Graduate labour market update: 30 January

In this week's update, Charlie Ball takes a look at reports from the British Red Cross on loneliness at work and the Department for Education on the link between Key Stage 2 results and future earnings

UK vacancies were 1% above their pre-pandemic level, and at 78.4% of the same time last year, according to the Office for National Statistics (OFS). This actually represents very modest 3% growth from last week but in reality, the data is pretty flat right now. Most sectors are reasonably close to pre-pandemic levels, with sales, marketing and legal lagging a little, and education, engineering, science and graduate all a little ahead of pre-pandemic levels.

Note that in early 2020, the indicators were suggesting a labour market downturn and even a possible recession were on the way before COVID turned everything upside down, so it may be that the labour market is starting to return to that scenario. Most sectors are a little behind where they were this time last year but education, energy (albeit from a very low level in 2022) and graduate roles are ahead of last year's market.

The proportion of working adults who travelled to work at some point in the past seven days increased to 68%. This includes:

• 43% who only travelled to work in the past seven days (36% in the previous period).
• 25% who reported both working from home and travelling to work (hybrid working) in the past seven days (13% in the previous period).
• Around 14% of working adults said they worked from home exclusively in the past seven days (15% in the previous period). A further 18% neither travelled to work nor worked from home (35% in the previous period).

31% of businesses of more than nine employees said that the cost of labour was a challenge for them now, and 20% said labour shortage was a challenge (this data dates to 22 January):

• Labour shortages are a particular issue for medium sized business and business in construction, health, education and professional services.
• 79% of the IT workforce, 64% of the professional services workforce and 51% of the education workforce are working in a hybrid or remote mode. These figures have barely changed in nearly three years now and must be considered the status quo.
• 72% of businesses with more than nine employees maintained staff levels in December. 11% increased headcount and 14% reduced it (the rest didn't know!). Education and hospitality businesses were the most likely to reduce headcount, with IT, manufacturing and professional services the most likely to increase it. Most businesses expect to maintain headcount in February and more expect to increase it than decrease it. Education organisations are the most likely to expect to increase headcount (interesting considering last month's data) and accommodation and hospitality again look likely to shed staff.
• 32% of businesses of more than nine employees experienced recruitment difficulty in December - bear in mind that another 21% made no attempt to recruit. Recruitment difficulties do seem to be easing in most sectors but seem to be getting worse in manufacturing, construction, education and professional services, while most IT businesses made no attempt to recruit in December. A simple lack of candidates is much the most cited reason for difficulties.

Also from the ONS this week, this very interesting piece on out-of-town employment in England and Wales:

• Between 2009 and 2021, employment in England and Wales grew by 20% in out-of-town locations compared with 7% within towns and 14% within large cities (excluding London).
• Employment growth rates were higher in out-of-town locations than in towns and cities in 81% of travel-to-work areas in England and Wales.
• Of the employment growth in out-of-town locations, 87% occurred within two kilometres of town or city boundaries.
• The contributions to overall employment growth across England and Wales between 2009 and 2021 were 35% for London, 16% for large cities, 30% for towns and 19% for out-of-town locations.
• The manufacturing, retail and administrative and support service sectors grew more strongly in out-of-town locations than in towns or cities. For example, in the retail sector employment in towns declined by 6% while employment out of town grew by 12%.

The Recruitment & Employment Confederation's (REC) new Jobs Outlook suggests employers are making more use of temps as business confidence falls. In the fourth quarter of 2022, employers' confidence in both the UK economy and their ability to invest in their business remained low, falling from -67 and -27 in July to September to -68 and -30 in October to December 2022.

Despite the drop in confidence, the immediate outlook for hiring remains positive for both permanent and temporary workers. Anticipated demand for temporary agency workers continued to rise - improving by 1%, quarter-on-quarter, to +7 over the next three months, and 4% to +8 in the next four to 12 months. Employers report that hiring intentions for permanent staff were +11 over the next three months, down by 6%, and +15 over the next four to 12 months, down by 3% - but they still remain net positive meaning on the whole employers still anticipate increasing headcount through 2023.

The British Red Cross have released an interesting new report about loneliness at work:

• Loneliness has a negative impact on individual health and wellbeing. It is linked to poor mental and physical health, increasing the risk of early mortality by 26%.
• Feeling lonely at work can affect reasoning, decision-making ability, and withdrawal behaviour, with adverse impacts on personal and organisational effectiveness, lower levels of job happiness and lower work engagement. It is also strongly linked to increased worker turnover.
• 10 to 11% of workers often feel lonely at work according to a range of measures, compared to 13% that are often or always lonely in life in general (general loneliness). 43 to 45% of workers experience aspects of loneliness at work some of the time.
• Disabled workers and those with long-term health conditions that affect their day-to-day lives are much more likely to report general loneliness than those without (24%, compared to 9%).
• Senior managers report higher levels of general loneliness: 32% of senior managers are often or always lonely - which is over twice the average for UK workers - and are more likely to feel that their colleagues are like strangers. Workers are more likely to feel close to the people they manage (78%) than to their managers (66%).
• The researchers did not find higher levels of loneliness among workers who worked mainly from home than those working onsite. They did find, however, that those working onsite were almost twice as likely to feel close to their colleagues than those who work from home and that homeworkers are more likely to want opportunities to socialise with colleagues during working hours.
• Workers were more likely to be positive about the impact of hybrid working on their relationships, both in and outside work, than to be negative.
• 75% of those whose work location had changed during the time of restrictions said the change had affected their work relationships, with 43% of those saying that they had become closer to colleagues (compared to 26% who felt more distant).
• 69% of those whose work location had changed said it had affected their relationships with friends or family, with 50% of those saying they had become closer (compared to 17% who felt more distant and 33% who reported neither closer nor more distant).
• Workers with caring responsibilities were more likely to report that changes in working location during the time of restrictions had impacted positively on their relationships outside of work.

The Department of Education has released a fascinating report using Longitudinal Educational Outcomes (LEO) data to examine the link between Key Stage 2 results and future earnings:

• The labour market return to increased overall KS2 attainment is positive. A one standard deviation improvement in KS2 test scores is estimated to be associated with a boost to earnings of around 24% in the early thirties. This is equivalent to almost £7,000 at age 33. It is also associated with a two percentage point increase in the likelihood of being employed at age 33.
• The equivalent improvement in KS2 maths attainment has a three-times larger effect on earnings and two-times larger effect on employment prospects at age 33, compared to KS2 English and science.
• Including controls for highest level of qualification reduces the estimated increases in earnings. For improved attainment in KS2 English, the returns become insignificant. This means that the main benefit appears to be to allow further, usually higher education, study, which then leads to higher earnings.
• In maths, however, estimates remain significant, suggesting the skills acquired hold intrinsic value in the labour market by themselves whether or not students continue in education post-18.
• The labour market returns to KS2 attainment are larger for women than men.
• Between the ages of 25 and 33, in both percentage and absolute monetary terms, the equivalent improvement in attainment increases earnings more for women than it does for men. It also increases the probability of employment by five percentage points more.
• Free school meals (FSM) eligible pupils have a five percentage point larger boost to their likelihood of employment through their late 20s and early 30s, compared to their more well-off peers, from the same improvement in KS2 attainment. They also experience remarkably similar percentage terms earnings increases, but the absolute monetary returns are smaller as earnings tend to be lower.
• Across the whole earnings distribution individuals have positive returns to KS2 attainment. In fact, the lowest earners have the largest returns.

Employment remains high across the whole Organisation for Economic Cooperation and Development (OECD):

• The OECD employment and labour force participation rates were stable at 69.4% and 73.2% in the third quarter of 2022, their highest levels since the start of the series in 2005 and 2008 respectively.
• About 40% of OECD countries were at record highs for both indicators. The number of persons employed, as employees or self- employed workers, also reached its highest level at 607.9 million workers.
• The OECD employment rate in the third quarter of 2022 edged up to 62.4% for women, while it decreased to 76.6% for men for the first time in over two years. The OECD labour force participation rate reached its highest level of 65.9% for women and remained stable for men at its pre-pandemic level of 80.6%.
• The OECD unemployment rate decreased slightly to 5.1% for women, while it was stable at 4.7% for men. It also decreased slightly for young workers (aged 15-24) and was stable for workers aged 25 and above.
• In the European Union and the euro area, the unemployment rate in November 2022 remained at record lows of 6.0% and 6.5%, respectively. Outside Europe, more recent data show that in December 2022, the unemployment rate continued to decrease in Canada to 5.0% (only 0.1 percentage point higher than its lowest level) and edged down to its record low of 3.5% in the United States.

 In Ireland, SOLAS have looked at Irish recruitment difficulties:

• The demand for skills in sectors such as life sciences, ICT, construction, health and financial activities continued in 2022. This is despite issues facing the Irish economy such as rising inflation and reduced consumer confidence.
• Competitive salaries remained a key factor. This is reflected in respondents indicating an increase in salary offered for over four-fifths of the vacancies mentioned as difficult-to- fill. These increases were primarily in areas of identified skill shortages.
• 62% of the difficult- to-fill vacancies related to permanent positions while the remainder related to a combination of both permanent and contract positions. Recruitment agents stated that many candidates have been reluctant to move jobs within this uncertain economic climate and that job security, along with other factors, such as the choice of remote/hybrid working and company branding, are very influential in their decision to move jobs.
• Vacancies at graduate level reported as being particularly hard to fill included software developers, engineers (including network, security, dev-ops, automation), analysts (IT business, quality), solutions architects, technical support staff, data scientists, system administrators, process engineers , quality control/ assurance, validation, mechanical engineers, R&D, chemical engineers, manufacturing, environmental health & safety (EHS), automation, technicians (engineering, maintenance, mechanical), nurses, registrars, GPs, customer care with languages, sales/marketing managers, HR specialists/managers, accountants (financial, practice, insurance, tax), financial administrators, credit control, payroll, actuaries and financial recruiters.
• This is, not surprisingly, very similar to the same list for the UK.

Written by

Charlie Ball

Head of labour market intelligence

Jisc