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UK graduate labour market update: 23 November

November 2021

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

Firstly this week, in a poll by Prospects Luminate 51% of students and graduates surveyed said it was 'very important' that employers offered flexible/remote working. Just 5% replied that it was 'not at all important'.

Level of importance,Percentage
Not at all important,4.62
Slightly important,10.77
Fairly important,20.77
Very important,50.77

The latest round of the Office for National Statistics (ONS) fast response experimental statistics on the impact of COVID were released on 18 November:

  • According to Adzuna, on 12 November 2021, the total volume of online job adverts in the UK stood at 144% of its February 2020 average level.
  • Of the 28 categories, only 'legal' and 'energy, oil and gas' are below their February 2020 average level.
  • The volumes of online job adverts in all 12 UK countries and regions were above their February 2020 levels.

The ONS have also produced some more data from their regular business survey:

  • The percentage of currently trading businesses has fallen slightly from 93% in late October 2021, to 91% in early November 2021. This is the first time the figure has fallen since January 2021 and is primarily led by the transportation and storage industry.
  • Over a quarter (28%) of businesses currently trading reported a decrease in turnover compared with normal expectations for this time of year; this is up from 24% in late September 2021, and is the highest percentage since early August 2021.
  • Of businesses not permanently stopped trading, 6% reported no or low confidence that they would survive the next three months, which compares with 4% reported in early October 2021. The figure was highest (13%) for businesses in the other service activities industry.
  • Three-quarters (75%) of importing businesses reported that they had experienced a challenge importing in late October to early November 2021, up from 60% in late September 2021. A change in reference period for the question may have impacted responses.
  • Approximately one in six (17%) of the workforce were estimated to be using a hybrid model of working in late October. This increased to over a fifth (21%) of the workforce in businesses with 100 employees or more.
  • In early November 2021, half of businesses not permanently stopped trading reported that their workforce had already returned to their normal place of work. In contrast, 1 in 11 businesses do not expect their workforce to return to their normal place of work.

Still from the ONS data, 18% of businesses reported they intend to use increased homeworking as a permanent business model, while 35% of businesses do not. Half of IT businesses have already decided to use increased homeworking in the future.

The reasons reported by businesses that indicated they planned to use an increased homeworking model going forward in early November 2021, compared with late October 2021 were:

  • improved staff wellbeing - 65% (up from 63%)
  • increased productivity - 53% (up from 45%)
  • reduced overheads - 53% (up from 49%)
  • reduced carbon emissions - 43% (up from 34%)
  • ability to recruit from a wider geographical pool in the UK - 23% (up from 22%)
  • reduced sickness absence - 17% (up from 13%)
  • ability to better match jobs to skills - 15% (unchanged)
  • ability to recruit from a wider geographical pool internationally - 13% (unchanged)
  • reduced wage bill - 4% (unchanged).

Meanwhile 5% of businesses were not sure if they would use a homeworking model, down from 8% in early October.

The top three reasons reported by businesses who indicated they did not plan to use an increased homeworking model in early November 2021, compared with early October 2021 were:

  • not suitable for our business - 90% (up from 89%)
  • negative impact on working culture - 9% (up from 6%)
  • reduced communication - 9% (up from 6%).

Businesses in the accommodation and food service activities industry and the wholesale and retail trade, repair of motor vehicles and motorcycles industry reported that an increased homeworking model was not suitable for their businesses at 100% and 93%, respectively.

The ONS have also released data from their annual business enterprise research and development survey, for 2020:

  • Expenditure on research and development (R&D) performed by UK businesses (in current prices) grew by £900million to £26.9billion in 2020. The increase of 3.5% was similar to recent year-on-year growth.
  • The software development product group had the largest growth in expenditure on R&D in 2020, with an increase of £314million (18.3%) to £2.0billion.
  • The East of England had the largest growth in the value of regional expenditure, increasing by £425million (7.8%) to £5.8billion in 2020.
  • In 2020, total UK business employment in R&D grew by 18,000 to 283,000 full-time equivalent positions, an increase of 6.8% since 2019.
  • In 2020, 75% of business R&D was funded by businesses' own funds (£20.3billion) followed by overseas funding at 15% (£3.9billion). Businesses' own funds also had the largest growth in the value of funding of R&D in 2020, which increased by £661million.
  • In 2020, business R&D consisted of civil R&D of 93% (£25.0billion) and defence R&D of 7% (£2.0 billion). The split between civil and defence has changed over time with civil R&D accounting for 88% and defence R&D accounting for 12% in 2009.

The majority of young people think that their school or college did not spend enough time helping them understand future career pathways or options.

The CIPD have issued a new report, Youth Employment in the UK. It's a very interesting report, but one point to be made is that the CIPD used a sample that was 65% graduate - way more than the actual population at this age, which is slightly less than 50% graduate.

  • Over a quarter think that they are overqualified for their current role, rising to a third of those educated to degree level and above. Levels of qualification mismatch also vary by industry, with levels of overqualification highest among those working in wholesale and retail (47%) and hospitality and leisure (40%), and underqualification more prevalent among those working in manufacturing (11%) and business services (11%).
  • Of those who attended university, over half would have considered an apprenticeship as an alternative route if it had been available.
  • Paid work during education is seen as more beneficial for developing employability skills as opposed to gaining subsequent employment. Those who did combine work and study are much less likely to be currently unemployed compared with those who didn't.
  • Most young people report taking part in work experience organised by their school or college. Over a quarter of young people rated the quality of their work experience placement as either low or very low. However, those who did work experience more recently were most likely to rate it positively
  • While the majority of young people received some type of careers advice and guidance in education, just a fifth report that the guidance they received was high quality. Further, the majority of young people think that their school or college did not spend enough time helping them understand future career pathways or options. There are clear differences by socioeconomic background, with young people from less advantaged backgrounds less likely to have received careers guidance and those who did being more likely to rate it as poor.
  • Half of young people reported receiving a face-to-face careers guidance interview at school. Of those who did receive this, just 41% report that this was effective in helping them understand and plan their next steps into either further education, training or work. Young people from less advantaged backgrounds were more likely to rate the guidance they received as not effective compared with their more advantaged peers. Survey results show that most help and support received at school or college was on educational/academic options, with just 29% reporting careers help and support.
  • Of those surveyed, under one in ten were currently unemployed and, of this group, half had been unemployed for 12 months or more. Only half of unemployed respondents had accessed support services to help them find work. Overall, 42% of those who are unemployed have applied for ten jobs or more, and the majority of young people who have applied for positions and have been interviewed did not receive any feedback on why they weren’t successful.
  • Overall, respondents were broadly positive about career progression. However, 29% of young people reported that it had failed to meet their expectations, with poor-quality line management, lack of effective training programmes and lack of access to graduate programmes as the most commonly reported barriers.
  • When asked whether the location of their work has changed as a result of the COVID-19 pandemic, 39% report that they have continued to work on business premises, 39% report that they have changed location and are now working from home, and 16% report working from a mix of home and business premises.

There is a new annual Employment Trends report from the CBI/Pertemps:

  • This year's survey shows that the UK's jobs outlook is strengthening, with 50% of firms expecting to grow their workforce next year.
  • 87% of businesses are planning to recruit permanent roles this year, with nearly half of firms (46%) expecting higher levels of recruitment.
  • Access to skills (noted by 77% of companies) and the ability to move UK workers across the EU (69% of companies) feature heavily in businesses' list of current concerns
  • Factors important to labour market competitiveness include finding people with the right skills (89%), a more flexible labour market (47%) and a healthy workforce (35%).
  • 68% of firms are planning to increase pay in line with, or above inflation - making the rebound the highest since the question was first asked in 2009.
  • Compared to working pre-pandemic, 76% expect the use of hybrid working to increase, with 40% expecting full-time remote working to increase.

The influential EY Item Club have also published their new quarterly economic forecast:

  • EY ITEM Club's expectations for GDP growth have been downgraded. The forecast is now for the UK economy to grow by 6.9% in 2021 and 5.6% in 2022, down from the 7.6% and 6.5% forecast back in the summer. Widespread supply-chain shortages, tight labour markets and rising energy prices have all played a part in this downgrade.
  • Despite the downgrade to the forecast, the economy is in far better shape than expected 12 months ago. The UK economy is expected to get back to its pre-pandemic size by Q1 2022, in line with our European neighbours.
  • A very buoyant labour market means that, despite the end of furlough, unemployment is unlikely to rise significantly, with the EY ITEM Club expecting it to peak at just 4.6%, well below the expectations of 10%+ anticipated at the start of the pandemic. The strong labour market is feeding into higher wages, which should support consumer spending in the face of any squeeze on living standards caused by higher prices. Households have also been able to save throughout the pandemic, amassing approximately £180bn of 'excess' savings. This means households' financial positions are far stronger than in an equivalent recovery phase of a normal business cycle, and this again should support consumption through the course of next year.
  • CPI inflation will now peak at almost 5% early next year and remain above 3% until the second half of 2022.

The long-term impact of COVID

The Resolution Foundation have assessed the permanent implications of COVID-19 for the UK’s labour market:

  • Unemployment in Q3 2021 was just 4.3%, compared to 4.0% on the eve of the crisis. Long-term unemployment has been falling since the spring, and youth unemployment is now just below its pre-crisis level. This is a much better performance than in previous crises.
  • The fall in the number of workers through the crisis is showing up in higher numbers of economically inactive people - those not working or looking for work. This has increased by 586,000 since the start of the crisis, of whom 364,000 are working-age. Among 55 to 64-year-olds, participation has fallen by 1.2 percentage points during the COVID-19 crisis. It rose by 1.4 percentage points after the financial crisis. This reverses the trend of the past decade - in the decade prior to the crisis, adults aged over 50 accounted for 88% of the increase in the labour force.
  • There is a sharp gender divide to labour force participation among younger workers. Among adults aged 25 to 44, labour force participation among men has gone down by 1.1 percentage points during the pandemic, but it is up by 1.8 percentage points among women. 74% of mothers of 0 to 3-year-olds were in the workforce in 2021, compared to 68% in 2019 and 2017. Women now make up almost 48% of the workforce, up from 47% in 2019, and 44% in 1992. This is partly due to homeworking allowing some carers to work, partly due to second earners working more to offset labour market disruption experienced by partners, and partly due to sectoral shifts which, on balance, have favoured female-heavy sectors.
  • The large-scale sectoral reallocation over the past two years has not happened through workers moving from hard-hit industries to booming sectors.. Although vacancies are filling quickly, there is little relationship between the industries where unemployed people are looking for work and the sectors with the highest number of vacancies.
  • There are signs of growing mismatch in the labour market, too. The share of workers who are in a higher-skilled job than a year earlier has fallen back to levels last seen in 2012, and moves into lower-skilled jobs have increased since before the pandemic. The share of people who are over-educated for their occupation has reached a record high. At the start of the crisis, very few job-to-job moves were happening at all, likely reflecting both a fall in worker confidence as well as opportunities drying up. As the economy has reopened, and vacancies and hiring rates have surpassed their previous highs, job-to-job moves, too, reached record levels in Q3 2021 - but even among those who have been moving jobs, there has not been a rise in reallocation between sectors. In fact, the share of job-to-job movers going to a different industry has fallen slightly since the pandemic hit and fell to a record low of 43% in the year to Q3 2021.
  • Around three-quarters of the respondents who were in the highest-paying quartile were homeworking in October 2021 (40% hybrid, and 34% exclusively at home) compared to half of the lowest-paid workers.
  • Survey evidence suggest workers expect the increase in hybrid work to outlast the pandemic, but not fully remote working. Hybrid working will give educated professionals more options about where to live, and more opportunities to balance work and family commitments. But there will be impact on low-paid workers who will need to find new jobs in new places as they respond to the demand of higher-paid workers.

And finally HESA and The University of Warwick have examined graduate earnings:

  • The research examines graduate earnings for different birth cohorts (who are covered by long-running studies) at the age of 26, and particularly the Next Steps (formerly known as the Longitudinal Study of Young People in England) cohort, which covers a set of individuals born in England between 1 September 1989 and 31 August 1990.
  • The average graduate earnings premium relative to non-graduates by age 26 for a cohort of young people born in 1990 is around 10%.
  • From BCS70 data for a 1970 birth cohort, we estimate the equivalent graduate earnings premium to have been 17%, from which we conclude that the graduate earnings premium fell by around seven percentage points across these two birth cohorts. Complementary analysis based on LFS data corroborates this finding of a fall in the graduate earnings premium.
  • The decline in the premium impacted only on those born close to 1990: specifically, on those born over the period 1988-93.
  • However, the premium for an upper honours over a lower degree class was 10% by age 26 for those born in 1990: this is four percentage points higher than the equivalent premium of 6% for those born in 1970, based on BCS70 data.
  • This increase in the earnings premium for an upper honours over a lower degree class is associated with those born between 1970 and 1982: there was no increase in the premium for those born during the period 1982 to 1992.

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