UK graduate labour market update: 12 October

Charlie Ball's regular summary of data and reports from the graduate labour market, brought to you by Prospects Luminate and Jisc Data Analytics

The latest round of the Office for National Statistics (ONS) fast response experimental statistics on the impact of COVID were released on 7 October:

• 67% of the workforce travelled to work in the two weeks ending 3 October.
• According to Adzuna, on 1 October 2021, the total volume of online job adverts in the UK stood at 139% of its February 2020 average level.
• Of the 28 categories 26 saw a weekly increase in the number of online job adverts, 'energy, oil and gas' was unchanged and 'charity, voluntary' fell when compared with the previous week. The largest weekly increases were in 'legal' and 'travel and tourism' which rose by 14% and 12%, respectively.
• In the latest week, volumes of online job adverts remained above their February 2020 average levels in all UK countries and English regions. The highest of these were in Northern Ireland and the North East, at 199% and 189% of their February 2020 average levels, respectively. In comparison, this figure was lowest in London and the South East at 124% and 127% in the latest week, respectively.

There's also an analysis of the 40th Wave of the Business Insights and Conditions Survey (BICS), which was live for the period 20 September to 3 October 2021:

Of businesses not permanently stopped trading, 12% reported having vacancies that were more difficult to fill in the last month while 67% reported they had no vacancies to fill. However, these figures were 41% and 25% for businesses with 10 employees or more, respectively.

Over half of currently trading businesses in the construction industry reported that the prices of materials, goods or services bought in the last two weeks had increased more than normal price fluctuations, compared with nearly three in ten of businesses across all industries (29%).

In the last two weeks, 10% of businesses currently trading reported the price of goods or services sold increased more than normal price fluctuations, with the manufacturing industry, the wholesale and retail trade; repair of motor vehicles and motorcycles industry, and the other service activities industry reporting the highest proportions at 25%, 23% and 21% respectively.

Of currently trading businesses that reported how their importing had been affected, 22% reported lack of hauliers to transport goods or lack of logistics equipment as a challenge in early September 2021, compared with 11% in April 2021.

Businesses that had furloughed some of their workforce were asked if they had provided additional training or support for their furloughed workforce after their return to work. Of these businesses:

• 23% reported yes, my business has provided this
• 5% reported no, but my business intends to provide this
• 59% reported no, my business has not and does not intend to provide this
• 14% reported not sure or not applicable.

Businesses not permanently stopped trading were asked how their staff turnover for the last month compared with normal expectations for this time of year. Across all businesses:

• 4% reported staff turnover had increased, 16% for businesses with more than 10 employees
• 3% reported staff turnover had decreased, 5% for businesses with more than 10 employees
• 49% reported staff turnover had not been affected, 63% for businesses with more than 10 employees
• 44% reported not sure or not applicable, 16% for businesses with more than 10 employees

Industries with the highest proportion of businesses reporting an increase in staff turnover were accommodation and food service activities (11%), arts, entertainment, and recreation (6%), and information and communication (5%).

Of all businesses not permanently stopped trading, 12% reported that vacancies were more difficult to fill in the last month compared with normal expectations for this time of year, in late September 2021. However, there was a large difference depending on the size of business, with 9% of businesses with fewer than 10 employees and 41% of businesses with 10 employees or more reporting difficulties filling vacancies.

Across all size bands several industries had a higher proportion of businesses reporting more difficulty filling vacancies than normal for this time of year:

• the other service activities industry, at 29%
• the accommodation and food service activities industry, at 27%
• the human health and social work activities industry, at 24%.

Across all businesses (that reported difficulties filling vacancies), the most difficulties experienced were:

• lack of qualified applicants for the roles on offer (53%), with the information and communication industry reporting the highest proportion (84%)
• low number of applicants (46%), with the real estate activities industry reporting the highest proportion (85%)
• reduced number of EU applicants (18%), with the education industry reporting the highest proportion (43%)
• business cannot offer an attractive pay package to applicants (16%), with the information and communication industry reporting the highest proportion (32%)
• reduced number of applicants aged 16 to 24 years (9%), with the accommodation and food service activities industry reporting the highest proportion (22%)
• increased number of vacancies for other reasons (9%), with the information and communication industry reporting the highest proportion (24%).

The proportion of businesses that expect to make any of their workforce redundant in the next three months has remained broadly similar at 2% despite the end of the furlough scheme at the end of September.

There is an analysis of new data on the characteristics of UK businesses in 2021:

• The number of companies and public corporations has continued to rise and represents 74.3% of total UK businesses, while the proportion of sole proprietors and partnerships has fallen to 22.1%.
• The largest industry group is still professional, scientific, and technical, making up 16.4% of all registered businesses in the UK. This is down 0.6 percentage points from March last year. Note that this is one of the key employers of graduates in the UK.
• London remained the region with the largest number of businesses, representing 19.3% of the UK total. However, the year-on-year growth in London businesses is the lowest since 2018.
• Out of the 2.77 million VAT and/or PAYE businesses, only 59,000 (2.1%) operate from more than one site. Of the businesses with one site, the largest number are within the professional, scientific and technical sector.

The impact of AI on skills and employment

BEIS commissioned PWC to examine the potential effects of AI on UK employment and skills demand. This is a mammoth report and a brief summary doesn't do justice to such a complex and important topic – but here goes:

• Around 7% of existing UK jobs could face a high (over 70%) probability of automation over the next five years, rising to around 18% after ten years and just under 30% after 20 years. This is within the range of estimates from previous studies.
• AI will also create many jobs through the boost it gives to productivity and economic growth. While some of these extra jobs will be in areas linked directly to AI and related technologies (e.g. data scientists, robotic engineers or people involved in the design and manufacture of sensors for driverless vehicles and drones), most of the additional employment will not be in high tech areas. Instead, these additional jobs created will mostly be in providing relatively hard-to-automate services (e.g. health and personal care) that are in greater demand due to the additional real incomes and spending arising from higher productivity generated by AI.
• The overall net effect on employment is unclear, with the most plausible assumption based on historical trends and past macroeconomic research for the UK being for a broadly neutral long-term effect when examined across the whole economy.
• The health and social care sector had the largest estimated net employment increases from AI over the next 20 years. This is projected to be an area of high demand due to an ageing population and rising income levels, and also one where AI and robotics are likely to be complementary to human labour in most cases rather than substitute.
• Less well-paid clerical and process-oriented roles will experience negative estimated employment effects, although only in the longer term for manual workers such as truck or taxi drivers. This suggests that AI will drive a continuation of skill-biased technological change with the potential to widen existing earnings differentials.
• The largest increase in jobs by education level is seen at degree level, with about a 10% increase in expected roles due to AI. Broadly, demand for post A-level qualifications is expected to increase while demand for qualifications at A-level or below is expected to fall. The authors note that it is quite likely that they have underestimated the net job creation for graduates as they may also be more adaptable in developing new skills to make themselves complementary to AI rather than substitutable by it. This appears to have been true for earlier waves of digital innovation that have been associated with increased job polarisation and there is no reason why this might not happen again.
• The jobs performed by people aged 16 to 24 could see net job losses of around 6% over 20 years. Workers aged 16 to 19 are concentrated in certain occupational groups, notably sales and retail assistants (20% of workers aged 16-19), kitchen and catering (12% of workers aged 16-19) and waiters and waitresses (10% of workers aged 16-19).
• However, Moravec's Paradox applies: 'It is comparatively easy to make computers exhibit adult level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one-year-old when it comes to perception and mobility'. In other words, AI is good at many things that we find hard, and bad at many things that we find easy. The lowest paid jobs, which includes bar staff, waiters, cleaners, kitchen and catering assistants, involve skills such as perception and mobility that many people, including young and relatively uneducated people, are able to do, but which remain hard for robots and seem likely to remain so for some time. As a consequence, the occupations that are estimated to see the biggest net employment losses generally have a median wage of around £20,000.
• Analysis using Burning Glass data suggested particularly strong increases in demand for skills related to health care. There were smaller but still significant increases in demand for science and research and IT skills, although the nature of the skills in this latter group will likely change significantly as AI and other digital technologies evolve. Demand for skills relating to administration, finance and customer support may see net decreases over time as the tasks involved are increasingly automated.
• Of the occupations that are currently in shortage in the UK, the majority are not highly automatable this suggests that shortages are likely to continue increasing – particularly if workers losing their jobs to automation do not get reskilling relevant to the growing occupations. Those occupations in shortage largely see a positive net effect of AI on jobs - particularly nursing. There are only very few occupations featuring on the UK Shortage Occupation List that are estimated to see a negative net impact of AI.

This is a major, important piece of work - do read it all if you can.

The Recruitment & Employment Confederation's (REC) Report on Jobs for October, produced with KPMG, came out last week:

• UK recruitment consultancies signalled a further sharp rise in hiring activity in September amid reports of increased activity at clients and improved market confidence. Permanent staff appointments expanded at a pace that was only slightly slower than August's all-time record, while temp billings growth edged down to a five-month low but remained marked.
• The upturn in recruitment coincided with further steep increases in demand for both permanent and temporary staff. Overall vacancies increased at one of the quickest rates on record, with growth of permanent staff demand remaining quicker than that seen for temp workers.
• Salaries awarded to new permanent joiners and wages awarded to temporary staff both increased at the fastest rates in 24 years of data collection.
• September survey data showed a further substantial drop in the availability of staff, with the rate of deterioration easing only slightly from August's all-time record. Recruiters indicated that greater demand for staff, a generally high employment rate, fewer EU workers and a lack of confidence among employees to switch roles due to the pandemic had all contributed to the latest decline in candidate numbers.
• Regional data indicated that the North of England saw the steepest increase in permanent staff appointments, while the slowest upturn was in the Midlands.
• Data signalled that growth of demand remained considerably stronger for private sector roles than public sector vacancies in September. Underlying data showed that the steepest increase in demand was seen for permanent workers in the private sector. The slowest rise in vacancies was signalled for temporary staff in the public sector.
• IT & computing employees were the most in-demand type of permanent staff in September, just ahead of hotel & catering. Executive/professional workers registered the slowest increase in vacancies, albeit growth was still sharp overall.

British Chamber of Commerce have produced their influential and well-regarded Quarterly Economic Survey for Q3 2021:

• 47% of respondents overall reported increased domestic sales in Q3 (compared to 44% in Q2), while 16% reported a decrease (20% in Q2).
• In the services sector, the balance of firms reporting increased domestic sales increased to +31% in Q3, the highest since Q4 2015 and up from +20% in Q2. The balance of services firms reporting increased domestic orders rose to +27 in Q3, the highest since Q3 2015 and up from +17% in Q2.
• In the manufacturing sector, the balance of firms reporting increased domestic sales was +28% in Q3, unchanged from Q2. The balance of manufacturers reporting increased domestic orders eased slightly to +22 in Q3, from +25% in Q2
• Firms in the hospitality sector were most likely to have seen increased domestic sales as restrictions eased, with nearly 2 in 3 (63%) reporting as much. This was followed by transport/distribution, and marketing/media, both on 50%.
• Once in five firms (22%) reporting a decrease in their cash flow, while 44% reported no change. Given the dramatic worsening of cash flow at the onset of the pandemic in Q2 2020, the failure to see any significant increases in this metric is a cause for concern.
• Micro (28%) and small (20%) businesses were also more likely than medium (17%) or large (12%) businesses to report a decrease in cash flow in the quarter.
• 27% of firms overall reported an increase in investment in Q3 (unchanged from Q2), far lower than the percentage of firms who reported a rise in domestic sales (47%). The failure to see any positive upward movement in investment is another troubling warning sign for longer term recovery.
• Meanwhile, 13% of firms reported a decrease in investment in Q3, and a further 59% said they had seen no change.
• 47% reported overall expect their prices to increase over the next three months (42% in Q2) with just 2% expecting prices to decrease (unchanged from Q2).
• In the services sector, the balance of firms reporting expecting to increase their prices rose to +38% in Q3, up from +31% in Q1, the highest level since Q3 2008.
• In the manufacturing sector, the balance of firms expecting to increase their prices rose to +60% in Q3, up from +57% in Q2.
• 52% of respondents cited inflation as an increased cause of concern (40% in Q2). 64% for manufacturers (46% in Q2) and 51% for service sector firms (40% in Q2), both of these sectoral figures are the highest seen since the metric was first collected in Q4 2009.
• Around 9 in 10 (88%) manufacturers cite raw materials costs as the driver of price increases. In contrast, just 1 in 5 (22%) manufacturers cite pay settlements as a driver of price increases, still below its pre-pandemic level.
• Within the survey, firms provided details of the wide range of inflationary pressures on their business, such as 150% increases to some steel products, and 600% increases in shipping containers

The EPSRC and ESRC have produced reviews of doctoral education in engineering and the physical sciences (EPS), and in the social sciences. In EPS:

• The number of EPS doctoral students in the landscape has been stable for the last five years. However, without continuing to secure additional investment, it is likely that there will be a decline in the number of students EPSRC is able to support in the future. EPSRC funds students across all areas of its remit and there have been no significant changes in the proportion of students in each discipline over the last five years.
• EPS doctoral graduates are highly employable with over 80% in some form of employment, 6 months after graduation. EPSRC graduates are more likely to be employed in industry (40%) or to have a STEM-related career (77%) than the EPS doctoral graduate population overall. For those that continue to a career in academia (35%), EPSRC funded students are also more likely to hold a research or research-related role (65%).
• While less likely to enter the public sector, probably due to the high number entering industry, those that do, again, are more likely to occupy research/research-related positions (24%). The main sectors EPSRC doctoral graduates go into are manufacturing, information and communication, and professional, Scientific, and Technical activities.

In the social sciences:

• There is some suggestion, particularly from international commentators, that UK training does not provide enough emphasis on the development of quantitative skills and that the quantitative training that is provided is too basic. This is a long-standing issue and a shortage of quantitative skills amongst social science PhDs is well known.
• There is a pressing need for PhD graduates to develop transferable employability skills to ensure they can compete for both academic and non-academic positions. Differences in the transferable skillset required for academic and non-academic careers are minimal. Employers outside of academia value social science doctoral graduates' subject expertise and critical thinking skills, but rarely actively target them during recruitment. The report itself mentions that the findings of the 2002 Roberts Review, quietly one of the most influential education reviews in recent memory, still remain current, and this writer can recall reports from a decade ago with very similar conclusions.
• Competition for academic jobs is intense, so additional employability skills can only benefit those looking to follow this career path. Stakeholders agree that current training does not systematically equip students with skills and attributes such as project and budget management, business/commercial acumen and the ability to communicate with a broad range of audiences. Or, where students do develop such skills, they do not always recognise their importance for their future career.
• There are inequalities for key groups in access to, participation in and outcomes following doctoral study. Access to research council studentships by students from Black, Asian and Minority Ethnic (BAME) backgrounds is low, especially among Black students. Women are under-represented among PhD graduates in some disciplines (notably economics, planning and business studies) but over-represented in others (such as psychology, education and social policy).
• There is evidence of socio-economic inequalities in access to the PhD and many stakeholders view current funding levels as insufficient to cover living costs - meaning those with access to additional sources of finance are at an advantage.
• Worryingly, levels of stress and anxiety among doctoral students are increasing, as is the number of students seeking support with their mental health. The causes are varied but some highlight failings in the culture as well as the systems and processes in place within DTPs and ROs. Although there is evidence that pastoral support is improving, it is not universally accessible or sufficiently tailored to doctoral students' needs.

UK Research and Innovation (UKRI) have published detailed data on the ethnicity of applicants for funding and those awarded funding from 2015/16 to 2019/20:

• The proportion of PI awardees reporting they are from an ethnic minority increased in 2019/20 by three percentage points to 12%. However, it continues to remain below the HESA academic staff share of ethnic minorities, which is used as a benchmark for the figures.
• Over the five-year period from 2015/16 to 2019/20, the proportion of CI and Fellow awardees reporting they are from an ethnic minority has increased by five percentage points to 18% and by six percentage points to 17% respectively.
• For doctoral studentship starts in 2019/20, 10% of students reported they are from an ethnic minority.

Skills and employment in Ireland

The Skills and Labour Market Research Unit (SLMRU) in SOLAS, the Irish agency responsible for funding and monitoring further education and training, has published the annual National Skills Bulletin for 2021. This looks at the Irish labour market in 2020.

The onset of COVID-19 had a significant impact on Ireland's labour market in 2020 evident across a number of labour market indicators:

• The labour force decreased by 12,400, standing at 2.43 million.
• Employment fell by over 28,200 to 2.29 million.
• The employment rate decreased by 1.8 percentage points to 67.8%.
• The participation rate decreased by 1.2 percentage points to 61.1%.
• The unemployment level increased by 15,800, standing at 136,700 persons.
• Using traditional methods of calculating unemployment, the COVID-19 adjusted unemployment stood at 444,200 in 2020, an increase of 323,300 (or 267.3%) compared to the standard LFS estimate in 2019.
• The unemployment rate (using traditional methods) increased by 0.7 percentage points to 5.7% (annual average); the COVID-19 adjusted unemployment rate reached 18.5%.
• The youth unemployment rate increased by 4.2 percentage points to 13.8%.
• The broad unemployment measure (combining unemployed and part-time underemployed persons) increased by one percentage points to 9.9%.
• Average hourly earnings increased across all sectors apart from the transport sector. The accommodation and food sector had the largest percentage increase in earnings over the year, despite the fall in average weekly paid hours for this sector.
• Inward migration continued to exceed outward migration resulting in positive net migration of 28,900 persons in 2020, approximately 5,000 fewer than 2019.
• The long-term unemployment rate declined by 0.1 percentage points to 1.5%.
• While employment increased for some occupations including managers, associate professionals and administrative roles between quarter four 2019 and quarter four 2020, other occupations experienced significant declines, with employment in elementary and skilled trades occupations falling by approximately 65,000 persons combined.
• Professionals (24,000) and administrators (12,800) with a third-level (degree-level) education observed the greatest increase in terms of persons employed.
• This pattern of increases in professional (i.e. graduate) employment and falls in most other areas is the same in the UK.
• In 2020, there were 330,000 recent job hires, a decline of 26% on the previous year. The wholesale/retail sector accounted for the highest share of recent job hires, followed by the health sector. Recent job hires were primarily in elementary, professional and sales occupations in 2020; elementary and sales occupations experienced the largest declines in hires between 2019 and 2020.
• Between quarter four 2019 and quarter four 2020, the education distribution of employment shifted towards higher education levels: the share of workers with qualifications at NFQ levels 7 (degree level) and above increased by four percentage points. Again, this same effect was seen in the UK during 2020. Rises were observed in graduates working in most occupational groups, most notably for those working in associate professional occupations (+19,200 persons or 10%). Occupations where the number of third level qualification holders fell were elementary workers (a fall of 12%), operatives (a 5% drop) and skilled trades occupations (-5%). In the UK these would be considered below graduate level employment.

This is another great report, packed with detail and well worth reading for our UK readers as there are many similarities between the two labour markets and the data is presented in an accessible and informative way.

Finally, it's time for the results of the Graduate Outcomes Survey! The Australian Graduate Outcomes Survey, that is. You can read my summary on Luminate here.

Written by

Charlie Ball

Head of higher education intelligence

Prospects