1. Main points
The unemployment rate for graduates, non-seasonally adjusted (NSA), was 4.6% in Quarter 3 (July to Sept) 2020, compared with 5.1% for the overall unemployment rate; the latest (Quarter 4 (Oct to Dec) 2020) NSA figure for the overall unemployment rate was 5.2%.
Graduate skill mismatch, defined as the proportion of graduates not employed in graduate occupations, decreased by 5.0 percentage points to 25.5% between Quarter 3 2019 and Quarter 3 2020.
Of all graduates who changed occupation but remained in employment in Quarter 2 (Apr to June) and Quarter 3 (July to Sept) 2020, we recorded an outflow of 1.0 percentage point in high-skilled occupations.
A smaller proportion of graduates (6.7%) switched occupation in Quarter 3 2020 compared with that of non-graduates (7.0%).
The coronavirus (COVID-19) pandemic has had a marked impact on the UK labour market so far, with the latest period (Quarter 4 (Oct to Dec) 2020) showing further increases in the unemployment rate. Using the Quarterly Labour Force Survey (QLFS) and Longitudinal Labour Force Survey, this work assesses the early impacts of the pandemic on the graduate labour force.
Graduates are among the highest-skilled workers and they play an important role in the economy. Higher levels of skills promote innovation and growth (Barro 2001, Lucas 2015, Mason and others 2008) and are therefore crucial in dealing with the challenges imposed by the pandemic. Graduates are also more occupationally and geographically mobile, a factor that may support their employment in times of crisis. However, the skill mismatch among graduates is reportedly higher than in other skill groups (Savic and others 2019) and this could hamper productivity performance in the long run.
Our article starts with an overview of graduate numbers for the period Quarter 1 (Jan to Mar) 2017 to Quarter 3 (July to Sept) 2020. Graduate unemployment is compared with the overall unemployment rate, and the unemployment rate for recent graduates, to address the questions of whether graduates are facing deteriorating job prospects¹ and assess how their outcomes compare with non-graduate workers. We then focus on labour market transitions of graduates across occupations. We present a detailed evaluation of occupational switching and skill mismatch in the UK labour market prior to and during the coronavirus pandemic, accounting for variations in the whole economy and across industries.
Our analysis focuses on the first three quarters of 2020, which cover different phases of the coronavirus pandemic, including the first lockdown period (March to June 2020) and the period of limited restrictions during the summer months (July to September 2020). We compare figures for 2020 with earlier data to evaluate how the labour market outcomes of graduates have been affected by the pandemic.
Specifically, our study aims to:
analyse movements in the unemployment rate for graduates before and during the pandemic
investigate changes in the distribution of graduate workers across different occupations, comparing the situation during the pandemic (Quarters 1, 2 and 3 of 2020) with previous years
analyse graduates' occupational shifts
explore the incidence of skill mismatch and whether this has been affected by the pandemic
investigate changes in the extent of the skill mismatch across industries
In our analysis, we assume there has been a significant reallocation of workers in the light of the pandemic, as workers have moved out of some professions and sectors badly hit by the crisis (for example, pilots in travel and tourism), and into other professions and sectors (for example, nursing and grocery retail). Such reallocation has the potential to affect the skill mismatch in the labour market. The direction of this effect is unknown as displaced workers can either improve their job match, for example, in case of a promotion, or they might not be able to match their skills to new openings in the labour market, in which case the mismatch will increase.
Given the negative association between the skill mismatch and productivity performance, understanding this phenomenon is important in assessing the potential scarring effects that this crisis may cause.² Our analysis of the changing labour market conditions of graduates overall and of recent graduates (those who graduated within the past five years) will provide an important outlook for economists and policy-makers.
Notes for Overview:
Economic contributions have shown that graduating during a recession may have long-lasting consequences on labour market outcomes in terms of career paths and wages (Altonji and others 2016); there is also evidence that experiencing recessions during youth affects long-run perceptions of redistribution policies (Giuliano and Spilimbergo 2014).
See, for example, Mason and others 2018
3. Graduate labour market characteristics
The number of graduates has been steadily increasing in the UK. In 2017, approximately 42% of the 34 million individuals aged 21 to 64 years¹ had a graduate degree. In aggregate, the graduate labour market comprises approximately 14 million of the UK population. Women account for around 56% of graduates in the labour market with a modest increase in their share over time.²
Graduates have specific skills related to their subject type (for example, engineering, accountancy, psychology), as well as more general transferrable skills (writing, communication, critical thinking). Because of these skills, graduates may have greater resilience during times of economic crisis, although the evidence is mixed³. Graduates may therefore be less likely to be unemployed in comparison with those who do not have a degree.
In Quarter 3 (July to Sept) 2020, people aged 25 to 64 years without a degree accounted for 37% of the unemployment rate, followed by those without a degree aged 16 to 24 years (31%). Comparatively, graduates aged 25 to 64 years and young graduates (aged 16 to 24 years) accounted for 15% and 9% of the overall unemployment rate respectively. Individuals aged 25 years or over who hold a higher degree, accounted for 8%. These figures suggest that graduates on average are less likely to experience unemployment than non-graduates. Overall, 76% of individuals who are unemployed do not hold a graduate degree.
Figure 1 shows the unemployment rate in total, and separately for graduates and recent graduates, (those graduating in the past five years) using the non-seasonally adjusted Quarterly Labour Force Survey (QLFS). Between Quarter 1 (Jan to Mar) 2017 and Quarter 4 (Oct to Dec) 2019, total unemployment was on a declining trend. Unemployment only increased marginally during the first two quarters of 2020. The introduction of the UK government's Coronavirus Job Retention Scheme (CJRS) and Self-Employed Income Support Scheme (SEISS) helped to keep unemployment lower than it would otherwise have been during the initial phase of lockdown restrictions. However, total unemployment increased between Quarter 2 (Apr to June) and Quarter 3 (July to Sept) 2020, when in the latter the unemployment rate reached 5.1%.
Unemployment amongst graduates has been consistently lower than the total. The average unemployment rate for graduates between Quarter 1 2017 and Quarter 3 2020 was 3.0%, compared with the total average unemployment rate of 4.2%. However, average unemployment for recent graduates was the highest, averaging at 6.3% over the period and reaching a peak of 12.0% in Quarter 3 2020. This suggests that recent graduates have been hardest hit by the pandemic in terms of unemployment. Nevertheless, the unemployment rate for recent graduates remains below the non-seasonally adjusted youth unemployment rate (aged 16 to 24 years), which stood at 14.2% and 13.6% in Quarter 2 and Quarter 3 of 2020 respectively⁴.
Figure 1 also illustrates recent seasonal trends in the unemployment rate for recent graduates, which shows an increase in the third quarter of every year. This usually coincides with the period immediately after graduation and indicates the presence of a lag between obtaining a degree and successful job search. However, the unemployment rate in the third quarter of 2020 was the highest over the past three years.
Figure 1 Unemployment rates (%) for total labour force, graduates and recent graduates (aged 16 to 64), from Quarter 1 2017 to Quarter 3 2020, non-seasonally adjusted
Unemployment rates for total labour force, graduates and recent graduates (aged 16 to 64 years), from Quarter 1 2017 to Quarter 3 2020, UK, non-seasonally adjusted
Notes for: Graduate labour market characteristics
See, for example, Clegg (2017).
See, for example, Burke and Scurry (2019).
Younger workers (those aged 18 to 24 years) have been disproportionately impacted by the pandemic. In the three months to July 2020, 18- to 24-year-olds experienced the largest decrease in employment, the largest increases in unemployment and the second-largest increase in economic inactivity.
The increase in youth unemployment is linked to younger workers' tendency to work in industries that were worst affected by the pandemic, that is, accommodation and food service activities and arts, entertainment and recreation. The number of job vacancies across the economy remain historically low, suggesting deteriorating job-market prospects for graduates.
The analysis so far has focused on trends in occupation and skill mismatch at the whole economy level. However, the impact of the coronavirus (COVID-19) has most acutely been felt within industries such as tourism, entertainment and hospitality¹. In this section we take a broad sectoral view, providing major trends within seven industry aggregates: agriculture, energy and construction (AEC)²; manufacturing; hotels and recreation; transport services; financial services; government services; and other services.
Data from the Quarterly Labour Force Survey (QLFS) show that financial services and government services traditionally employ a larger share of graduates compared with other industries. In government services we observe the largest increase (0.7 percentage points) in the proportion of graduate workers across all industries during the third quarter (July to Sept) of 2020. In AEC, manufacturing, hotels and recreation, and other services the proportion of graduate workers declined in Quarter 3 2020. However, these changes are not very dramatic, indicating that at this aggregate level graduates' employment within industries has not been greatly affected by the coronavirus.
Turning to the industry-level analysis of the skill mismatch across graduate workers, Figure 7 shows the proportion of graduates who are employed in jobs that do not require a degree qualification, comparing the average for Quarter 1 (Jan to Mar) 2017 to Quarter 1 2020 period with Quarter 2 (Apr to June) and Quarter 3 (July to Sept) of 2020.
In all years, the largest proportions of graduates without a graduate job are observed in the government services, hotels and recreation, and in financial services. In the case of government services and financial services, graduate workers may choose to enter the sector at positions which do not require a degree, to get a "foot in the door". In hotels and recreation, on the other hand, there are fewer graduate-level jobs and the skill-mismatch in this sector might be more long-lasting.
Broadly, Figure 7 shows that the skill mismatch in most sectors has marginally decreased during the coronavirus crisis, with the exception of government services, where the mismatch increased by 4.5 percentage points, if compared with the average period between 2017 and 2020. Between Quarter 2 and Quarter 3 of 2020, the proportion of graduates working in a non-graduate occupation shows a slight decline in most sectors. The limited change in occupational switching is likely to reflect the effect of the government's job retention schemes, the Coronavirus Job Retention Scheme (CJRS) and Self-Employed Income Support Scheme (SEISS), which encourage an attachment between individuals and a specific job. Occupational switching might therefore become more prevalent as employment support unwinds.
Figure 7: Overqualification by sector
Proportion of graduates who are overqualified across industries, Quarter 1 (Jan to Mar) 2017 to Quarter 3 (July to Sept) 2020
Source: Office for National Statistics – Quarterly Labour Force Survey
Download this chart Figure 7: Overqualification by sectorImage .csv .xls
Notes for: Industry
Industry breakdowns using the LFS should be interpreted with caution, as they are based on respondents' views about the business for which they work. This may not be the same as the industry in which businesses are classified in estimates of the national accounts.
The category AEC has been created aggregating the following SIC major groups: A - agriculture, forestry and fishing; B,D,E - energy and water; and F - construction.
6. Outcomes for graduates and non-graduates
This article has investigated changes in graduates' employment patterns during an ever-changing economic and social environment, using data from Quarterly Labour Force Survey (QLFS) and the Longitudinal Labour Force Survey. Our findings show that labour market outcomes for graduates are worsening slightly, as revealed by an increase in their unemployment rate, particularly among recent graduates. However, unemployment figures are still below those for the total labour force (graduates and non-graduates) and lower than comparable youth unemployment rates.
Graduate workers were better able to change occupations in the periods prior to and in the first few months of the crisis, compared with workers in the total labour force in the UK. These occupational shifts may have been helped by their wider skill set. Given the higher level of human capital, graduates may be in a stronger position to adjust to challenges imposed by the pandemic in terms of retaining jobs and finding new employment opportunities; however, these jobs may not be of the same quality and they may not fit their skill profile. However, the general population had a higher incidence of occupational switching between Quarter 2 (Apr to June) and Quarter 3 (July to Sept) 2020 as the effects of the pandemic began to be felt. This may suggest those who hold a degree were better able to remain in their jobs over the period.
Indeed, we find that during the first three quarters of 2020, graduates who changed occupations have moved out of the highest-skilled jobs and into intermediate and low-skilled ones. The skill mismatch, on the other hand, has been declining during the pandemic, continuing the downward trend that started in 2018. This may be because of a better match with the educational requirement of occupations, allowed by the fact that graduates are better able to work remotely because of the nature of their work.
A decline in the skill mismatch during the pandemic could also be a consequence of the increase in the unemployment rates among graduates, as sectors with a high proportion of overqualified graduates, such as hospitality and recreation, have drastically reduced their activity. These areas are some of the many questions for future research around this topic.
As the impact of the coronavirus (COVID-19) in the labour market is still unfolding, concrete conclusions on the basis of these findings are not possible. However, our analysis shows that graduate workers may fare better in their labour market outcomes in the current crisis, compared with non-graduates.
One caveat to our study is that a change to Labour Force Survey data collection during the pandemic has impacted both the level of response and the non-response bias of the survey, and consequently the survey estimates. Hence, figures from January to March 2020 onwards need to be interpreted with caution.
This article has been written in collaboration between the Office for National Statistics (Marina Romiti and Vicky Haigney) with Dr. Michela Vecchi, Associate Professor of Economics at the University of Middlesex and Dr. Catherine Robbinson, Deputy Dean at the University of Kent. Dr Vecchi and Dr Robinson would like to acknowledge support from the ESRC (ES/V017543/1).Back to table of contents
An individual aged between 21 and 64 years not enrolled on an educational course who have attained a higher education degree or equivalent.
A change in a worker's Standard Occupational Classification (SOC) from one quarter to the next, which would not be reflected in the traditional flows between employment, unemployment and inactivity. This analysis classifies occupation switchers as those who have changed one-digit SOC code (major groups)¹ between periods. The analysis at the major group structure, although broad, compresses occupations that are similar in terms of qualification, training, skills and experience. Changes in occupations can occur for a number of reasons, such as promotion, and indeed workers can move occupation while remaining within an organisation.
Labour market mismatch
A worker with a level of education, experience, skills or interests that do not correspond to the requirements of the job where they are employed.
Overqualification and overeducation
A form of education skills mismatch where a person possesses more education than required for the job. This analysis follows a statistical method used by the International Labour Organization to compare the distribution of educational attainment of those in employment in the UK against the average educational attainment level for their occupation.
Notes for: Glossary
- "The major group structure is a set of broad occupational categories that are designed to be useful in bringing together unit groups which are similar in terms of the qualifications, training, skills and experience commonly associated with the competent performance of work tasks."
8. Data sources and quality
This article uses data from the UK Quarterly Labour Force Survey (QLFS) and Longitudinal Labour Force Survey to explore the incidence of occupational switching and educational mismatch (specifically overqualification) since the advent of the coronavirus (COVID-19) pandemic and associated UK lockdown. This covers Quarter 1 (Jan to Mar) 2020, Quarter 2 (Apr to June) and Quarter 3 (July to Sept) 2020. We compare these figures with the same periods from 2017 onwards to determine how the pandemic might have affected the data. The QLFS offers the most representative and timely data on labour market trends available.Back to table of contents
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