IES report

Welsh Graduates and

their JobsEmployment and Employability in Wales

Claire Tyers, Helen Connor, Peter Bates, Emma Pollard, Will Hunt

Prepared for HEFCW by:

INSTITUTE FOR EMPLOYMENT STUDIESMantell BuildingUniversity of SussexFalmerBrighton BN1 9RFUK

Tel.+ 44 (0) 1273 686751Fax+ 44 (0) 1273 690430

www.employment-studies.co.uk

HEFCW

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The Orchards

Ilex Close

Llanishen

Cardiff CF14 5DZ

UK

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Fax +44 (0)29 2076 3163

www.hefcw.ac.uk

© Copyright Higher Education Funding Council for Wales (HEFCW).  Where HEFCW copyright material is published or issued to others, the source and copyright status must be acknowledged. 

ADVANCE \Y 638.0

The Institute for Employment Studies

The Institute for Employment Studies is an independent, apolitical, international centre of research and consultancy in human resource issues. It works closely with employers in the manufacturing, service and public sectors, government departments, agencies, and professional and employee bodies. For over 35 years the Institute has been a focus of knowledge and practical experience in employment and training policy, the operation of labour markets and human resource planning and development. IES is a not-for-profit organisation which has over 60 multidisciplinary staff and international associates. IES expertise is available to all organisations through research, consultancy, publications and the Internet.

IES aims to help bring about sustainable improvements in employment policy and human resource management. IES achieves this by increasing the understanding and improving the practice of key decision-makers in policy bodies and employing organisations.

Higher Education Funding Council for Wales

Our mission is to promote internationally excellent higher education in Wales, for the benefit of individuals, society and the economy, in Wales and more widely.

Working with partners, we deploy funds from the Assembly and others in order to:

· secure higher education learning and research of the highest quality

· maximise the contribution of higher education to the culture, society and economy of Wales

· ensure high quality, accredited teacher training provision across Wales.

Acknowledgements

The authors of this report acknowledge the considerable assistance given by other IES staff involved in the project delivery, Emma Diplock, Gill Howd, Polly Green and Denise Hassany, and also Geoff Pike and his team at Employment Research, who conducted the survey of Welsh employers. Additionally, we would like to acknowledge the input of all stakeholders, including careers service staff within Welsh HEIs, and Welsh employers who gave up their time to speak to the research team. Finally, we would like to acknowledge the assistance given by the project steering group, Alyson Thomas, Roger Carter, James Dawson, Hannah Falvey and Frances Good, and members of HEFCW’s Third Mission Committee who provided comments on initial drafts of the report.

Contents

ixResearch Summary

11.Introduction and Background

1Research aims and objectives

2Methodology

7Definitions used in the report

7Report structure

92.Background and Context

9Introduction

9Larger and more diverse graduate supply

12Increased HE participation but rates vary

13Other changes to the HE landscape

14Changes in the graduate labour market

16Starting salaries vary markedly

17Longer-term graduate outcomes

18What is a graduate job?

20Graduates in small firms

22Recruitment methods

23HE careers services

24Overseas comparisons

26Chapter summary

28Chapter conclusions

293.Graduate Supply

29Introduction

29Student population

32Demographics of the student population in Wales

35Graduate population in Wales

40Chapter summary

42Chapter conclusions

444.Graduates at Work

44Introduction

45Economic activity

48Graduate occupations

52Graduate jobs

55Industrial sector

56Employment contracts

59Graduate earnings

62Returns on higher education

65Early experiences of new graduates

68Chapter summary

69Chapter conclusions

725.Graduate Migration

72Introduction

72Overview of mobility data

73Migration pathways

75Stayers and leavers

79Early leavers and returners

82Early arrivers and passers-through

84Later arrivers and the missed

87Overview of flows in and out

91What drives migration?

93Chapter summary

95Chapter conclusions

966.Graduate Recruitment and Demand

96Introduction

96The nature of the Welsh economy

99Understanding the Graduate Labour Market

103Profile of graduate recruiters

106Jobs and vacancies

107Recruitment methods

113Wages

115Chapter summary

116Chapter conclusions

1187.Graduate Employability

118Introduction

119Greater focus on graduate employability in HE generally

122HEI approaches to employability

129Employer contacts with HEIs

133Use of labour market information

138Drivers behind graduate recruitment

145Potential barriers to graduate recruitment

148Welsh-language issues

151Chapter summary

152Chapter conclusions

1548.Conclusions

154Overview

154Graduate demand and employment in Wales

155The structure of the Welsh labour market

156Implications of employment patterns in Wales

156Graduate earnings in Wales

157Mobility and retaining/attracting graduates

158Employability

159Graduate views of Wales

159Employer involvement with graduates in Wales

161Summary of conclusions

161Recommendations

163Appendix 1: Stakeholder Participants

165Appendix 2: Details of Employer Survey

168Appendix 3: Employer Questionnaire

177Appendix 4: Additional Data Tables

181Appendix 5: Earnings Equations

185Appendix 6: Breakdown of Geographical Areas

187Appendix 7: Confidence intervals

189Bibliography

Research Summary

1.1 The overall aim of this study has been to provide the Higher Education Funding Council for Wales (HEFCW) with an up-to-date and comprehensive set of research evidence on trends and developments in the graduate labour market. This is important, given the changing landscape of higher education in Wales, the attitudes and expectations of students and graduates about work and jobs, and the developing Welsh economy and its demand for graduates. This summary provides an overview of the research scope, and presents the key findings from the research evidence collected, and the main conclusions and recommendations made in the report.

Scope of research

1.2 HEFCW commissioned the Institute for Employment Studies (IES) to conduct a market research study of graduate employment and employability in Wales. The full research objectives are presented in Chapter 1 of the main report, but were primarily to:

· shed further light on trends arising from the three previous research studies commissioned by HEFCW, through a review of existing information sources

· explore the issues of retaining graduates of Welsh higher education institutions (HEIs), and of how Wales-based employers might attract Welsh graduates from HEIs outside Wales, where this would demonstrably be to the benefit of the Welsh economy

· identify any mismatches of supply and demand that exist in the Welsh labour market for graduate-level skills, and explore the notion of a ‘graduate job’

· consider what might be done at both the HEI and employer level to improve graduate career prospects

· compare the situation in Wales with that of other (similar) regions of the UK, Western Europe and North America.

1.3 In order to fulfil these objectives, the research had five main components:

· a review of relevant existing literature and data sources, including analysis of student data from the Higher Education Statistics Agency (HESA) and other key sources

· interviews with a range of stakeholders in Wales, representing 12 organisations

· interviews with representatives of all Welsh HEI careers services, 22 interviews in total

· an analysis of data from two large UK-wide datasets with specific data on Wales: the Destinations of Leavers from Higher Education (DLHE) providing a short-term view of migration patterns, and the Labour Force Survey (LFS), which gives a longer-term view of graduate outcomes

· a survey of 514 employers operating in Wales, with 23 additional face-to-face interviews with current graduate recruiters.

1.4 The main findings from the research, in terms of key statistics, trends and issues, are outlined below.

Background and overview of general trends

1.5 Welsh higher education (HE) is growing, as in the UK as a whole, and there is now greater participation by people from a wider range of educational and personal backgrounds. However, participation rates vary, especially between socio-economic groups, regions and local communities. Participation rates of lower socio-economic groups, for example, are slightly higher in Wales than the rest of the UK outside Scotland (which has the highest figure of any region of the UK). The balance of HE provision has also changed, including greater increases in part-time study with more individuals in postgraduate study in particular, and also shifts in the subject balance at institutions.

1.6 There is a general trend across the UK in recent years towards studying at an institution nearer home, mainly due to financial considerations, but also the changing demographic student profile. Welsh-language issues also play a part in some Welsh regions, where there are more opportunities to speak Welsh in the HEI curriculum or stay in Welsh-speaking HEI halls of residence. This affects institution choices by Welsh-speaking potential HE students (but alongside many other factors usually). There also continues to be a significant cross-border flow which has an impact on Welsh HE.

1.7 HE expansion has been driven by economic competitiveness and social arguments and the expected needs of the new knowledge economy. But there is also an argument that more attention needs to be given to the greater utilisation of the available talent and, therefore, making better use of the existing graduate workforce.

1.8 Despite the larger graduate labour supply ‘pool’, there is little evidence to demonstrate that the demand for graduates has slackened off, or that graduate wage premiums are falling. Rather, the labour market for graduates has broadened and become more differentiated, including more variation by sector, type of job and starting salary; and the UK has some of the highest graduate-wage premiums in Europe. For some graduates, finding work of an appropriate level, however, can be difficult, and graduate employability has become an important concern for HEIs.

1.9 Wales is seen as a leader, certainly within the UK, but also further afield, of approaches to graduate employability in HEIs. Despite this, as discussed further below, there is evidence that Welsh HEIs and their graduates have yet to make inroads into the majority of employers in Wales, especially the large number of small firms. This is a situation which also applies in the UK as a whole. Where contacts, via HEIs and with the help of the Graduate Opportunities Wales (GO Wales) Programme (an HEFCW programme), have been established between employers and graduates, the evidence does suggest, however, that this has had positive results. In particular, GO Wales has offered, through its range of services, a significant number of placements (over 1,600 between 2003 and 2005) and also supported over 1,600 businesses during that time. It is seen by employers as offering good value, and by students as enhancing their core skills.

1.10 There have been various changes to graduate-recruitment methods used by employers and also to graduates’ job-search methods, the most significant of which is the greater use of the Internet. Students also use HE careers services in a more varied way than they did in the past, and many careers services have been changing their focus to become more integrated with their HEI in their advice and guidance services and in the development of employability skills as part of curriculum development.

Graduate supply

1.11 Using HESA data on the student population in Wales and data from the LFS on graduates in the working population, we have presented an overview of the key characteristics of, and trends in, graduate supply. This shows that:

· In 2003/2004, around 110,000 UK-domiciled students were enrolled in Welsh HEIs and 42 per cent of these were studying part time. The number of non-Welsh students studying in Welsh HEIs has increased by around 4,000 over the last five years, although in overall terms the proportion has fallen.

· The proportion of female students has increased over the past five years and women now outnumber men across the Welsh HE sector as a whole, though the gender balance varies between institutions and levels, and especially between subjects.

· Wales has also experienced a greater increase in older students (students aged over 25 at entry) than younger entrants, and among part-time rather than full-time students, also among those studying at undergraduate other than degree level.

· The number of graduates in the working-age population in Wales has risen considerably over the last decade, by 69 per cent, although the upward trend has slowed in recent years. Graduates now make up 15 per cent of the working population of the country. This places Wales mid-table in a league of other UK regions.

· Despite recent demographic changes in the student population, male graduates still outnumber female graduates in the population of graduates of all ages in the workforce (as opposed to current students or recent graduates only). This reflects historical trends (the higher HE participation of men pre-1995).

· Younger people and minority ethnic groups in the workforce are disproportionately more likely to have a degree; this reflects the recent education supply changes.

Graduates at work

1.12 Once individuals have graduated, there is a range of data from the LFS about the jobs they take up. This tells us that:

· employment rates for graduates in Wales are very high, especially for those with higher degrees, and rates are higher than for non-graduates. In all the UK regions, only the East Midlands and Northern Ireland have higher employment rates for graduates than Wales

· the vast majority, 84 per cent, of graduates in Wales are employed in managerial, professional and associate-professional (ie higher-level) occupations

· graduates in Wales are more likely than those in the rest of the UK to be employed in jobs classified according to the new standard occupational classification system (SOC (HE)), as traditional graduate jobs rather than the newer graduate jobs. This is likely to reflect the different employment structure of Wales, especially its comparatively higher employment of graduates in the public sector (including education) compared to the rest of the UK, and lower employment in large commercial enterprises (few head offices)

· graduate earnings in Wales are lower than in most other UK regions, but this largely reflects the lower relative wages generally in Wales, rather than anything specific to the financial returns to education in the region

· graduates working in Wales earn on average around 46 per cent more per year than individuals with lower qualifications (A-levels or HE qualifications lower than degree). Taking inflation into account, earnings of both groups have increased over the last decade, but at a slightly lower rate for graduates (44 per cent) than for those qualified only to A-level or lower than degree-level (46 per cent)

· female graduates have higher returns: women with degrees in Wales earn considerably more than women with no qualification (101 per cent more), and this rises to 139 per cent for women with higher degrees. By comparison, male graduates earn an average of 97 per cent more with a degree than with no qualifications, and 130 per cent more when in possession of a higher degree.

1.13 The economic returns in Wales on holding a higher-level degree over a first degree were greater for women than men (19 versus 16 per cent), while the returns on holding a first degree over a lower qualification were only marginally higher for women than men.

Graduate migration

1.14 Wales is a net exporter of graduates, but its performance in this respect mirrors that of many UK regions, and only London is a net importer.

1.15 More detailed analysis of mobility was conducted using information from HESA on graduate destinations collected six months after graduation. The information provided a snapshot view of initial graduate migration, and allowed the complexity of the flows of graduates in and out of Wales to be mapped. This showed that:

· a relatively low proportion of Welsh-domiciled students studying in Wales leave after graduation. Men are more likely to leave; so too are younger graduates, postgraduate-degree holders and those with the highest degree classifications

· of the majority of those who study in an HEI outside of Wales, two-thirds do not return to Wales after graduation to work (initially at least); those who do return are likely to have lower degree classifications and are less likely to hold postgraduate qualifications

· almost a quarter of non-Welsh students who study at a Welsh HEI stay in Wales following graduation, but there is no clear pattern relating to the types of qualifications these individuals possess. But non-Welsh graduates from other UK HEIs who migrate to Wales to work are more likely to have postgraduate qualifications and to be working in higher-level occupations.

1.16 It is apparent from studies elsewhere that most graduate migration is driven by the desire to gain access to better opportunities. Wales can be successful in attracting in high-level graduates, where suitable opportunities exist. The economic pull of London and more affluent regions is similar to those found in other countries within Europe, where more economically attractive regions dominate patterns of graduate migration.

Graduate recruitment and demand

1.17 The economy of Wales is developing, offering a more diverse profile of employment, an expanding services sector and an increasing entrepreneurial and small-business culture. This has implications for graduate employment. The employer survey and careers services interviews undertaken as part of this research study found that:

· graduate expectations can be out of line with the opportunities available in Wales and overly negative. Perceptions on graduate opportunities vary between regions, with South and East Wales seen as offering more visible opportunities

· larger employers and those in the public sector are the most likely to offer graduate employment. The dominance of the public sector is seen by some private sector employers as an ‘unfair’ driver of graduate wages and demand

· Welsh-owned businesses are less likely to offer graduate opportunities than non-Welsh-owned, but this may be because many are smaller enterprises

· graduate staff are more likely than non-graduates to be working in higher-level jobs, but over half of employers surveyed employed graduates in non-graduate positions

· there is little evidence of skill shortages at higher levels: just 20 per cent of employers had hard-to-fill vacancies, and only three per cent had hard-to-fill vacancies requiring graduates

· graduate recruiters in Wales tend to use local recruitment sources more frequently, although more use on-line recruitment methods than non-graduate recruiters. Informal methods (such as word of mouth) are seen as the most useful by graduate employers.

Graduate employability

1.18 Employability is high on the agenda in HE in Wales, and to this end the GO Wales programme, as outlined above, has been usefully expanding the resources of HE careers services. Views from employers and careers service staff on employability showed that:

· thirty per cent of employers had had some form of contact with their local HEI, which means the majority (70 per cent) had not; student work placements and vacancy advertising were the most common examples of this

· careers services are operating without the range of Welsh-specific data on the graduate labour market they would ideally like. Much of the data used to inform graduates and employers regionally is collected in an ad hoc manner by individual employees

· the degree subject most commonly requested by employers was business administration, followed by education, then engineering and technology and languages. However, less than half (43 per cent) of employers are looking for graduates in specific disciplines, the majority simply using a degree as an indicator of more generic skills

· graduate employers were more likely to feel they had skills deficiencies in their workforce than non-graduate employers, and Welsh-language skills were the most common. This is likely to reflect the public sector bias in graduate employment in Wales. Among graduate staff, the main deficiencies were IT skills. Technical-skills deficiencies were an issue also, but for only a small minority of employers

· half of all employers, including three-quarters of those with no recent experience of working with graduates, saw some benefits to employing graduates. However, employers who currently, or had recently, employed graduate staff were far more positive about their potential benefits, including the positive benefit of graduates adding IT skills and bringing innovative or creative thinking to their workplace

· non-English language skills had little significance in general. But although the majority of graduate employers had no preference for such skills, just over one-fifth would prefer a Welsh-speaking graduate.

Conclusions

1.19 A number of conclusions can be drawn from the research findings. One of the main ones is that there is no evidence of demand for graduates decreasing in Wales, and the increasing upward trend seems likely to continue. However, there is some evidence of a small decline in the economic returns on higher degrees and first degrees for recent cohorts, compared to those of a decade before. This, along with the evidence of a broadening labour market for graduates, suggests that the value that a degree brings may be weakening somewhat, due mainly to the substantial growth in supply over the last decade. But employment rates for graduates are very high, and they continue to be employed in higher-level occupations in the main, which indicates that graduates today can still expect good employment outcomes. Wages for graduates in Wales are lower than most other UK regions, but this reflects lower relative wages rather than lower returns on education.

1.20 A second key conclusion is that Wales is an overall exporter of graduates, but no more so than a number of other UK regions (the only net importer of graduates in the whole of the UK is the London area). However, the research has shown that there is a complex set of flows pre- and post-HE, and given the relatively large cross-border flows into Wales from England to HEIs, there is potentially a missed opportunity in encouraging non-Welsh-domiciled graduates to stay in Wales after graduation to take up work.

1.21 Wales is seen as being at the forefront of employability initiatives in the UK, and this is worthy of greater recognition both inside and outside of Wales. There is evidence that inroads are being made by HEIs with employers, particularly those in the public sector, which is a large recruiter of graduates in Wales. However, there is less evidence of breakthroughs with smaller, private sector employers, which make up the vast majority of Welsh businesses with the potential to offer graduate jobs both now and in the future. Whether, and how much, Welsh HEIs can be expected to change this situation is a key question for the employability agenda. GO Wales appears to have helped HEIs to make and strengthen employer links, but there could be a role for other strands of HEI activity to link more effectively with this and other employability programmes (eg knowledge transfer partnerships). The actual shape of employability activities within each HEI, however, will need to reflect each institution’s relative academic (and other) strengths.

1.22 Working with smaller firms, many of which have little experience of graduates or HE, requires different approaches and different resources from developing contacts with larger employers. The extent to which individual careers services will be willing to commit to this endeavour will be, at least in part, related to the relative importance of small businesses in their local areas. In some regions of Wales, these represent virtually the only local opportunities for graduates, unless they start up their own businesses. Changing views in these areas is therefore vital if much of the graduate talent is not to move on after graduation, whether to other areas of Wales or further afield. In other Welsh regions, however, graduate opportunities are available with more traditional types of graduate recruiters, and the argument could be made that to maximise the effectiveness of resources, focusing on ‘big wins’ with larger organisations makes sense.

1.23 The perception certainly seems to be that Wales is attractive to graduates for a number of work-balance factors, and that graduates are keen to stay to work (and to return at an older age/career phase). However, there is fairly low awareness of what the Welsh economy, with all its variations, can offer students and graduates in terms of work opportunities. Wales does not have, or has fewer of, the most immediately lucrative types of jobs that many graduates are looking to break into, such as in the financial services or commercial functions of large enterprises. However, the situation is actually no different from many other UK regions and this should be more clearly recognised. The research evidence shows that graduates who do stay in Wales, or move into Wales, do well with regard to their employment rates and the utilisation of their skills, and Wales is relatively successful in retaining graduates, with a high proportion in the working population. Also, it may be that some ‘leakage’ is beneficial overall. The lack of Welsh-specific labour market information for Welsh HEIs to use in helping graduates understand more about the Welsh labour market was identified by HE staff as a serious hindrance to their ability to fully brief graduates about these issues, enabling them to make informed choices about Wales versus the rest of the UK. This could be addressed by HEFCW and/or the Welsh Assembly Government.

1.24 London clearly exerts a strong pull on graduates from Wales, as it does on those from all UK regions. However, this is compounded by the fact that these are often the most visible graduate opportunities and are the types of employers that are most likely to work with HEIs, and so exert a strong influence generally on graduate expectations about the type of work they should expect to enter, and the kind of salaries they should be earning. In fact, vacancies with blue-chip employers are an ever decreasing proportion of all graduate jobs (under ten per cent of the total), and as the supply of graduates has changed, so have the roles they are expected to take on. What should be made clear, however, is that the economic returns on education, that is, the added economic value of taking a degree, remain despite these changes, and that graduates now actually have more choice, rather than less.

1.25 As the graduate supply continues to grow (albeit at a decreasing pace), graduates continue to be highly employable overall, and employer awareness of the benefits that graduates can bring to their organisation also seems to be growing. Employers who would previously not have considered recruiting graduates are beginning to be less resistant. However, there is little current research which offers any systematic data on the proven benefits that graduates bring to organisations in economic terms, and certainly nothing that could answer some of the specific questions relevant to many Welsh employers. The emphasis on employability research to date has been on getting graduates into jobs rather than on graduates getting on in jobs. It is debatable, therefore, whether focusing on providing the economy with more graduate-level skills is more important than on making better use of them in work, but this goes beyond the scope of this study and is undoubtedly a subject for further debate. It is important to note, however, that an absence of evidence is not evidence of absence. Graduates are seen as bringing a range of business benefits, but research which quantifies this is difficult to find.

1.26 For employers, the issue appears to be about finding the ‘good’ graduates. Again, Wales is no different from any other region of the UK. However, what appeals to smaller employers is slightly different, and they need graduates to make an almost immediate contribution to their organisation. This type of employer is therefore more attracted to graduates with work experience. Also, employer exposure to graduates promotes more positive views in both parties of what the other can offer. From both points of view, the approach of GO Wales in promoting and supporting work placement opportunities seems entirely appropriate. However, whether, when, or if this source of financial support is reduced or withdrawn, HEI careers services are unlikely to be able to resource employer-focused activities to the same extent as they do currently. Therefore, the task of engaging ‘hard to reach’ employers in the higher-skills agenda is likely to become increasingly difficult, or at least likely to lose momentum in this event. The need to centralise efforts on employability within institutions, and continue working to engage individual academic departments, therefore, and embed employability as part of every student’s experience continues to be a priority.

1.27 To sum up, the range of evidence in this report has presented a fuller and more detailed picture than hitherto on graduate employment and employability. This shows that:

· there is a strong case for continued investment in the HE sector in Wales

· there are clear benefits to individuals of engaging in HE, both economically and socially

· evidence from Welsh employers shows that graduates offer a range of skills which translate into business benefits and stimulate innovation

· producing and employing graduates is of real benefit to the economy of Wales

· there is also much more that can be done, building on existing initiatives, particularly engaging the 70 per cent of employers who have little contact with HEIs in Wales currently.

Recommendations

1.28 Priorities for future policy should lie in the following:

· Allocating more resources and building expertise to improve the available labour market information (LMI) relevant to graduates and making better use of it. This would involve compiling regional and Wales-wide LMI, and taking steps to formalise the ‘grey’ or informal information held within individual careers services. HEFCW would seem ideally placed to take this forward.

· Raising the profile of the employability agenda in Wales, particularly among employers. This will require a more focused and systematic approach, which HEFCW could encourage. One option would be to map and gain access to all relevant employer networks; another to identify more ‘employability advocates’ who were committed employers with a track record of success, able to articulate the business benefits they have experienced through their involvement with employability initiatives or employing graduates.

· Getting the right messages over to students, graduates and potential students about employability through the development of a more strategic marketing PR strategy. This would address the shortcomings in their awareness of graduate labour market trends, and some of the popular negative and often overstated perceptions about poor wages and graduate ‘brain-drain’. It would also facilitate the breadth and scope of additional research needed to provide a more robust platform for highlighting actions taken to raise the profile of the employability agenda in the years to come. A more strategic stance would also help to identify the areas where a very local focus on specific aspects of awareness would be more useful. The PR could also be targeted at employers, but with clear messages for them, and recognising their diverse needs.

· Developing better comparative information which relates the position of Wales to other regions/countries of the UK, certain European regions and areas in the rest of the world. The available research and statistics are patchy on this, and where data do exist, it can be difficult to reconcile UK-developed data with sources from overseas. Further research/resource is required to provide the type of regional comparisons that would most benefit Wales, as this needs to go further than could be done within the scope and resources of this research.

· Monitoring more closely changes to graduate earnings and the graduate wage premium. This is needed because accurate and up-to-date graduate-earnings data are becoming more important as a factor in student decision-making. HEIs also need timely information on how changes could affect their markets, especially in variable fee-setting. Research continues to be needed in many other areas too, to monitor other aspects of the information recorded in this report. Keeping a close eye on trends in the graduate market will offer the strongest evidence to policy-makers who need to address and understand employability in both the short and longer term.

1 Introduction and Background

1.29 This report presents the main findings of a research study conducted by the Institute for Employment Studies (IES), and commissioned by the Higher Education Funding Council for Wales (HEFCW). HEFCW has been engaged in a research programme to inform policy development and provide information to stakeholders since 1998. The purpose of the current research is to enhance and refine this existing body of work, and to provide further information to inform higher education institutions (HEIs), and other key policy-makers.

Research aims and objectives

1.30 The main aim of this project was to update, enhance and refine HEFCW’s existing research on the graduate labour market, much of which had been undertaken prior to 2003. It was also required to respond to recent imperatives that Wales should embrace the knowledge economy, and for its HEIs to play their part in producing graduates with appropriate skills, able to meet the needs of Welsh employers in particular. Given the public interest in these issues, HEFCW also wanted to examine the changing nature of a ‘graduate job’, and how graduate employability policies might be further developed, especially in HEIs, by improving the provision of work-related skills to students and graduates, thereby enhancing work and career prospects.

1.31 In order to meet these aims, the research was set five key objectives by HEFCW:

· Through a review of existing primary and secondary information sources (eg labour market reports), to shed further light on trends arising from the analysis and conclusions of the three previous graduate employment research studies commissioned by HEFCW

· To explore the ways in which more graduates of Welsh HEIs might be retained in Wales, and what incentives, advice and guidance might be offered to Wales-based employers to enable them to attract and retain Welsh-domiciled graduates of HEIs outside Wales, where this would demonstrably be to the benefit of the Welsh economy

· To identify any mismatches of supply and demand that exist in the Welsh labour market for graduate-level skills, including an examination of the notion of a ‘graduate job’ and any implications arising from such conceptual distinctions

· To consider what might be done at both the HEI and employer level to improve graduate career prospects

· To compare the situation in Wales with that of other (similar) regions of the UK, Western Europe and North America.

Methodology

1.32 The research methodology contained five main elements:

· a review of relevant literature and data sources

· interviews with stakeholders to inform the research development

· interviews with representatives of all Welsh HEI careers services

· an analysis of data from two large national datasets (the Labour Force Survey and the Destinations of Leavers from Higher Education Survey)

· a survey of employers operating in Wales, with some additional face-to-face interviewing of employers.

The approach to each of these is set out below.

Literature review

1.33 The literature review was conducted using both expert knowledge of the literature (knowledge of the project team, stakeholders and the project steering group) and a search of bibliographic databases and web-based literature search engines using search terms related to the aims of the study. In addition, citation searches were carried out using particularly relevant articles and hand searches of recent issues of relevant journals were conducted.

1.34 The literature review was concerned with literature relating to the Welsh situation, UK-wide research and comparative information internationally where possible. The purpose was to set the context to the current research, and provide a vehicle for comparing the results with those obtained by other researchers. It also helped to inform the design of data collection tools, including the interview guides for stakeholders and careers services, as well as the employer survey.

Stakeholder consultation

1.35 The project steering group provided a list of potential stakeholders. This was divided into two levels, each of which was approached in a different way by the research team. Group one were considered to be the primary sources of information on the research issues, having a whole-Wales overview. Group two were considered more likely to have in-depth views and information on certain aspects of the research. All stakeholders in group one were approached by a member of the research team and interviewed face to face or by phone. Group two were approached using e-mail and asked to provide a written response to some key questions. A list of the organisations participating in this aspect of the research is provided as Appendix 1.

Careers service interviews

1.36 Interviews were conducted with representatives of the careers services of all the 12 HEIs in Wales. Contact was generally with the head of service but often also included a GO Wales co-ordinator (GO Wales is a programme run by HEFCW which provides a range of services to employers and graduates related to improving links between these groups and to enhancing graduate employability). A total of 22 interviews took place in May and June 2005. A semi-structured interviewing technique was used, with a guide agreed in advance with the research steering group.

1.37 The discussions focused on:

· the organisation and delivery of careers information, advice and guidance

· the approach taken within the institution towards employability

· sources and use of LMI within the careers service

· staff perceptions of the labour market for graduates in Wales.

Analysis of graduate destinations and employment outcomes

1.38 Two main sources of information about the Welsh graduate labour market were utilised as part of this research: the Labour Force Survey (LFS), and data from the Higher Education Statistics Agency (HESA).

Labour Force Survey

1.39 The LFS is carried out quarterly by the Office for National Statistics (ONS). Each quarter, approximately 60,000 households are contacted for information on household members’ personal circumstances, qualifications and their work, including earnings. Around 80 per cent of households chosen agree to participate. First interviews are usually conducted face to face, with other waves carried out by telephone.

1.40 The data from each quarter are weighted to be representative of the UK population as a whole, by age, gender and region. The figures produced from the LFS are estimates, not a count, and are, therefore, subject to sampling variability. This sampling variability is greater for regional estimates than it is for national estimates, and this needs to be taken into account when interpreting LFS data. However, the survey remains the largest survey of households in the UK which can give us information about employment in Wales.

1.41 To improve reliability the Labour Force Survey data used in this report are based on pooled quarters over the three-year periods 1993/1995 and 2001/2003. In order to produce appropriate comparison samples, the data in all the tables, except the summary descriptive analysis in Chapter 3, exclude individuals who are still in full-time education or are under 20 years old. A discussion of the statistical reliability of the Labour Force Survey is presented in Appendix 7.

HESA Survey of Leavers from Higher Education

1.42 The HESA Destinations of Leavers from Higher Education (DLHE) target population contains all United Kingdom (UK) and European Union (EU) domiciled students reported to HESA for the reporting period 1 August 2002 to 31 July 2003, as obtaining relevant qualifications and whose study was full time or part time (including sandwich-course students and those writing up theses).

1.43 As data were available for all new graduates from HESA records (eg data on demographic characteristics, degree type, subject and results, institution of study etc.) it was possible to weight the analysis of destinations in Chapter 5 to take into account any non-response bias in the DLHE survey. To do this, the propensity of each graduate to participate in the DLHE survey, and their associated weight, were calculated using logistic regression modelling. In addition, the migration analysis excludes graduates from part-time degree courses, as some sub-groups in the analysis include a high proportion of graduates who are distance learners, and therefore whose geographic movements are unclear.

Employer survey

1.44 A telephone survey methodology was adopted in order to collect the views of employers within Wales. The purpose of the survey was to explore in more depth the issues raised by existing surveys undertaken on HEFCW’s behalf. Details of our approach are set out in Appendix 2. To summarise, 514 usable telephone interviews were conducted with employers during September and October 2005. One thousand and forty-eight employers were given the opportunity to participate, resulting in a response rate for the survey of 49 per cent, and an adjusted response rate of 60 per cent (see Table A2.2 for a full breakdown of this response rate). This rate was considered to be very satisfactory and higher than that achieved in previous HEFCW employer surveys (where response rates were low, 25 per cent of employers in the 2001 survey, and 18 per cent in the 2003 survey). The use of telephone interview methodology rather than a postal survey is felt to have been a major factor in the improving response rates in 2005.

1.45 Employers’ contact details were purchased from Experian’s database of all organisations listed in the Yellow Pages, which provides indicative details of the industrial sector and size of establishments. The sample was deliberately skewed towards larger establishments and across all sectors to ensure that a sufficient range of responses was obtained to analyse with confidence. The results have been weighted back to the population estimates using cell-based weighting techniques to control for disproportionate sampling across size and industrial sector. This weighting has been done to ensure that the employer survey sample is broadly representative of the population of workplaces (see Appendix Table A2.1) in Wales. Throughout this report, therefore, we present only weighted data, but provide the numbers of cases on which results are based using the unweighted data. A discussion of the statistical reliability of survey is presented in Appendix 7.

Employer survey profile

1.46 Table 1.1 provides a breakdown of the employers involved in the survey by size, area and sector. The weighted data are comparable with the profile obtained by a recent large-scale survey of Welsh employers, and there are no differences in the size profiles of the two areas used for analysis in this report, so that when analysis is conducted by area, this is independent of size effects. The areas have been allocated to address data using the European Social Fund definitions, where Objective 1 areas are classified as West Wales. Throughout the report, and due to small numbers of employers interviewed in some sectors, a three-sector break has been used to analyse the data. Table 1.2 provides an overview of how this was constructed.

Table 1.1: Profile of HEFCW employer survey sample (size and area) and comparison with national estimates from Future Skills Wales survey (percentages)

Future Skills Wales

HEFCW survey

Size band

All

All

West Wales

East Wales

Micro (up to 9)

76

75

74

75

Small (10 to 49)

20

21

22

21

Medium (50 to 249)

3

3

3

3

Large (250 or more)

1

1

1

1

Base (unweighted)

6,020

514

312

200

Source: IES survey of Welsh employers 2005 and Future Skills Wales survey of Welsh employers 2003

Table 1.2: Profile of HEFCW employer survey sample by sector

Industrial sector(3 stratifications)

%

Industrial sector (10 stratifications)

%

Primary services sector

19

Agriculture, hunting, forests, fishing, water, energy

1

Manufacture

8

Construction

10

Secondary services sector

61

Distribution, retail, wholesale, hotel, restaurants

34

Transport, communications, media

5

Banking, finance, insurance, other services

22

Public service sector

20

Public administration, health, education

20

Total

100

100

Source: IES survey of Welsh employers 2005

Face-to-face work

1.47 In addition to the core survey, researchers attended three employer events, taking the opportunity to gain greater insight into employer views through both interviews and a focus group. These discussions helped to test out some of the results from the survey and other interviews. A total of 23 individuals was involved.

Definitions used in the report

1.48 The following general terms are used in this report:

· Graduates – individuals who have gained an undergraduate or higher-level degree from a higher education institution in the UK

· Higher-education qualifications below degree level – all other sub-degree qualifications (eg HNC, HND, DipHE and, more recently, foundation degrees). Individuals studying on these courses are classified in the HESA student statistics as ‘other undergraduate’ students

· Graduates with higher degrees – individuals with postgraduate qualifications including masters graduates, individuals with doctorates and a range of other qualifications higher than a degree

· Higher education institution (HEI) – all 12 institutions in Wales currently offering higher education courses (but not further education colleges with HE students)

· Welsh-domiciled graduates/students – those who were living in Wales prior to starting their HE study; similarly graduates/students domiciled in the rest of the UK were those living outside Wales but in the UK prior to HE study.

1.49 In the findings of the employer survey, a distinction is made between:

· Graduate employers – ie those who are current employers of graduates and

· Graduate recruiters – ie those who may, or may not, currently employ graduates, but who have been engaged in some form of graduate recruitment activity in the last two years.

Report structure

1.50 The rest of the report is divided into seven further chapters.

· Chapter 2 sets out the research background and policy context of the research, identifying key issues and trends in the graduate labour market more widely.

· Chapter 3 presents details of the supply of graduates from Wales and how this has changed, including an overview of the current student profile.

· Chapter 4 examines the labour market destinations and performance of graduates and looks at trends in the data over the last ten years.

· Chapter 5 considers patterns of graduate migration in the very early parts of their careers.

· Chapter 6 looks at issues of demand and recruitment trends in the graduate labour market, focusing mainly on employer experiences.

· Chapter 7 considers graduate employability from the perspective of both careers services and employers. It provides an overview of current approaches and some reflection on the relative success of these efforts, along with an assessment of the currently available labour market information.

· Chapter 8 draws together the main conclusions from the research findings.

2 Background and Context

Introduction

2.1 This chapter uses the research literature and other sources (eg policy papers) to set the background and context for the research study. It highlights a number of key issues relating to trends and developments in HE and the graduate labour market, mainly in the UK but also in other countries. While differences between Wales and the UK identified in previous research are noted, the main discussion on Welsh graduate supply and the labour market for Welsh graduates is presented in the chapters which follow.

Larger and more diverse graduate supply

2.2 The long-term trend in higher education across the UK has been growth and increasing student diversity. This has also been reflected within Wales. The composition of the HE student population has broadened so that it now includes more mature students and students from lower socio-economic and minority ethnic groups, and increasing numbers with non-traditional entry qualifications (ie other than two or more A-levels). But recent history shows slower growth rates and also less compositional change than in the early 1990s. Analysis of the Welsh HE student population and graduate supply trends is shown in Chapter 3, but some key general points of note are worth highlighting here by way of introduction.

2.3 The HE student population in Wales (excluding overseas students, which make up 11 per cent of the total ) has grown to around 110,000 in 12 HEIs in 2003/2004. This represents approximately seven per cent of the UK total (UK-domiciled) student population which has grown to a little over 1.5 million. Overall, growth rates have been similar in Wales to those in the rest of the UK, but in the last few years Welsh growth has been slightly lower. In Wales over the period of 1993/1994 to 2002/2003, the percentage of higher education student places (full-time), as a proportion of the UK, dropped from 5.52 per cent to 5.09 per cent. This is equivalent to nearly 6,000 full-time equivalent places lost in comparison to the rest of the UK. However, this is in contrast to an increased demand, with almost every institution in Wales experiencing an increase in applications between 2003/2004 and 2004/2005. Wales is therefore in the position of experiencing a decline in provision relative to other parts of the UK, alongside some evidence of a growth in recent demand.

2.4 In addition, there are around 7,500 students taking HE programmes at 21 further education (FE) institutions in Wales. The majority of the latter, as in the rest of the UK, are mature and are studying part time. FE colleges have had an important role to play in widening access to HE and responding to local needs for vocationally relevant courses and skills. The vast majority of HE students in FE take qualifications other than first degrees (eg Higher Nationals, other higher certificates and more recently, foundation degrees). The proportion of total HE student enrolments in FE colleges in Wales is slightly lower than in England, but considerably lower than in Scotland (where it is almost one quarter of the total).

2.5 HE student numbers have been increasing over the long term because of the policy priority of the UK Government to expand HE in order to meet rising skill needs and to improve the UK’s international economic competitiveness. Additionally, it is seen as a way of increasing equality of opportunity and providing wider benefits to society. A similar view about the country’s requirements for a growing HE sector and more highly qualified and skilled people is being taken by the Welsh Assembly Government (WAG). In particular, the growing ’knowledge economy’ is seen as providing substantial potential benefits to Wales, should it take that route. The recently published WAG consultation on Wales’ Science Policy highlights the importance of the skills of the people and having sufficient talent in Wales, as well as having technological strengths. The economic agenda in the WAG strategic framework for economic development in Wales also gives recognition to the importance of having a skilled, innovative and entrepreneurial workforce.

2.6 International comparisons on education levels show that the UK compares favourably at higher levels with many countries (and so, therefore, does Wales), but the UK’s relative position has slipped recently to below that of many other countries (no such comparison has been published for Wales only).

2.7 Growth trends are not being driven by evidence of major skills shortages at higher levels: various skills reports suggest that the main area of skills shortage at present is at lower skills levels, including intermediate-level. However, many intermediate level jobs now require a degree qualification (see discussion below on changing graduate jobs) and it is therefore argued that they actually require higher-level skills. However, there are some specific high level skills gaps (eg in some areas of IT and engineering) across the UK. The Future Skills Wales survey in 2003 reported on the skill gaps in Wales where employers thought that their workforces were deficient in skills (rather than having problems filling vacancies, which is defined as a ‘skill shortage’). IT skill gaps for managers, professional, associate-professional and technical staff were greater than for other staff.

2.8 Forecasts of growth for the UK, and also for Wales, to the end of the decade anticipate stronger growth in jobs in the services sector, concentrated in health, leisure and services support, and jobs at professional and associate-professional levels, areas where graduates would be required in larger numbers. In Wales, while an emphasis needs to be placed on the re-skilling of older people and lifelong learning, attention also needs to be given to management and entrepreneurialism to help support new business starts and their survival, and also to increase the supply of highly qualified individuals to meet industry’s research and development needs.

2.9 Much of the predicted growth will come from the development of the ‘knowledge-based economy’ of the future, which is expected to require substantially more highly skilled individuals. This view is supported by the recent interim report from the on-going Leitch Review (commissioned by the UK Treasury) on future skill needs of the UK. Some forecasts (cited above) suggest a more gradual increase in the number of graduates than Leitch, but there are others who take a different view of the need for more graduates in the knowledge economy and the relationship between productivity and qualifications. They argue that a major problem is the under-utilisation of talent, and that instead of concentrating on increasing the supply of highly qualified people and improving the employability of graduates, we should be focusing more on the overall demand for employment and in encouraging employers to make better use of the graduate supply available. The 2003 Future Skills Wales Household Survey suggests that under-utilisation is a problem that is widespread, with people at all levels believing that they have more skills than employers need or better qualifications than their jobs require.

Increased HE participation but rates vary

2.10 The increased supply of graduates has occurred mainly through increased participation by young people, itself largely a result of the rapid expansion in educational attainment of young people in the early 1990s, although other factors, including greater choice and increased flexibility of provision, have played important roles. These factors have also encouraged more older people to enter HE. Over 40 per cent of young people (18 to 30-year-olds) now participate in higher education, a figure which has tripled for England and Wales since the 1980s, although growth has been much slower in the latter period and the trend has actually been quite flat for the last few years.

2.11 It is important to note that although participation has increased overall, HE participation rates vary considerably between geographical localities and by social groups. In Wales, there are contrasts in HE participation between the more rural central and western counties and the valleys of South Wales; and the lowest rates of all are in Merthyr Tydfil, Blaenau Gwent, Torfaen and Caerphilly. Despite the actions taken on widening participation, a significant gap still remains between the participation rates of the highest and lowest socio-economic groups, which is worst at the extremes: young people from professional backgrounds are almost five times more likely to be among the entrants to higher education than those from unskilled backgrounds.

2.12 HE participation by lower socio-economic group is slightly better in Wales than England (30 per cent of 18 to 20-year-old full-time first degree entrants to Welsh HEIs were from low socio-economic backgrounds compared to 28 per cent in the UK. NB comparable figures in Scotland are higher still), but as indicated above, there are significant contrasts in participation figures between regions of Wales and between local communities, and similarly between regions of England. The participation rate for mature entrants is also higher in Wales than in other UK regions.

2.13 Traditionally, the pattern in the UK (except Scotland) for many students has been to move away from home to go to an HEI, or to move away from home on graduation, but this has been reducing over the last decade or two as more people stay at home or travel less distance to study. This is partly due to increased participation by older people and those from less well-off groups, but also because of the higher costs of studying. The traditional pattern of moving away to an HEI in the UK, however, is still having a distinctive impact on Welsh HE, as cross-border flows are significant (as discussed more fully later in section 3.4), and likely to remain so for the foreseeable future, at least for certain Welsh HEIs (eg the pre-1992 universities which attract more of the traditional types of students, and HE institutions close to the English border).

Other changes to the HE landscape

2.14 The HE sector has changed in other ways too: in its provision and structures, and in its funding, which affect the HE student experience and the skills graduates can offer employers. The balance between different subjects in the overall graduate output has changed (with more growth in the last ten years in disciplines such as subjects allied to medicine, IT , media studies and creative arts and design, and reductions in parts of engineering and science); as has the balance between part- and full-time study. New subjects and new modes of more flexible delivery (distance and e-learning) have been introduced, including more vocationally orientated programmes, and there has been an increased emphasis on employability in the curriculum. Many of these changes were initiated some years ago, when the HE sector was encouraged to become more market-driven in the 1980s, and are associated with this trend. The most significant recent change has probably been the introduction of foundation degrees, which have become firmly established in England, but less so in Wales and not at all in Scotland. This reflects to some extent the differing policy stances towards foundation degrees in the different administrations, with strong (and funded) support for their widespread development being forthcoming in England. In Wales, seven institutions were initially given limited funding to develop foundation degrees, but there has been no particular policy to support their operation and no additional funding for delivery. This position is now being reviewed.

2.15 A key change in HE has been to the way students finance their study. Many students are now taking up student loans, when in the past they were eligible for maintenance grants, and from 1998/1999, full-time undergraduates have been expected to make an up-front contribution towards their tuition fee (currently £1,150, although some students from low-income families are exempt or pay a reduced contribution; and they also can be eligible for maintenance-support grants). In England, institutions will be permitted from 2006 to vary their fees for full-time undergraduates from the current level of £1,150 to a maximum of £3,000, with payments deferred until after graduation. In Wales flexible fees (again to a ceiling of £3,000, with deferred payment) will be introduced from 2007. Furthermore, Welsh-domiciled students choosing to study in Wales will be eligible to receive £1,800 towards their fees from the WAG, but this will not generally apply to those choosing to study elsewhere. In order that Welsh higher education should not be placed at a financial disadvantage during 2006/2007 compared to that of England, the WAG will pay a supplementary income stream to the Welsh HEIs in 2006/2007 to compensate for their being unable to change variable fees above the current level.

2.16 As a consequence of the funding changes that have already taken place, many graduates have higher levels of debt on graduation than in the past, and these are expected to rise further in the future. Perceptions about likely debt may be affecting students’ choice of HE study. Although the extent of this has yet to be substantiated by research, it is likely to be affecting the choice of institution or whether to go away from home to study. Finances appear to be a contributory factor in such decisions, but among a range of factors, some of more significance to certain groups of students than others.

2.17 Another change related to finance is that more students are working during term-time. This is often done to improve their income, but can have the potential to impact negatively on their academic studies, although it can also give them some valuable work experience. Research published recently indicated that over half of the 2002 undergraduate population were in paid employment during term-time. The proportion is likely to have risen since then: some estimate to 60 per cent or more, although it is worth noting that this is an average figure which will vary considerably across the student population.

Changes in the graduate labour market

2.18 From an employer perspective, the growth in supply means that there are now considerably more graduates around. Many employers have reported receiving high numbers of applications for advertised graduate vacancies. Frequently, though, there are criticisms of the quality of graduates and so the available supply may not be as great as application figures suggest. An employer in a recent IES research study reflected:

…there are ‘layers’ of graduates coming out now, not all can compete for the best jobs and some take a while to realise that they are not in the top layer and need to lower their sights.

Graduate employer

2.19 This increased segmentation is a key feature of today’s graduate labour market, as much in Wales as in the rest of the UK, although Wales has fewer vacancies than other regions of the UK (especially London and big cities) at the top end of the graduate market, as there is a scarcity of business headquarters. While the increased supply of graduates from higher education appears to have been absorbed, as indicated by relatively low unemployment rates/ high employment rates of graduates (see section 4.2 later), the type of employment which graduates take up is broader and more varied than in the past. It is only a small proportion of the total output today that enter ‘traditional’ graduate jobs – those in the professions or structured graduate training programmes offered by large blue-chip companies – and they are predominantly those from a relatively select group of pre-1992 universities.

2.20 The jobs graduates take up initially vary considerably: some may be in firms where a graduate is occasionally recruited with specialist skills, or for a particular purpose, others may be in new kinds of graduate jobs (ie in new professional areas), yet others may be recruited alongside non-graduates to do similar work. Many employers have multiple graduate entry points (recruiting to graduate schemes and to other advertised vacancies). It is estimated that around one in three graduates in the UK (six months after graduation) hold jobs which do not require a degree, and this is similar for graduates employed in Wales (see section 4.9 later). This percentage, though, drops considerably over time following graduation (further details are presented in Chapter 4 on definitions of a graduate job and Welsh graduate employment specifically).

Starting salaries vary markedly

2.21 Initial starting salaries of graduates also vary, another indicator of the extent of differentiation in graduate demand. Average starting salaries in the UK have remained relatively stable for new graduates over the last few years, increasing by about three to four per cent per year on average (in line with or just above inflation). But the average masks a wide range of salaries, from those at the high end of the range mostly from blue-chip companies (eg AGR members where the median is £21,000 but where some salaries are above £25,000) to those as low as £12,000 advertised on the Graduate Prospects website. The recent survey of graduates destinations (the DLHE survey), covering most of the 2004 graduates’ entering full-time employment in the UK, gave the average graduate’s earnings as just over £17,000. Graduates working in London had the highest salaries, almost £20,000, while those in Wales (and also North of England and Northern Ireland) were among the lowest, at under £16,000. Five of the ten HEIs whose graduates had the lowest average salaries were in Wales. Salary differences between regions are often due to variations by sector of industry and job type: the highest salaries on offer are in law firms, investment banking, and management consultancies (employment opportunities which Wales lacks), while some of the lowest are in transport, retailing, construction and the public sector (a key graduate employment sector for Welsh graduates). Published regional graduate salary figures however, usually fail to acknowledge the differences in cost of living (and Wales has one of the lowest).

2.22 These overall salary figures can also mask other variations in graduate employment, by degree discipline and by age, gender or ethnicity. For example, those studying medicine and dentistry are the most likely to be in full-time employment after finishing, as are students from some of the science and technology subjects. Older students are more likely to have taken their degree part time, and while the likelihood of being in employment or further study is similar for both modes by age, older graduates who obtained their degree full time are more likely to be unemployed at the six-month stage. Males and females tend to have inclinations towards different subjects, which affect their overall employment patterns and salaries. These variations can be seen for Welsh graduates also.

2.23 A particular combination of disadvantage can affect some minority ethnic groups, as shown in recent research, where the highest unemployment among UK graduates was found among Pakistani and Bangladeshi first degree graduates, at 14 per cent, double the average rate, and high also among some black groups and Chinese graduates. These variations were found to be due to combinations of factors in addition to their ethnicity, including age, subject choice and regional differences. Other factors, such as individuals’ location preferences, personal circumstances, attitudes to careers, relevant work experience, the time and effort spent on job search, and employers’ recruitment policies can all influence employment outcomes.

2.24 Welsh HEIs have a higher proportion of minority ethnic students (UK-domiciled) than in the country’s population, as does UK-wide higher education, though in comparative terms the percentage of minority ethnic students in Welsh HEIs as a whole is slightly lower than in English HEIs as whole. There is, however, a varied pattern of minority ethnic participation across the Welsh HE sector, between individual institutions and subjects in particular, a similarly distinctive feature of minority ethnic participation in HE in England. It would be expected that the issues identified above for minority ethnic graduates across the UK would also apply to many Welsh patterns and graduate outcomes for minority ethnic groups; a detailed understanding of them and their various causes is required to effectively ‘unpick’ the specific problems that exist for particularly disadvantaged minority ethnic groups (and many Welsh institutions have developed specific career/employability programmes aimed at such groups).

Longer-term graduate outcomes

2.25 Many people argue that statistics from the annual First Destinations survey (now known as the DLHE survey) can provide a false picture of graduate outcomes since graduates are taking longer nowadays to settle into good jobs and careers. The DLHE survey is a snapshot taken at the six-month stage, and many students do not start to look seriously for employment until after the summer of graduation, and so take longer to settle into jobs. Surveys which take a longer-term view can provide a more realistic picture, although their drawback is that they describe historical data which may not relate closely enough to the current state of the labour market.

2.26 A number of longitudinal surveys have been undertaken in the past, the most recent on the 1999 UK graduate output, which showed that, by 2003:

· nearly all of the 1999 graduates held jobs as employees four years after graduation, with an additional three to four per cent self-employed. Seven per cent were in postgraduate study

· nearly 70 per cent of men and 66 per cent of women reported that they were in full-time employment which related to their longer-term career plans; and over 80 per cent were reasonably or very satisfied with their career to date

· although half of the cohort who entered employment immediately were employed then in non-graduate occupations (see further discussion on this term in section 2.8 below on ‘graduate jobs’), this dropped rapidly in the first year or two, and by four years after graduation, only 15 per cent were in non-graduate jobs

· many graduates had experienced some period of unemployment during the four years, with short spells immediately after graduation being the dominant picture

· those with longer spells of unemployment over the four years were more likely to have lower classes of degree and hold qualifications in arts subjects

· assimilation into graduate employment took longer for some graduates than others, mainly those in less vocational or technical subjects (eg humanities), particularly for those with lower classes of degrees and for women.

2.27 Research by the same authors over a seven-year period (on 1995 graduates) showed that unemployment was just two per cent by 2002/2003. Unfortunately, there is no separate breakdown of these figures published for Welsh graduates, probably due to the small numbers of graduates in Wales captured by the surveys.

What is a graduate job?

2.28 As graduates are going into a wide range of jobs there is some controversy about what constitutes a ‘graduate job’. Is it a job that graduates go into, or a job where degree qualifications are needed, or preferred?

2.29 Traditionally, it was assumed that most graduates entered professional- or managerial-level jobs, that is standard occupational classification (SOC) upper levels, 1 and 2, for which a degree qualification is normally required. But research has shown that this is unlikely to be true as some graduates can be working alongside non-graduates in very similar jobs, and there are a number of people in SOC level 1 and 2 jobs who do not have an HE qualification, and vice versa, a number at other levels who do. Various studies provide evidence of graduates taking different entry routes into firms and different career paths in their early careers.

2.30 Elias and Purcell set out, through analysing graduate employment in their graduate surveys, to determine if there are: ‘key skills and core outcomes from higher education that are required across the graduate occupational spectrum?’, in order to define graduate jobs more clearly. Through detailed questioning of graduates about the relevance to their current jobs of skills and knowledge acquired on their undergraduate programmes, plus analysis of graduate employment patterns, they developed a new classification, which has been mapped onto main job groups in the SOC, which they call SOC (HE). Three broad categories were found to define graduate work in different combinations – level of expertise, strategic and managerial skills and interactive skills – and from them four main types of graduate employment were developed:

· traditional graduate jobs

· modern graduate jobs

· new graduate jobs

· niche graduate jobs

· and a fifth – non-graduate jobs.

2.31 The study found that most graduates were in one of these first four graduate categories some years after graduation but that a significant proportion of graduates initially were not, and so were in non-graduate jobs (43 per cent of 1995 graduates).

2.32 This classification is now being used more widely to analyse graduate employment. For example, research in Scotland recently showed that there has been a shift in the balance of graduate jobs, while other research showed that graduates from some subjects are more likely to be in graduate jobs than others. It has been used in this study to analyse the occupational profile of Welsh graduates and non-graduates (see section 4.3) and to compare the profile of graduate employment in Wales with the rest of the UK (see section 4.4).

2.33 While distinctions like these are valid, they have their limitations. One issue is that they are time-bound, and the nature of jobs and their requirements are continually changing. They also make very broad assumptions about similarities in occupations and industries between different localities (which may be false). There has been little exploration to date about how they map on to similar jobs taken up by graduates in Wales versus England, or Scotland. Furthermore, the current definitions tend to reflect the extent to which graduates are in these types of occupations rather than how useful their education has been or what added value they have brought to the business. In many occupations, the most useful knowledge and skills are learned on the job and taking a degree provides a set of generic skills, a certain amount of maturity and a platform on which to develop further, rather than a specific set of skills.

Graduates in small firms

2.34 Graduates in today’s marketplace are expected to bring a range of skills to the recruitment table, and this is particularly important in small firms where the need is often for them to ‘hit the ground running’ in terms of their business, skills or knowledge contribution. Within smaller organisations, there is also some fluidity about what constitutes a ‘graduate job’ because graduates can be undertaking a wider range of functions than in larger firms.

2.35 A continuing feature of the graduate market across all regions of the UK is the relatively low employment of graduates in small firms, though some improvements have been seen in recent years. Wales has an above-average proportion of small firms, especially in its more rural areas, and so efforts to encourage more graduates into small firms are especially relevant here. However, it needs to be recognised that not all small businesses are likely to be potential growth areas for graduates, and they differ considerably (from family businesses or high street shops to hi-tech R&D centres and small manufacturing sites).

2.36 Graduate recruitment by small and medium-sized enterprises (SMEs) is an area where much less research has been undertaken generally on graduate demand. Most of the data generated tend to be focused on the larger businesses, which traditionally have recruited most graduates. Furthermore, graduate careers information at HEIs has tended to be dominated by opportunities in large companies, and larger firms are more likely than small ones to have contacts with HEIs (as confirmed in our interviews in Welsh HEIs, see Chapter 7). Some surveys (from across the UK) indicate that most graduates do not give much consideration to the possibility of working in small firms; while others give an impression that graduates have a poor understanding of what working in a small firm would be like, with some research showing opinions to be negative (eg perception of lower salaries, poorer working conditions) while others see it more positively (eg a friendly working environment, learning a lot to help them in a future career). Other research, though, has shown that the small-business sector can be attractive to many young graduates, because it offers freedom for flexible, informal, skill development contrasting with the more structured opportunities in larger organisations.

2.37 The earlier HEFCW research on graduate destinations found that one in four Welsh graduates were working in SMEs with under 250 employees, and one in ten with under ten employees. Graduates in SMEs were more likely to be in what was described as a ‘stop-gap’ job than graduate-level work, but there was little difference by size of firm in the proportion who felt they were utilising their skills to the full potential, nor in satisfaction levels on the whole.

2.38 Current research by the DTI is aiming to get a better understanding of the SME –graduate interaction, in particular what is driving or impeding graduate employment in small firms in different sectors. Early findings show wide variations across different sectors and types of small businesses in their attitudes to graduates and how they make use of them. Those with graduates could cite both tactical (ie immediate rewards in greater sales, new markets developed, etc.) and strategic benefits (more long term, re-positioning in the market, developing better market intelligence) of employing graduates. Some graduates were noticeably ‘growing’ their (non-graduate) jobs. It also shows evidence, which is supported by other studies, that SMEs are often prevented from employing graduates by misconceptions about what graduates can offer them, and so do not recognise sufficiently the qualities which graduates can bring, such as specific technical skills (like web or Internet skills) or more generic ones, like innovative thinking or creativity, or simply bringing more ‘brainpower’. Other research (from the East Midlands) shows that SMEs and HEI careers services have a rather negative perception of each other; half of the SMEs in the region did not use the Internet and web-based services provided by HEIs, and graduate recruitment support activities had low usage among small firms. As shown below, the Internet is now a major tool in graduate recruitment and in job search by graduates and students.

2.39 We are not aware of any recent research done in Wales (other than the earlier HEFCW study) which can add anything more specifically on small firms and graduate employment. However, the HE careers services in Wales, with support from GO Wales, are attempting to change attitudes among SMEs with regard to taking on a graduate or taking a student for a period of work experience. Our interviews (reported later in section 6.3) indicate that they are having some success and SMEs are becoming more willing to recruit graduates.

Recruitment methods

2.40 Another important trend in the graduate market has been in the recruitment methods used by employers and their interaction with HEIs. The traditional graduate milkround, as a core activity for the larger employers, has been replaced with a wide range of recruitment methods, including graduate fairs, advertising in newspapers and directories and increasingly using the Internet and an organisation’s own websites. A recent IES study showed how technology was producing more sophisticated and interactive websites, offering processing efficiencies to recruiters, but also enabling them to approach a wide pool of potential applicants rather than prioritising a few universities. Surveys of students and graduates have also shown how looking at employers’ websites has grown in popularity. AGR reported in 2002 that most graduate recruiters had dedicated websites and a growing number were moving to 100 per cent on-line application (though again this applies mainly to the larger employers in AGR membership).

2.41 Smaller employers, and those recruiting locally, are more likely to use traditional sources, such as newspaper advertising. Welsh employers were more likely to use this than non-Welsh employers, regardless of size, according to the HEFCW employer survey in 2000. It also showed that ten per cent of employers used websites then, but this is likely to have grown substantially since.

HE careers services

2.42 An important stakeholder in the employer/graduate relationship is the HEI careers service. Its prime function is to prepare students for the world of work and help them to be better informed, self reliant, able to plan and manage their own learning and have sound career management skills; and to help institutions produce students with the skills employers need. In this way careers services provide an important bridge linking higher education to employers, the economy and society.

2.43 Following a review of the HE careers service in the UK a few years ago, it was recommended that some changes should be made to help make the provision more transparent, better targeted, more integrated, innovative and coherent for students, graduates and employers. Clearly, some changes have taken place, which have reflected the increasing importance of the work within HEIs’ strategies. Many have extended their sphere of activity through a repositioning within institutions and a greater focus on employability. This has provided opportunities for the activities of careers services to become more integrated with those of academic departments.

2.44 There is still a high degree of complexity and variation in the positioning of careers services within institutions (although location of careers services within student services was common), and this can impact on core levels of funding and their influence on key decision-making, including representation on HEI committees. Similarly, while the majority of careers services work with academic departments to develop career-management skills, relationships with academic departments vary considerably both between and within institutions. Indeed, working effectively with academics can be a challenge for some careers services, although the Quality Assurance Agency (QAA) Code of Practice has been influential in encouraging the development of careers education within academic programmes.

2.45 The Maguire study (cited above) also indicated that careers services are establishing effective links with employers, particularly through co-ordinating and facilitating work experience and placement activities. The GO Wales programme was highlighted as a particularly effective mechanism for promoting an excellent partnership between employers and HEIs, and the author recommended that HEIs should be encouraged to assess the appropriateness of replicating this type of programme.

2.46 Research has shown that there is a trend towards HE careers services being used in different ways, less (heavily) by students for job search but more for advice and guidance. HEI careers services were used by 17 per cent of employers in the 2000 HEFCW survey, and were highly valued then, with 84 per cent rating their usefulness as very good. Employers based in Wales were less likely to use them at that time, and were less satisfied with their usefulness than those outside Wales.

Overseas comparisons

2.47 UK graduates tend to take a longer-term perspective on the benefits of HE and are more likely to have access to further training while working than graduates in many other countries. The relative earnings of graduates, compared to individuals without HE qualifications, are highest in the UK. Mobility for employment reasons was also more common in the UK, although in other European countries the stronger economic regions do tend to attract graduates who are attracted by the potential economic rewards.

2.48 However, it is notoriously difficult to make valid comparisons between countries on their graduate labour markets because of the differences in education systems and in particular the length and level of course and the age of participation. Welsh (and other UK) graduates are both younger and older than graduates from other European countries: ‘younger’ because the first degree is much shorter here, and ‘older’ because we have more people participating for the first time at an older age. The younger ones are seen often as less prepared, less mature, less of a ‘finished article’ than other European counterparts, who are more likely to be qualified to a higher level (masters). But UK graduates differ in other ways too: they tend to value their HE more for its contribution to long-term career development and less for short-term job-getting; and they are more likely to be given training and development, funded by their employers during their working time, while their European counterparts (and also those in the US) would be expected to take this at an education institution, and pay for it themselves. It seems that the extent to which a HEI qualification is regarded as sufficient evidence of employability varies from country to country. The different approaches taken to graduate development in the early years in the UK compared to other countries mean there are different issues in the relationships between employment and jobs and in interpreting any comparative statistics.

2.49 Although there are limitations in interpreting the published statistics, broadly speaking high levels of participation in the labour force of higher-education qualified personnel are found across all European countries – ranging from 91 per cent in the Netherlands and Spain to 93 per cent in the UK and 95 per cent in Norway and Austria (men