Graduates face two-tier jobs market

June 18, 2004

Thousands of graduates still earn less than £20,000 a year by the age of 30, according to research that will challenge the positive picture painted in this week's biggest-ever survey of graduates in mid-career.

A comprehensive study by Kate Purcell of the University of the West of England and Peter Elias of Warwick University concluded that the "expansion of higher education had not led to deterioration in opportunities for graduates". It backed further growth and found that graduates continued to enjoy a substantial salary premium.

But research to be published later this year by academics at Cardiff, Essex and Bath universities has found "increasing polarisation" in the incomes of the best and worst-paid graduates over the past ten years.

The findings will fuel the debate over the worth of a degree and whether the expansion of higher education is creating a glut of students competing for too few graduate jobs.

Phil Brown of Cardiff University revealed that the forthcoming study - carried out with Hugh Lauder of Bath University and Muriel Egerton at Essex University - found that a "significant minority" earn little more at the age of 30 than previous estimates of the average graduate starting salary, which stood at £18,000 for a new starter in 2000.

"Our studies are showing that over the past ten years graduate incomes are increasingly polarising - being stretched," he said.

"There are large numbers of graduates - a significant minority - at the age of 30 who earn less than £20,000 a year.

"Once you've taken off tax, then large numbers of graduates are really going to feel the pinch when it comes to paying back student loans."

Professor Brown said a "systematic review" was needed of all of the evidence about graduate careers and earnings.

The Purcell-Elias research charts the career progress over seven years of 4,500 people who left 38 universities in 1995. It found that two-thirds of those graduates felt a degree was required for their job.

Although a third said they were not in graduate jobs in 2002, only 11 per cent had not used their degree to secure employment at some stage since leaving university.

The study also concludes that employers do pay a "premium" to degree-holders, even if they hold "non-graduate" posts.

Professor Purcell said: "We found that the graduate earning premium is holding up. To some extent, we found that quite surprising in the light of the hypothesis that with so many people entering the labour market with degrees, a degree might not be worth what it used to be. But our evidence suggests that is not the case at all."

Alan Johnson, the Higher Education Minister, welcomed the Purcell-Elias research as "another nail in the coffin of the doom merchants who insist that more graduates means worse".

Mike Hill, of the Higher Education Careers Service that funded the Purcell-Elias research, said: "It's quite obvious from the report that the economy is absorbing people and that we have nothing to fear if past performance is anything to go by."

His view was echoed by Carl Gilleard of the Association of Graduate Recruiters who said that employers were increasingly looking at the "graduate talent pool as the pool to fish in".

But Chris Grayling, the Shadow Higher Education Minister, said: "These figures show that more than 10 per cent are still in non-graduate jobs after all that time.

"To me, it casts even more doubt on the desirability of the Government's 50 per cent target for participation in higher education."

Professor Brown also published a paper in March with Anthony Hesketh at Lancaster University, which concluded that the demand for highly skilled graduates had been overestimated.

He said: "Kate and Peter have made a welcome contribution to the debate, but it is only one piece of research and there is other research that shows a different picture - a picture of increasing numbers of graduates chasing good jobs in short supply.

"The typical idea that a graduate has of a job is one that is paid well, interesting and probably for a large company: there are something like 60,000 to 80,000 of jobs available and 400,000 graduates leaving university. So there is a problem. The issue then is how you define a graduate job."

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