Is the day of the graduate over?

Universities have had a good run over the last 50 years, gradually sucking half of the population into their orbit. But are politicians, employers and even young people now losing faith in this route in favour of apprenticeships?

In the 1960s about 5% of young people went into higher education. The proportion of graduates has been rising ever since, getting very close to half of all young people.1

The Office for National Statistics (ONS) reports that 42% of the current working population are now graduates.2 By the age of 30 graduates are earning around £5,000 a year more than those who have been through an apprenticeship and by the time they are 40 this is close to £8,000. So far so good. The message, surely, is to get a degree if you possibly can.

Causes for concern

Although the outlook for graduates seems pretty rosy, there are a number of clouds on the horizon. Firstly, the graduate premium is quite variable. The government's Longitudinal Education Outcomes (LEO) data shows us that there are huge variations in graduate salaries.3 Things like subject studied and institution attended can make a big difference. So too, regrettably, can socio-economic background, ethnicity and gender.

There is also considerable debate about whether there is an oversupply of graduates. Some point to the swelling graduate numbers and argue that many of the jobs they are doing do not require a degree. As Henry Hill has argued on Conservative Home, too many graduates means stretched higher education provision and a neglect of vocational alternatives.4

Conversely others, like Michael Grove on Luminate, argue that this is a myth and there is a need to continue to produce high levels of graduates to feed a dynamic high skill economy.

Successive governments have worried about the supply of graduates. On one hand, they love talking about high skills and telling voters that their children will go to university. On the other, there is embarrassment about the emaciated British vocational education system and the sense that some skills gaps might be addressed more effectively and more cheaply through a revived apprenticeship system.

Are apprenticeships taking over?

We have had more than 20 years of trying to relaunch apprenticeships, but the numbers of young people pursuing apprenticeships has remained remarkably stable.5 Where apprenticeships have grown they have typically been with older people who are often pursuing them as a form of continuing professional development.

Young people have, perhaps understandably, been unsure of the value of apprenticeships in comparison with the obvious benefits of higher education. So, as the supply side of the labour market has failed to drive engagement with apprenticeships, the government has introduced the apprenticeship levy to engage the demand side (employers), essentially by taxing them if they don't pay for apprentices. As yet, this hasn't really worked either.

At the Institute of Student Employers (ISE) we've been watching all of this with great interest. The kinds of employers who are members of the ISE tend to be larger and to have a strong track record in running formal development programmes. In general, they have been rather better at engaging with apprenticeships than many other organisations.

In our research with our members we have noticed a number of trends that are worth reflecting on. For example, ISE members are spending about twice as much of their apprenticeship levy than the national average. This proportion has been going up, suggesting that these employers are getting more engaged with apprenticeships as time is moving on. But there is still a long way for them to go before all of the levy is spent, which indicates that the number of apprentices might increase even further.

The number of apprentices that ISE employers are recruiting has been going up much faster than the number of graduates. In our most recent report, the number of apprentices reported by respondents is getting very close to the number of graduates.

ISE employers are recruiting apprentices at all levels including level 6 (degree) and level 7 (Masters). In many cases they are combining these with their existing graduate programmes, meaning that some graduates will finish their degrees and then begin an apprenticeship, while others will study for a degree during an apprenticeship. Both of these approaches blur the distinction between apprenticeships and graduates.

Long live the student labour market

The shifting behaviour of ISE members is interesting. Many of our members have moved away from an exclusive focus on graduates toward a broader conception of where entry-level talent might come from. This process has been going on for a number of years, but has gathered pace in the aftermath of the apprenticeship levy. At the moment, the rapid growth of apprentice numbers have been accompanied by the more steady growth of graduate numbers.

A key question will be what happens if there is a recession and the overall growth of the student employment market stalls. Will employers retrench back to a focus on graduates or will they make a purposeful shift towards apprentices who our research tells us are cheaper and more loyal? If this happens it could signal an important shift in the operation of the student labour market.

Perhaps most importantly of all, the next few years will tell us whether ISE employers are outliers of the wider labour market or mavens who lead where others will follow. If other employers follow the practice of those in the ISE the employment prospects for graduates could change radically.

But, for now at least, the day of the graduate goes on.

Notes

1. Almost half of all young people in England go on to higher education, The Guardian, 2017.
2. Graduates in the UK labour market: 2017, ONS.
3. Graduate outcomes (LEO): Employment and earnings outcomes of higher education graduates by subject studied and graduate characteristics, Department for Education, 2018.
4. The government must get to grips with graduate oversupply, Conservative Home, 2018.
5. Apprenticeship Statistics: England, House of Commons Library, 2019.

Written by

Tristram Hooley

Chief research officer

Institute of Student Employers