Let's see - it's '23: forecasting the graduate labour market

Charlie Ball suggests that recruiter concerns about worker retention and pragmatism around entry requirements will be among the themes of the 2023 graduate labour market

Having patted myself on the back (a bit) by reviewing last year's predictions, it's time to look forward to 2023 and what I think is going to happen to the graduate labour market.

As always, there are bound to be things that affect us that I didn't/couldn't anticipate, and so some of this will be wrong. But trying to set aside my biases and tendency to wishful thinking (see the recap of 2022), here are some things I expect for 2023.

1. There's a recession on, and it's going to be on for a while

We're in recession now, and we're in this for the year. Some of the inflationary drivers that have led to this are easing now but the main effects are with us now and will last. This year is going to see falling real term wages, we're going to see hardship for many and in terms of propensity to hire, we'll see business confidence down (but medium term sentiment ok - I think most expect things to be getting better by this time next year), and so investment in things like training and hiring could fall.

2. But we're not going to see the graduate labour market you normally get in a recession

At this point in the cycle, you'd already be seeing cuts in hiring and possibly layoffs. That's not happening much in the graduate labour market (I know some big tech companies have done it, but the ones who have tend to have little trouble recruiting when they need to). The reason is simple - that pesky labour shortage is not going away. Particularly in IT, professional services, tech, engineering, health, social care and related industries that happen to employ a lot of graduates, we haven't had enough candidates to meet demand for some time now, and many businesses are running at staffing levels below their ideal. That means their current staff are often taking up the slack, or even having to turn away business.

So recruitment in many sectors is not likely to reduce substantially even as the economy goes into recession. Most graduate recruiters have learned the hard way in the past that cutting their training schemes only hurts them when recovery comes around.

3. Graduate recruiters are going to carry on worrying about retention

One slightly counter-intuitive consequence of a recession and cost-of-living crisis has already been to reduce the willingness of workers to take risks. A good example of a risk they are avoiding is 'quitting my current job and taking a new one'. Now, that seems good in theory for businesses trying to reduce people leaving, but we have a worker shortage. So, one quiet theme of the last couple of years has been businesses who can offer better wages have been steadily attracting employees of organisations who can't or don't offer the same salaries - often SMEs or public sector organisations. And they're hard to replace. And they may be even harder to replace in 2023.

There are costs to losing employees at the best of times, but losing your key coder or a crucial team leader in 2023 could be very hard for some organisations to manage. This means we're going to see even more concessions from business towards more flexibility and better benefits among other things

4. We'll see more recruiters being pragmatic about entry requirements

As I started this, Santander announced they'd no longer be specifying a 2:1 for graduate entry.1 They won't be the last this year. Anouska Ramsay, their HR director, is quoted as saying, 'Academic achievement is important, but it is only one of many factors we look at when searching for new talent. We believe potential can be found anywhere and this move reinforces our commitment to finding the best candidates from a wide range of backgrounds.'

And this is a neat encapsulation of the reasons some businesses are setting aside this kind of requirement - the realisation that they've been missing talent. Equity, diversity and inclusion (EDI) will continue to be a focus in 2023, despite the recession, as businesses have realised not only does it help maintain a balanced talent pool, but also current employees take diversity seriously. As Indeed and Glassdoor report, 72% of workers aged 18 to 34 said they would consider turning down a job offer or leaving a company if they did not think that their manager (or potential manager) supported EDI initiatives.2

5. Not everything will be different about this recession

There is one iron rule of recessions, and it's not one that this recession is going to change. The less advantage you had going into the recession, the more likely you will be to lose out. Or, to put it more simply, graduates will have it better than non-graduates, and more advantaged groups of the workforce will largely have it easier - which is a good reason why those EDI initiatives are particularly welcome right now.

Some groups will find it particularly difficult, though, and will need particular support. SMEs will find it difficult, with consumer spending down and their workforce vulnerable to reduced hours in sectors that are badly hit, and poaching from larger firms in sectors that fare better. Although many graduates are in demand right now, not all specialities are in shortage, and this isn't just everyone's favourite targets in the arts (in fact, their comms skills may be very valuable if they're willing to look at the business services sector). But one group always gets the worst of it in downturns, and that is workers with disabilities. Let's all be mindful of the disadvantages this group faces, and understand that they will need and be entitled to particular support this year.

Have a good 2023 everyone, and good luck. All being well, we can take a look at these predictions this time next year!

Notes

1. Santander updates degree criteria for graduate roles, Santander, 2023.
2. Indeed & Glassdoor's Hiring and Workplace Trends Report 2023.

Written by

Charlie Ball

Head of labour market intelligence

Jisc