per cent.
The authors, David Bell of the University of Stirling and David Blanchflower of Dartmouth College (and a former member of the Bank of England’s Monetary Policy Committee), say their figures assume that furloughed workers “will count as unemployed” while official statistics may describe them as employed but not working—something they describe as a “rather novel definition of employment”.
“In short, unemployment is set to rise in the UK by a lot,” they write in their report, US and UK Labour Markets Before and During the Covid-19 Crash. “What is coming in the labour market looks horrendous.”
A separate report, by the Institute for Fiscal Studies—also published in April—told a similarly gloomy story. It found that anyone entering the labour market this year, graduate or otherwise, is likely to suffer lower wages and employment levels “for some time to come”.
The IfS says evidence shows that education-leavers who enter the workforce during a recession are significantly more likely to enter “non-graduate” jobs, will earn less in the first few years after graduation, and will still be less likely to be in work at all even several years after graduation.
The think tank used earnings and employment data about young people who left school or university during the last three recessions, and compared them with those who joined the labour market in “normal times”.
“On average unemployment rates rose by four percentage points during those recessions,” the IfS says. “That led to a probability of being in paid work that was 7 percentage points lower for young people a year after they entered the labour market.
“Even five years on they were still slightly less likely to be in work at all than were young people who graduated or left school in happier times. Earnings were also affected. For those who did find a job they were 6 per cent lower after one year than they were for ‘normal’ cohorts and still 2 per cent lower after five years—although this effect was definitely more pronounced for school leavers than for graduates.”
Depressing news
Ostensibly, the overall picture for this year’s graduates looks fairly grim—and that prognosis has been backed up by several reports on graduate prospects published this week.
First, a Resolution Foundation report published on 6 May, which agrees with the IfS that “past recessions have left cohorts of ‘crisis leavers’ with substantial scarring effects, through the lens of both employment and pay”, and adds that “the depth of that scarring could be even worse this time around, given expectations for how the labour market will perform over the coming months”.
The Foundation’s report, called Class of 2020, finds that youth unemployment in the UK could rise by 640,000 this year, which would take the total above one million. About 20 per cent of graduates normally find their first job in sectors that have been hardest hit by fallout from Covid-19.
“Many of the lower-paying roles that education leavers have tended to enter into during their first years in the labour market are in sectors like travel, non-food retail and hospitality that are largely shut down at present, and unlikely to reach full capacity again in the near future,” the report says. “In other words, the first rung of the employment ladder looks to be broken, and it is unclear when, and if, it will be mended back to recent conditions.”
Meanwhile, the Association of Colleges published its own research—also on 6 March—which suggests up to 100,000 young people may struggle to enter the labour market at all this year as industry scales back. The association is asking Gavin Williamson, the secretary of state for education, to deliver “a new ‘September Promise’ guaranteeing access to high quality education or training places this Autumn to every young person who wants one”.
Such interventions may be needed, since the predicted job deficit appears to be backed up by the data. According to an analysis of advertiser behaviour carried out by the Adzuna job listing search engine, the hiring rate for graduates has already dropped by 76 per cent since January 2020. The average advertised salary for a graduate role this time last year was £24,000, and this has dropped to £23,200 this year.
Similarly, a survey of more than 1,200 final-year students carried out by Prospects, which offers information and advice on careers to students and graduates and merged with Jisc last week, found that nearly two thirds (65 per cent) feel negative about their career prospects and many have lost job offers.
According to the findings, published on 7 May, 26 per cent have lost a work placement or internship; 29.2 per cent have lost their current job; and 28 per cent have had a future job offer deferred or cancelled.
However, this is in contrast to a survey by the Higher Education Policy Institute and polling firm YouthSight from 28 April in which almost 80 per cent of students felt confident about getting a graduate-level job despite the effects of the coronavirus pandemic on the job market
The survey, which explored students’ feelings about entering the labour market, revealed that 79 per cent of full-time undergraduate students felt very confident or slightly confident that they would be able to bag themselves a graduate-level role once they leave university. With the mass of data this week, that survey is beginning to look like an outlier.
Silver linings?
There is no doubt that current trends in the job market suggest very real challenges for those graduates who complete their studies this year. But these are problems that university leavers will face alone, and as lockdown conditions ease and businesses look to return to some kind of normality, the economy will begin its slow recovery.
The pandemic has reinforced the importance of some disciplines more than others—particularly those in healthcare and related disciplines. Likewise, the current government has repeatedly stressed the importance it places on STEM graduates, and boosting R&D activity to 2.4 per cent of GDP—a target that will require huge numbers of graduate-level employees.
While there are concerns about the impact of the Covid-19 outbreak on ministers’ ambitions in this area, speaking to parliament on 6 May, prime minister Boris Johnson reiterated that “the agenda of this government remains unchanged: to unite and level up across our country with infrastructure, technology and education above all”.
There is also a silver lining for arts graduates. According to a report published by the British Academy on 7 May, graduates of arts, humanities and social sciences are “just as resilient to economic upheaval” as other graduates and are “just as likely to remain employed as STEM graduates during downturns”.
The report, Qualified for the Future: quantifying demand for arts, humanities and social science skills, finds that of the 10 fastest-growing sectors in the UK economy, eight employ more graduates from the arts, humanities and social science than other disciplines.
“[Such] graduates will be essential to fill in the workforce gaps of the future, particularly those studying fine arts, history and archaeology, philosophy and theology, geography, sociology and anthropology,” it finds.
This is undoubtedly a challenging time for job-seekers, and this year’s graduating class will bear the brunt of the coronavirus fallout. But they will be better placed than many.
According to government graduate labour market statistics, as reported by Universities UK, median salaries for graduates from England were £10,000 higher than non-graduate salaries in 2018. The graduate unemployment rate was 2.6 per cent, compared with 5 per cent for non-graduates.
It is undoubtedly a bad time for graduates to be entering the employment market. But given the potential scarcity of jobs, their degree might just be more important than ever.