How can employers make better use of graduates’ skills?

In an ideal world, everyone investing in their skills through education and training would enter the labour market and find a job which took full advantage of those skills. Concerns that this has not been the case for successive cohorts of university graduates are long-standing, particularly in the UK following the rapid expansion of the higher education sector in the early 1990s. However, there is wide disagreement about the extent of the problem, or how much it has changed over the past couple of decades.

It is commonplace to hear people refer, often interchangeably, to “over-education”, “under-employment”, “over-qualification”, “over-skilling” and “under-utilisation”. But ultimately these terms apply to two aspects of graduate work: whether a person needs to possess a degree to get a job, and whether they need the skills learned through studying for a degree to actually do the job.

Given the increase in the number of graduate applicants for jobs, it should not be surprising to find that more and more jobs require a degree in order to get through the recruitment process. As the Higher Education Funding Council for England has pointed out, 65% of recent graduates report that having a degree was either a formal requirement or an advantage in securing employment once out of university. The more substantial issue is whether the job, once secured, requires skills learned at university, or if the degree was simply a way for employers to screen candidates. All too frequently, the two points are conflated (although there are notable exceptions).

How the UK compares to the rest of Europe

In a report we produced for the Chartered Institute of Personnel and Development, we used two European surveys to indicate how different countries compare when it comes to producing jobs that require “graduate-level” skills. In both surveys, the UK does appear to have a relatively high proportion of its graduate workforce in jobs that don’t require such skills. By one widely reported measure, nearly 60% of UK graduates – of all ages – working in 2010 were in jobs which did not require the completion of a degree, as the graph below shows.

However, as we argued in the report, these types of self-reported survey data have some real problems. It is hard, for example, to work out when skills were actually developed during the long course of education, and almost impossible to say whether they would have been produced anyway if individuals had taken a different route into the labour market.

We could, as many labour economists have done, look at the wage differences between graduates and non-graduates. The large and persistent gap between the two even as graduate numbers increase suggests demand for them has also risen, but this could equally be due to rising demand for graduate skills or changes in employer screening and recruitment practices. Through recruitment, graduates out-compete non-graduates for the available better paying jobs, pushing the average wages of non-graduates downwards.

What is a graduate job?

It is therefore important to look at the work graduates are actually doing. Of course, the notion of a “graduate job” is difficult to define. The most recent data on the destination of university leavers show that 75% of recent graduates are working in professional, managerial, associate professional and technical occupations, which implies one in four have started their working life in lower-skilled jobs.

The bigger point, frequently missed, is that it is not correct to equate the higher skilled occupational groups with graduate jobs – a point which recent work by Peter Elias and Kate Purcell at Warwick has made very clear. In the mid-1990s, only around 20-25% of workers in managerial, associate professional and technical occupations were graduates – this rose to around 40-45% by 2014. For the graduates entering into occupations where once there were largely non-graduates, we need to see evidence that something is changing to the content of the job – that it is upgrading and requiring more skill – in order to argue that their graduate skills are being utilised and that the existing routes into these jobs were not just as effective (as well as being cheaper).

‘Upgrading’ jobs with more autonomy

To do this, we use data from the Workplace Employment Relations Survey on one aspect of jobs – the amount of autonomy, discretion and influence employees have over their work – to capture the skill requirements of a particular occupation. We looked at how this has changed over time (from 1998 to 2011), and crucially, how it differs for graduates and non-graduates in the same types of jobs.

What we found is that graduates’ use of skills across the labour market was mixed, leading to a range of different outcomes. There are a number of occupations which we could characterise as “upgrading” to accommodate extra graduates – these were where autonomy was increasing and was greater for graduates compared to non-graduates.

As the table below shows, many other occupations where the share of graduates had increased significantly – as shown in the final column – did not fit this description. For some occupations, graduate autonomy was falling relative to the occupation as a whole – indicating graduates were taking on lesser skilled jobs as a consequence of increased competition. For others, decreases were in line with absolute falls in autonomy across the occupation – which we call deskilling. There are also a number of types of work where graduates had less autonomy than non-graduates, suggesting graduate skills might actually be mismatched to the requirements of those occupations.

The next question for research is to look at why occupations have evolved differently as graduate recruitment has grown. This would help us understand how employers and policy-makers can work together with graduates to improve skill use where possible. Where it is not possible, we should be asking questions about the size of the higher education sector in relation to our labour market needs.

This article is published in collaboration with The Conversation. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Craig Holmes is Lecturer in Economics at Pembroke College at University of Oxford; Charoula Tzanakou is Research Fellow, Warwick Institute for Employment Research at University of Warwick; Daria Luchinskaya is IAS Early Career Fellow at University of Warwick, and Ken Mayhew is Emeritus Professor of Education and Economic Performance, Department of Education and Founding Director, Centre on Skills, Knowledge and Organisational Performance at University of Oxford

Image: Ndeye Astou Fall, 22, works at a call centre. REUTERS/Finbarr O’Reilly