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Europe’s evolving graduate labour markets: supply, demand, underemployment and pay

Europe’s evolving graduate labour markets: supply, demand, underemployment and pay For most students the aspiration to gain employment in a graduate job is the main motivation for going to university. Whether they fulfil this aspiration depends considerably on national graduate labour markets. We analyse the com- parative evolution of these markets across Europe over the decade leading up to 2015, focusing on supply, graduate/ high-skilled jobs, underemployment, wages, the graduate wage premium and the penalty for underemployment. The supply of tertiary graduates increased everywhere and converged, and this upward convergence is forecast to persist. In contrast the growth of graduate jobs was slower, not ubiquitous and nonconvergent. Underemployment was spreading, though at a modest rate; this rise was convergent but not ubiquitous. The rise was most substantial in Slovenia, Slovakia, the Czech Republic, Poland, Italy and Greece. Graduates’ real wages trended predominantly down- ward, but varied a great deal between countries. The graduate wage premium declined by more than one percentage point in seven countries. Inferences are drawn for the formation of education policy, for the broader discourse on HE, and for research on graduate futures. Keywords: Overeducation, Wage premium, Tertiary education, Social cohesion, Convergence JEL Classification: I23, J2, J31 1 Introduction institutionally or economically to the more steady Even though other motives are important, for most stu- demands of their country’s labour markets (Habibi 2019). dents the aspiration to gain employment in a graduate job In the twenty-first century, even without an acceleration is a central motivation for going to college or university, in tertiary enrolments, some have detected renewed risk in a deceleration in the demand for high-skilled labour and there is everywhere a substantive average wage pre- along with the apparent maturity of ICT as a general pur mium in prospect for tertiary graduates above those with - less education. Yet the medium-term future of skilled pose technology (Beaudry et al. 2016); others portray this employment has become especially uncertain. After the maturity of ICT as a world in which managers are able to global massification of higher education participation re-organise labour processes through ‘digital Taylorism’, (Marginson 2016), the proportion of tertiary-educated deskilling and intensification of graduate labour, except labour in the world’s labour forces has been rising inexo- for that of a minority of elite graduates trained in glob- rably. Graduate underemployment—also termed ‘over- ally-oriented universities (Brown et al. 2004). Still others education’, and first posed as a risk in the United States envisage a future for work dominated by Artificial Intelli - during the 1970s (Freeman 1976)—has become a world- gence (AI) (British Academy and the Royal Society 2018). wide issue, especially in those many countries where The assumption that the large majority of tertiary gradu - governments in the 1990s and 2000s allowed higher ates are guaranteed high-skilled jobs appears to be no education enrolments to expand rapidly, unconnected longer valid in many countries. Already, by 2011, roughly one in three university graduates of all ages were working in non-graduate jobs in many OECD countries (Green *Correspondence: francis.green@ucl.ac.uk and Henseke 2016b). UCL Institute of Education, London, UK © The Author(s) 2021. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creat iveco mmons .org/licen ses/by/4.0/. 2 Page 2 of 13 F. Green , G. Henseke In these circumstances, while many universities and kick-starting the massification process. Yet arguably the colleges have come to focus on their employability teach- state has less independent influence in the era of ubiq - ings, and their careers and related services, their gradu- uitous mass participation; rather, from a political econ- ates’ prospects for utilising their qualifications and skills omy perspective the key driver is said to be middle-class, rest to a considerable extent on the uncertain trajec- mainly urban aspirations, which are only loosely linked tory of national graduate labour markets. We ask in this to economic imperatives (Marginson 2016). Eventually, paper: is gaining a tertiary degree becoming, over the most children from these socio-economic classes expect medium term, a less fruitful channel to success in the to complete higher education. With their aspirations labour market? Unfortunately, evidence for a sufficiently beginning to reach satiation, the ceiling to participation broad coverage of countries to form an overview tends to could only be raised further by lifting the school achieve- be scarce. Excess supply over demand, potentially of con- ments of more disadvantaged socio-economic groups. cern to a whole generation of students, may vary sharply Yet that uplift and the necessary funding have their lim- between countries. its. With lagging nations catching up those ahead of the Our focus is on Europe in the decade leading up to educational growth curve, we could expect “upward 2015, in part owing to the availability of recent data suit- convergence” to emerge between nations (defined as a able for studying graduate underemployment trends conventional ‘beta convergence’ combined with a rising in a significant number of disparate countries with dis - average trend, for a desirable indicator). A trajectory of tinctive education systems and labour markets. Europe upward convergence of tertiary education achievement is also of interest because of the EU’s expressed objec- is found within Europe from 2007 onwards (Eurofound tive of ‘upward convergence’ in several socio-economic 2019, p. 18), a dynamic which sits comfortably alongside domains, including tertiary education. Thus, an impor - the intended policy and systems harmonisation in the tant supplementary question is whether there is evi- ‘European Higher Education Area’ that is orchestrated by dence of convergence between national graduate labour the Bologna Process. markets: if there is convergence, a future is suggested for The EU’s concerns, while they embrace employment, laggard countries; if there is persistent variation or cumu- do not (at least explicitly) extend to convergence mecha- lative divergence, the analysis may indicate scope for ben- nisms in the availability of graduate jobs. Nevertheless, eficial policy-learning in low-performing countries, but if the demand for graduate labour diverges, the differing also provides a warning signal that the important objec- experiences of graduates could be detrimental to a cohe- tive of social cohesion across the European Union (Euro- sive higher education area and wider cohesion objectives. found 2019) is not being achieved in this domain. Underpinning graduate labour demand is the theory of At the outset, we recognise that a graduate labour mar- skill-biased technological change (SBTC) which charac- ket is not expected to swiftly reach an equilibrium. The terises the predominant technologies of the modern era possibility that supply can diverge significantly from as leading to a proportionately increased demand for demand, and for long durations without significant high-skilled labour. In its most recent form, SBTC has behavioural adjustments, necessitates an examination of been supplemented by the ‘task-based’ theory of chang- both graduate wages and indicators of demand along- ing occupational skills demand. This theory holds that, side supply. We study the growing supplies of tertiary with the development of recent technologies, many graduates, the evolution of high-skilled jobs and gradu- middle-level, ‘routine’ jobs are becoming more eas- ate underemployment (where graduates work in non- ily automated, displacing these employees and polaris- graduate jobs), and key trends in graduate wages: the ing the workforce—even while high-skilled, non-routine average real wage, the wage premium of graduates over jobs are expanded (Autor et  al. 2003; Goos et  al. 2014), non-graduates, and the wage penalty suffered by gradu - a process termed ‘asymmetric polarisation’. With further ates who become underemployed. internationalisation of production through offshoring to lower-income regions, the thinning out of middle-level 2 Theories of graduate labour supply, demand, jobs is extended (Blinder and Krueger 2013). These the - and under‑employment ories inhabit a global domain, with similar occupational We begin in this section with an overview of what exist- restructuring expected in all countries open to new tech- ing theory and evidence tells us. From the neoclassical nologies. As these technologies are diffused, so the occu - economic perspective, the public’s desire to participate in pational structures—including the demand for skilled tertiary education is in anticipation of higher pay driven labour—would converge. And while ‘high-skilled labour’ by employers’ demand for high skills. The state, being in is not synonymous with ‘graduate labour’—indeed, grad- full or partial control of the funding for and governance uate jobs are less prevalent in nations where there is an of higher education, was in many countries involved in abundant stock of skilled non-tertiary labour (Henseke Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 3 of 13 2 and Green 2017)—over time we can expect the demand be lower than those working in graduate jobs (Green for graduate labour to move in close parallel with the and McIntosh 2007). Nevertheless, skill heterogeneity demand for high-skilled labour. accounts for a relatively small proportion of the variation This universalism is challenged, however, by strate - in graduate underemployment between nations (Green gic human resource management theory, in particular and Henseke 2016b). For the most part, underemploy- the resource-based theory of the firm. In this approach, ment for newly qualified graduates signals an underu - managerial cultures, industrial structures and labour tilisation of their skills. Moreover, underemployment market institutions are held to affect the pace and man - matters and is non-trivial for both individuals and soci- ner in which technologies are introduced (e.g. Boxall and ety. Underemployed graduates have substantially lower Purcell 2011; Erez 2010; Green 2013, Chap. 5). Patterns of wages than their fellow graduates who have obtained inter-country variation in these cultures and institutions graduate jobs, even though they typically receive higher have also been framed within production regime theory wages than their work peers who have lower education or within welfare regime theory (Gallie 2017). Added to (Iriondo and Pérez-Amaral 2016); they are also more this mix are inter-country variations in product demand likely to be dissatisfied with their work (Allen and van structure. Empirically, the hypothesis that there has been der Velden 2001). Once scarred by being underemployed a universal asymmetric polarisation of employment over (their further skills development being thus inhibited), it recent decades is contested by Eurofound’s jobs monitor- is hard to break out into graduate employment: under- ing observatory (Eurofound 2014). In consequence, some employment is individually persistent (Baert et  al. 2013; cross-national differentiation in the trajectory of the Kiersztyn 2013; Meroni and Vera-Toscano 2017). The demand for graduate labour could be expected. The trend possibility of underemployment increases the risks for is potentially divergent if the cumulative paths of capital- young people undertaking an investment in higher edu- ist development are sufficiently differentiated by nation - cation, and (unless we factor in the wider educational ally varying managerial cultures and institutions. value of a university life) there is a potential waste of soci- What happens when the aggregate supply of graduate ety’s educational resources. labour diverges from demand? If supply comes to exceed At any time in a complex economy, a certain mini- the demand for graduate labour, any market-induced fall mum proportion of graduates will be under-employed— in the supply, prompted by changes in employment pros- a consequence of mismatches in the labour market, or pects and/or falling graduate wages, would take place restrictions on labour mobility. Some are more likely to over a long horizon, given the duration of the higher edu- experience underemployment than others—the prob- cation investment. Only inward or outward migration of ability depends, for example, on an individual’s spatial highly-educated labour could speed up the adjustment, mobility (Jauhiainen 2011). Since there is no consensus and this too is constrained. Similarly, if employers are to on a single best way of classifying underemployment one respond by changing to a high-skilled production strat- cannot easily determine what national rate of underem- egy, this is also likely to be over the long term. With mar- ployment would be high enough to raise policy issues. ket-induced responses set to take place over a long time By contrast, concern is certainly warranted where there frame, the expected consequence is a persistent disequi- is an increasing rate of underemployment since, as noted librium, with a proportion of graduates underemployed. above, such a rise could be a sign of rising imbalance in That proportion would increase if the growth of aggre - the aggregate between supply and demand for graduate gate supply exceeds the growth in demand. As expected, labour. evidence confirms that the prevalence of underemploy - Whether graduate underemployment is rising, in the ment is higher where there develops a greater excess context of HE massification and potentially divergent supply of graduates (Verhaest and van der Velden 2013; graduate labour demand, is an empirical issue, as is the Green and Henseke 2016b). question of whether there is a divergence in the experi- However, some part of graduate under-employment ence of under-employment among European nations. can be attributed, not so much to aggregate imbalance, Spells of increasing graduate underemployment have as to heterogeneity among graduates. While the qualifi - been documented, but only for a few countries for irregu- cations that underemployed graduates have gained signal lar intervals: in Germany, Poland and Sweden during the a certain academic achievement, their work skills may 1990s, in Poland again between 2006 and 2016, and in the UK between 1992 and 2006 (Rohrbach-Schmidt and Tiemann 2011; Kiersztyn 2013; Korpi and Tåhlin 2009; Green 2013, p. 131; Baran 2019). By contrast, graduate In principle, if a country’s institutions for matching graduate labour to grad- uate jobs deteriorated, one could expect a long-term increase in educational underemployment fell in Germany between 1999 and mismatches. There are, however, as yet no documented examples of this. 2012, especially among women (Henseke 2019). 2 Page 4 of 13 F. Green , G. Henseke While tracking overall graduate labour supply, labour Given that there is, therefore, only a piecemeal scat- demand and disequilibrium will reveal much of what tering of evidence about how modern graduate labour matters for graduates’ prospects, it needs to be com- markets have evolved, we pose the following specific plemented by the trend in graduates’ wages. We might questions, with the focus on Europe and the wider con- expect rising graduate wages on average, given the posi- cerns with social cohesion within the European Union tive economic growth experienced by most countries (Eurofound 2009): and the presumption of a developing knowledge econ- omy. However, the intervention of the financial crisis in i. Are the recent graduate labour supply trends 2008–9, subsequent slow growth in many countries, and universally positive, and also convergent among the long-term decline in labour’s share of GDP (ILO and Europe’s countries? OECD 2015) could be expected to be reflected in lower ii. Is the share of graduate jobs increasing universally, graduate wages. and also convergent among nations? Also informative is the evolution of the graduate wage iii. Is there a predominant or universal and convergent premium, the difference between graduates’ wages and trend towards increasing graduate under-employ- those educated to the next level down, that is, upper sec- ment? ondary. The graduate wage premium is typically seen as iv. Have graduates’ wages been growing or falling? the bellwether for the prospective student evaluating the v. Has the graduate wage premium been rising or fall- potential gains from a financial investment in higher edu - ing? cation. Whether this premium will rise or fall will depend vi. Has the wage penalty from being underemployed on the relative states of the labour markets for graduate been increasing? labour and less skilled labour. Underemployed graduates typically work at one level down the skill hierarchy, dis- placing some of those educated to upper secondary level 3 Data and measurement who in turn are obliged to take up lower-paid jobs. u Th s, To answer our questions, data is required on graduate rising underemployment of graduates is not necessar- jobs, educational attainment, and the wages of graduates ily accompanied by a downward adjustment of the wage and less-educated workers across European countries. premium, if the average wages of those with upper sec- We focus on the period 2005 to 2015, for which we have ondary education fall as far or further than those of grad- data available in a consistent series. These are the micro- uates. Moreover, relative wages may be ‘sticky’ (slow to data from the European Labour Force Survey (EU-LFS) adjust), even in flexible employment regimes. According and from the EU-Statistics on Income and Living Condi- to recent studies, while for some countries the graduate tions (EU-SILC) instrument. We use the EU-LFS to trace wage premium remained high or even increased during changes within 26 European countries in the supply of the 1990s and beyond, the premium notably fell for sig- tertiary-educated labour and the occupational position nificant spells in Poland, Portugal, Italy, Taiwan (Straw - of graduates in the labour force. We focus on tertiary inski et  al. 2018; Figueiredo et  al. 2013; Crivellaro 2016; education, whether taught at universities or other higher Almeida et al. 2017; Huang and Huang 2015). Again, this education institutions. Until 2013, in official statistics evidence is patchy. tertiary education comprised levels 5 and 6 of the Inter- Finally, the incentive to participate in tertiary educa- national Standard Classification of Education (ISCED) tion is affected not only by the expected trajectories of 1997. From 2014, ISCED-11 levels 5–8 define tertiary the average graduate wage, but also its distribution: risk education in international statistics. averse students will have an incentive to choose paths A key measurement issue concerns the concept and with lower average—yet less uncertain—rewards, such classification of ‘graduate jobs’. Borrowing from our ear - as high-level apprenticeships. Several papers have docu- lier theoretical and empirical work (Henseke and Green mented increasing differentiation among graduates along 2017), we take the concept of a graduate job to be one various domains: the subjects taken, grades achieved, where most of the skills used are usually acquired in or level reached; some of this dispersion is manifested the course of tertiary education, including many of the through variation in occupational attainment, and in par- activities surrounding it, and in the course of ensuing or ticular through underemployment because of the wage penalty that attaches to it (Martins and Pereira 2004; Hoekstra 2009; Green and Zhu 2010; Green and Henseke 2016a; Altonji et al. 2012; Figueiredo et al. 2013; Lindley We include all countries in the EU by 2005 who contributed data over the decade, plus Switzerland and Norway. and Machin 2014). h t t p s ://e c .e ur op a .e u/e ur o s t a t/st a ti stic s -e x pla ine d/inde x .ph p/L iv in g_ condi tions . Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 5 of 13 2 Table 1 Descriptive statistics Mean Standard deviation Inter-period/ country range Tertiary graduate attainment share in the labour force (%) 28.6 8.8 33.0 Share of high-skilled occupations (%) 42.2 6.9 29.7 Under-employment rate among graduates (%) 17.9 7.4 32.5 Graduates’ wages (PPP-adjusted monthly € earnings, 2015 prices) 3558.4 1217.3 5662.9 41.5 1.5 6.1 Age Percentage male 48.8 6.3 26.4 Percentage foreign born 12.2 11.0 55.0 Europe 2005/2015 Derived from unweighted country averages Base is the working-age population with tertiary qualifications coterminous periods of work. Those skills include, inter Transport industry). Nevertheless, a large majority (nine alia, cognitive skills, knowledge creation, management out of ten) sub-major groups within major groups 1–3 and planning skills, information-processing, and inter- are found, using the task-based method, to be graduate/ personal skills (Allen and Van der Velden 2011; Barone high-skilled jobs in Britain (Green and Henseke 2016a). and Ortiz 2011). There are two valid ways of operation - We use the EUSILC instrument to compute trends in alising the concept: either through job-holders reports graduate wages (inflation and PPP adjusted), the graduate of whether a graduate level qualification is required to wage premium (relative to the wages of upper-secondary get and do their job; or via task-based analysis of jobs educated workers), and the graduate underemployment to identify high-skill requirements, which in turn per- wage penalty. To compute the change in the tertiary grad- mit classifying jobs using any of three approaches: either uate wage premium, using the sample of all employed through statistical methods using survey-based task workers in each country for each year, we regress the log data (Henseke and Green 2017), or via experts’ detailed of wages against a set of education level dummies, where job title scrutiny (Figueiredo et  al. 2011; Elias and Pur- the reference category is upper secondary, and including cell 2013) or through reliance on a major-group occu- a conventional set of controls: a set of 5-year age dum- pational classifications such as ISCO-08 which is also mies, a dummy for foreign-born, their interaction with expert-based. gender, and a full set of year dummies. To compute the Here, in addition to the need for a comparable Euro- change in the graduate underemployment wage pen- pean-wide indicator, to examine trends we need a clas- alty, using the sample of all employed graduates in each sifier that is consistently defined over time. Only the country for each year we regress log wages on a dummy major-group occupational classifier meets these require - variable for employment in an occupation outside major ments. We therefore take, as our ‘graduate job’ indicator, groups 1–3, plus the same controls. being in an occupation in one of the first three ISCO-08 Table  1 shows the basic descriptive statistics for the major groups: Managers, Professionals and Technicians sample of all countries during the period of our analysis. & Associate Professionals; an alternative nomencla- ture for this classification is ‘high-skilled job’. Comparing 4 Findings across methods, not all occupations in major groups 1–3 Figure  1a addresses our first question, surrounding sup - are determined to be graduate jobs using one or other of ply. We focus on the labour force aged 30 to 59, since the alternative classifiers (an example is Managers in the almost all graduates would expect to have made the tran- sition from education to work by age 30 in all countries, and 59 is below the normal retirement age in all coun- tries. The figure depicts a familiar story: consistent with We eschew the further method of identifying the required qualification the prior massification of tertiary participation, the share level of a job as that obtained by the modal group within each occupation; of tertiary educated labour in the work force increased this method builds on the near-tautological idea that graduate jobs are what graduates do, which we consider unsound. This method is particularly prob - in all European countries, and by an average of 7.7 per- lematic when studying changing education requirements, since rising supplies centage points across all of Europe. The fastest growing of graduates then tautologically define rising graduate jobs. tertiary educated workforce was in Malta, followed by A small number of detailed jobs were reclassified into or out of these Portugal, Austria, the Czech Republic and Poland; while major groups in the 2011 ISCO revision; we assume these reflected upskill- ing or downskilling. 2 Page 6 of 13 F. Green , G. Henseke a 7.0 MT 6.0 PT AT CZ 5.0 PL LV LU SK IE SI 4.0 LT IT CY HU GR UK CH 3.0 SE FR NO NL FI ES 2.0 BE EE DE DK 1.0 0.0 0.05.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 Terary aainment in the labour force 25-64, 2005 (%) 3.0 PT 2.5 IT SI PL 2.0 FR HU NL SK AT ES 1.5 BE GR CZ DK CH NO LU DE IE UK SE 1.0 LV FI 0.5 EE 0.0 LT -0.5 Terary aainment in the labour force 25-64, 2015 (%) Fig. 1 a Convergence or divergence of Europe’s graduate labour forces? Base: all in labour force aged 25–64. Source: European Labour Force Survey, Eurostat. Key: AT Austria, BE Belgium, CH Switzerland, CY Cyprus, CZ Czech Republic, DE Germany, DK Denmark, EE Estonia, ES Spain, FI Finland, FR France, GR Greece, HU Hungary, IE Ireland, IT Italy, LT Lithuania, LV Latvia, MT Malta, NL Netherlands, NO Norway, PL Poland, PT Portugal, SE Sweden, SI Slovenia, SK Slovak Republic, UK United Kingdom. b Convergence or divergence of the future graduate labour force? Base: working age population 25–64. Country key: see a (Data Source: Wittgenstein Centre for Demography and Global Human Capital (2019)) Projected average growth rate of the terary aainment share, 2015- Average annual growth rate of the terary aainment share, 2005-2015 2030 Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 7 of 13 2 3.0 PT 2.5 LU CY LT 2.0 NO LV 1.5 PL UK SE MT FR IE 1.0 EE SI FI AT DE 0.5 CH DK HU BE NL ES 0.0 0.010.020.030.040.050.060.0 CZ -0.5 IT GR -1.0 SK -1.5 Employment share of high-skill occupaon, 2005 Fig. 2 Convergence or divergence of graduate jobs across Europe? Country key: see Fig. 1a (Source: European Labour Force Survey, authors’ analysis) the lowest was in Germany and Denmark. The figure, continue to converge; the Beta-convergence coefficient is which plots these changes against the initial share in − 1.7 (0.276). 2005, shows that the participation rate grew faster for Figure  2 turns to the changing share of graduate jobs/ those with initially low rates. To show this formally we high-skilled jobs in the workforce. It shows that the share ran a linear regression of the growth rate on the natural rose over the 2005–2015 decade in most countries, the logarithm of the tertiary attainment rate in 2005: this largest increase being in Portugal; yet, unlike with the showed Beta convergence with a coefficient of − 3.02 graduate labour supply, this rise is not universal. In four (s.e. = 0.529). This convergence is consistent with that countries (Greece, Slovakia, Italy and the Czech Repub- reported by Eurofound (2019) for a different but overlap - lic) the share fell, while in nine other countries the rate of ping time interval. Together with the rising supply, our growth was near-zero or below one percent a year. Across findings confirm that graduate labour supply exhibits Europe as a whole, the proportion of graduate jobs rose ‘upward convergence’ within Europe. by 2.8 points to reach 42.3 percent. The plot reveals neither a convergent nor a divergent tendency: rather, 5 Can we expect upward convergence to continue whether the decade long change is positive or negative in the next decade? for a country is independent of the starting point for the Figure  1b plots the projected growth in tertiary-edu- share of graduate jobs in the employment structure— cated labour until 2030 against the initial share in 2015. compare, for example, Greece and Portugal where the In almost every country, growth is expected to continue; proportion of graduate jobs began at roughly the same this prediction would only be nullified in the wholly level, then diverged remarkably, while the Netherlands’ unlikely event of a major collapse of college participation very high proportion of graduate jobs was unchanged. among the present generation of young adults. Poland, Formally, the Beta convergence coefficient estimate is Portugal, Italy, Slovenia and France are expected to have statistically insignificant, being − 0.9 (s.e. = 1.25). the fastest growing tertiary-educated working-age popu- In Fig. 3 we consider the trends in under-employment, lation, while continued tertiary expansion in Lithuania defined here as a graduate working in an occupation and Estonia may come to a halt. In all, tertiary attainment classified outside the top three ISCO-08 major groups. of the working age population will exceed 40% in more According to this figure, under-employment was on than two thirds of the countries in our sample by 2030, the rise in the majority of countries, with Slovenia, Slo- up from a quarter in 2015. Attainment is projected to vakia, the Czech Republic, Poland, Italy and Greece Growth rate of the high-skill employment share,2005-2015 2 Page 8 of 13 F. Green , G. Henseke 12.0 10.0 SI 8.0 SK CZ 6.0 PL IT 4.0 GR HU FR AT IE 2.0 SE UK NL PT NO ES CY LU DK 0.0 FI LT LV BE EE CH -2.0 DE -4.0 05 10 15 20 25 30 35 Underemployment rate (in %), 2005 Fig. 3 Convergence or divergence in graduate under-employment? Country key: see Fig. 1a (Source: European Labour Force Survey, authors’ analysis) experiencing large increases. Yet this rise is not found in relative supply, even experienced a decline in the pro- everywhere: in Germany, Estonia, Switzerland and Bel- portion who were underemployed: that small decline gium there were falls of approximately 1 percentage could be accounted for by improved matching efficiency point or more in the proportions of graduates who were between graduates and jobs, though we offer no inde - under-employed in their jobs. Taking Europe as a whole, pendent evidence for that. Referring back to Figs.  1 and the proportion under-employed rose only modestly, from 3 reveals that, in some of the cases of substantially ris- 19 to 21 percent over the decade. The scatter plot indi - ing underemployment (Slovenia, Poland and Austria), cates some Beta convergence, with a coefficient of − 3.1 the proximate cause was an especially high expansion of (s.e. = 0.87); underemployment therefore exhibits upward the graduate labour force over the decade. In other places convergence. Visually, one can see that this convergence where underemployment rose fast (Greece, Slovakia and is driven by Slovenia, Slovakia, the Czech Republic and Ireland), the proximate cause was that the proportion of Poland, all of which began the period with relatively little graduate jobs fell or barely changed over the decade. In underemployment and subsequently increased it rapidly. the case of The Czech Republic, both factors were in play. Figure  4 sheds some light on these changes in under- Figure  5 and onwards turn to the trends in gradu- employment, by plotting them against the change in the ate wages, which complement the picture of supply and “relative supply” of graduates to graduate jobs (where the demand trends we have so far identified. As can be seen latter is defined as the growth rate of the tertiary attain - in Fig.  5, real wages of 25–34  year-olds (after allowing ment share minus the growth rate of the high-skilled for inflation) if anything predominantly trended down - employment rate). The figure reveals that the changing ward over the decade: taking all European countries proportion of individual graduates who find themselves together, the real wage fell by approximately − 0.8 per- underemployed bears a direct positive relation to the cent per annum. The variation across countries is also changing relative supply. A percent change in the rela- striking. The greatest falls were seen in Greece, Portugal tive supply of graduates is associated with a 1.3 percent and the UK, while the largest annual rise (4.2 percent) (s.e = 0.28) higher growth rate of the share of underem- was recorded in Slovakia. Among the richest countries it ployed graduates. Countries at the high end of the rise was the young graduates in Switzerland who fared best in relative supply—Slovakia and the Czech Republic, (1.7 percent growth). If one compares the rewards of notably—witnessed the largest rise in the proportion of young graduates in Switzerland with those working in graduates who are underemployed; while at the low end the United Kingdom’s, their relative fortunes changed Estonia and Germany, countries with little or no change by a remarkable 53 percent over the decade. Formally, Growth rate of the share underemployed graduates (in %), 2005-2015 Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 9 of 13 2 12.00 10.00 SI 8.00 SK CZ 6.00 PL IT 4.00 GR IE FR AT 2.00 SE UK HU NL PT NO ES CY FI DK LU 0.00 LT LV BE EE CH -2.00 DE -4.00 0.01.0 2.03.0 4.05.0 6.0 Growth of the relave graduate labour supply (in %), 2005-2015 Fig. 4 Relationship of changing graduate underemployment with changes in the relative graduate labour supply. Country key: see Fig. 1a. The growth rate of the relative graduate labour supply is defines as the growth rate of tertiary attainment in the working age population net of the growth rate of the high-skill employment share (Source: ELFS, authors’ analysis) SK EE PL CH D… FI NO SE DE CZ FR LT AT BE IE ES NL -2 HU CY SI LU IT UK PT -4 GR -6 Ini‹al mean gross monthly graduate earnings, (in 2015 PPP-EUR) Fig. 5 Convergence or divergence in graduates’ wages. Income figures deflated using Eurostat’s Harmonised index of consumer prices (HICP) and converted to PPP-EUR with Purchasing Power Parity data for individual consumption across the EU-15 in 2015. The base is graduates aged 25–34. The initial income reference year varies from 2003 to 2004, with a median of 2004. The final reference year varies from 2014 to 2016 with a median of 2015. Country key: see Fig. 1a (Source: EU-SILC; authors’ analysis) graduate wages are nevertheless overall convergent, with those qualified to upper secondary level. It can be seen a Beta coefficient of − 2.4 (s.e. = 0.85). from the figure that the premium fell substantially in Figure  6 shows the graduate wage premium across Lithuania, Slovenia, Portugal, Slovakia, Poland, Hun- Europe, the comparison of the wages of graduates with gary and Greece. Five of these cases, the exceptions Average annual growth rate of gross monthly earnings Growth rate of graduate underemployment (%), 2005-2015 2 Page 10 of 13 F. Green , G. Henseke 6 Discussion This paper contributes an understanding of decade- 0.5 long change in European graduate labour markets. The key medium term trends, so crucial for the prospects of modern day students across Europe, may be summa- -0.5 rised as follows. The decade leading up to 2015 saw the predicted ongoing increase in the tertiary attainment -1 level of Europe’s workforces, and there is evidence of -1.5 substantive convergence. In answer to our first research question, then, we confirm Eurofound’s own conclu - -2 sion that the tertiary labour supply exhibits upward Fig. 6 The changing graduate wage premium. See notes to Figs. 1a convergence. In parallel with, though quite disengaged and 5 (Source: EU-SILC; authors’ analysis) from the motors of supply, there was an overall rise in the demand for graduate/high-skilled labour as defined by employment in the top three occupational major groups. However, in answer to our second question we find that the growth of demand was not ubiquitous, was overall slower than the growth of graduate sup- ply, and was non-convergent. This conclusion is prima 0.5 facie more consistent with a country-specific or a varie - ties of capitalism perspective, such as strategic human resource management theory, than the universalist -0.5 expectation of the theory of skill-biased technological -1 change. Our third empirical question asked whether there has -1.5 been a universal tendency for increasing tertiary labour -2 supply to exceed the growth of demand. Consistent with our first two sets of findings, while the predominant -2.5 trend is that the prevalence of underemployment has Fig. 7 Average annual change in the underemployment wage been spreading in Europe, the rise is modest; moreover, penalty. See notes to Figs. 1a and 5 (Source: EU-SILC; authors’ analysis) the rise was neither ubiquitous, nor convergent between countries. Where underemployment was rising espe- cially fast, the proximate reason varied across countries: in some, the supply of tertiary graduates had risen espe- cially fast, outstripping the changing occupational com- being Hungary and Lithuania, showed high increases position; in others, the rate of supply increase was no in underemployment over the period (Fig.  3). In other more than average but the employment of high-skilled countries the wage premium changes were small labour was falling. (compared with the average level), and evenly mixed In response to our fourth question, about which we between increasing and decreasing premiums. had no prior expectations, in the majority of countries Finally, Fig.  7 depicts the trend in the wage pen- graduates’ real wages fell over the period. We speculate alty for being underemployed. Overall across coun- that this fall is linked to the long-term decline in the wage tries, underemployed graduates earned around a third share of GDP in many countries coupled with slower less than graduates doing graduate jobs, though this productivity growth; the path of wages would also have pay penalty slowly declined by 0.71 percent per year. been affected by the financial crisis and recession during At the extremes the underemployment wage pen- the decade: these factors will have affected the general alty increased at a rate of more than 1.2 percentage level of wages, including those of graduates. For the fifth points per annum in Slovenia and Portugal. At the question, we found that the graduate wage premium also other extreme the penalty fell at 1.5 percent or more declined in seven countries by more than one percentage in Ireland and Austria. However, with the excep- point—Lithuania, Slovenia, Portugal, Slovakia, Poland, tion of Slovenia, there is no country in the sam- Hungary and Greece; all but the first of these exhibited ple where a substantially rising underemployed pay rising underemployment. Finally, the wage penalty from penalty is compounded by a growing prevalence of underemployment is one manifestation of dispersion underemployment. Annual change of the underemployment Change in the graduate pay premium penalty (%) in %-points EE SK DE SI ES HU BE LU IE DE LU LT FR PT UK EE AT PL CY DK NL GR DK CH NO FI NO SE SE FR FI CH CY IT CZ UK BE LT ES SI NL PT CZ SK IT PL IE HU GR AT Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 11 of 13 2 among graduates; however, there is no general tendency a long period of time. Our contribution in this paper is to for the penalty from underemployment to increase. utilise this available European data to analyse key trends Turning to the incentives facing prospective students over a medium-term period, which can be the basis for in the medium-term future, the supply trends are eas- country-level analyses by policy-makers and researchers ier to call than the demand trends. One might specu- with access to more detailed information in particular late whether the lower premium in Portugal, Slovenia, countries. Greece, Hungary and Poland will lead to falling tertiary Our findings do not reveal an optimistic picture regard - participation in these countries. For the reasons outlined ing a convergence of national graduate labour markets by Marginson (2016)—in particular, the upward ratch- across Europe. We confirm that there has been an ongo - eting of social and economic aspirations—falling par- ing upward convergence in the proportion of graduates ticipation is by no means certain or even likely. Even if in the workforce, and that this will probably continue in participation were to fall or flat-line, an increasing sup - the present decade; yet there is no sign of upward con- ply of tertiary graduates in all of Europe’s workforces is vergence in the use of graduate labour in graduate jobs. almost certain, given the difference between the tertiary Of course, the demarcation of graduate labour mar- attainments of the young and old. Estonia and Finland kets is not fully coterminous with national borders; yet are possible exceptions. the implications for European social cohesion of these The future trend of demand for graduate labour is labour markets converging only in terms of supply are much less certain. Extrapolation from the recent decade uncertain. The findings are partly constrained, as noted would be a common first estimate, on the assumption above, by having to work with the major group 1–3 clas- that technology and demand-driven trends are likely to sification of graduate jobs as high-skilled jobs, in order to persist. However, this approach may not be valid here. plot the decade-long changes. Repeated task-based data Some predictions suggest a future for work dominated by linked to occupations, consistent across countries and disruptive, machine-learning technologies that will dis- over time, would allow an analysis based on the alterna- place skilled labour. Given the widely varying estimates tive task-based classification method. When the coun - of the impact of AI (Arntz et  al. 2017; Acemoglu and tries that participated in the first and second rounds of Restrepo 2018), and uncertain macroeconomic futures, the OECD’s Survey of Adult Skills again join the planned forecasting labour demand and wages is hazardous; and next wave of surveys, there could be the opportunity to the uncertainty is raised further by the striking between- do this for the decade beginning in 2011. It must also be country variations manifested in recent years. noted that estimates of wage premiums and wage pen- As a consequence, scholarly opinion about future pros- alties reported here cannot be treated as strictly causal pects for graduates is divided between optimists who rest estimates of treatment effects, either in the case of the their beliefs on the persistent high value of the graduate decision to undertake tertiary education, or in the case wage premium in many countries for a long time, and of taking up employment in a non-graduate job: in both pessimists who point to the seemingly high prevalence cases, to identify effects a causal estimator would require of graduate underemployment. Optimistic analysts can plausible, exogenous drivers, which are not available in support their beliefs with forecasts of rising demands for these data. Finally, we have not examined here the varia- creative and cognitive skills (Bakhshi and Yang 2015), but tions in graduate unemployment. are less common on the ground in countries with a falling Some general inferences may nevertheless be drawn graduate wage premium; pessimists (for example, Hol- for the formation of education policy, for the broader mes and Mayhew 2016; Mok 2016) highlight skills under- discourse on HE, and for research on graduate futures. utilisation and unemployment, college grade inflation Nation-wide policies to develop employability skills and rising credentialism. In our view, a nuanced judge- training in colleges and universities can improve equity ment is called for, in which both graduate excess supply and lower the costs of education to work transitions; data and wage trends are called on for a fuller ongoing access to good advice services retain an essential role understanding of trends. It is informative but not suffi - in the promotion of opportunities for disadvantaged cient for policy-makers to rely on retrospective evidence groups lacking established channels into rewarding on the wage premium to reveal important trends in grad- graduate jobs. Moreover, better careers information uate labour markets. There are complex, two-way links and guidance systems in all universities will raise pro- with unknown long-term lags between graduate wages ductivity if they improve the matches made between and the supply/demand gaps, which are yet to be mod- students’ skills and employers’ demands for skilled elled adequately. The best understanding has to come labour. However, these services should not be expected from a holistic account of information in both the wages by policy-makers to carry the burden of upholding or and occupational data that are consistently available over framing the promise of employment in graduate jobs 2 Page 12 of 13 F. Green , G. Henseke Disclaimer for modern-day students. For that, the key objective of This paper is based on EU-SILC and EU Labour Force Survey data, available on a nation’s policy should be to embed its tertiary edu- request from Eurostat. The responsibility for all conclusions drawn from the cation policies within an industrial strategy that is data lies entirely with the author(s). focused on promoting and incentivising increased lev- Authors’ contributions els of innovation. If the stimulation of innovation is The authors have made equal contributions. Both authors read and approved successful, firms are likely to need graduate skills for the final manuscript. the generation of new ideas, for effective further skill Authors’ information acquisition, for knowledge transfer, and for raising Francis Green is Professor of Work and Education Economics in UCL Institute of organisations’ absorptive capacity to profitably uti - Education, where he works at the LLAKES Centre. After graduating in Physics at Oxford University, he studied Economics at the London School of Econom- lise new technologies (Green and Mason 2015; Habibi ics, before writing his Ph.D. thesis at Birkbeck College. His research focuses on 2019). Industrial policies that do not foster innovation education, skills, the graduate labour market and job quality. are more likely to stimulate demand for less skilled Golo Henseke is Senior Research Associate (Applied Economist) at the UCL labour. Such considerations would appear to apply with Institute of Education where he has worked since 2014. He works in two ESRC particular force in the eight countries we have identi- Research centres: the Centre for Learning and Life Chances (LLAKES) and the fied as having experienced a particularly sharp rise in Centre for Global Higher Education. His research examines job quality, gradu- ate labour markets and job transitions. graduate underemployment: Slovenia, Slovakia, the Czech Republic, Poland, Italy and Greece. Funding Our findings on the diversity of trends in graduate This study is supported by the Economic and Social Research Council, the Office for Students and Research England (Grant reference ES/M010082/1), labour markets imply a need for national policy-mak- and the Centre for Global Higher Education (CGHE), UCL Institute of Educa- ers to monitor their graduate labour markets assidu- tion, London. ously alongside their tertiary education policies; they Availability of data and materials should know where their supplies and their prospective This paper is based on EU-SILC and EU Labour Force Survey data, available on demands for graduate labour are heading, and regularly request from Eurostat. The responsibility for all conclusions drawn from the survey graduates’ wages; these data can then be used data lies entirely with the authors. to inform prospective students, schools and colleges, Ethics approval and consent to participate all of whom must endeavour to make major long-term Not applicable. plans and decisions with considerable financial and life- Consent for publication changing consequences as well as possible in an uncer- Not applicable. tain world. Finally, it must be recalled that the value of tertiary Competing interests The authors declare that they have no competing interests. education does not lie only in the private financial returns. There are partly-private non-financial benefits Received: 8 September 2020 Accepted: 27 January 2021 such as better health, and external benefits for soci - ety along with universities’ public good aspects, which are quite separate from tertiary education’s links with employment (McMahon 2009). 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(2010) Habibi, N.: Preventing overeducation and graduate surplus What can West Asia learn from Singapore and Hong Hong’. Asian Educ. Dev. Stud. 8(4), 523–535 (2019) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal for Labour Market Research Springer Journals

Europe’s evolving graduate labour markets: supply, demand, underemployment and pay

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Abstract

For most students the aspiration to gain employment in a graduate job is the main motivation for going to university. Whether they fulfil this aspiration depends considerably on national graduate labour markets. We analyse the com- parative evolution of these markets across Europe over the decade leading up to 2015, focusing on supply, graduate/ high-skilled jobs, underemployment, wages, the graduate wage premium and the penalty for underemployment. The supply of tertiary graduates increased everywhere and converged, and this upward convergence is forecast to persist. In contrast the growth of graduate jobs was slower, not ubiquitous and nonconvergent. Underemployment was spreading, though at a modest rate; this rise was convergent but not ubiquitous. The rise was most substantial in Slovenia, Slovakia, the Czech Republic, Poland, Italy and Greece. Graduates’ real wages trended predominantly down- ward, but varied a great deal between countries. The graduate wage premium declined by more than one percentage point in seven countries. Inferences are drawn for the formation of education policy, for the broader discourse on HE, and for research on graduate futures. Keywords: Overeducation, Wage premium, Tertiary education, Social cohesion, Convergence JEL Classification: I23, J2, J31 1 Introduction institutionally or economically to the more steady Even though other motives are important, for most stu- demands of their country’s labour markets (Habibi 2019). dents the aspiration to gain employment in a graduate job In the twenty-first century, even without an acceleration is a central motivation for going to college or university, in tertiary enrolments, some have detected renewed risk in a deceleration in the demand for high-skilled labour and there is everywhere a substantive average wage pre- along with the apparent maturity of ICT as a general pur mium in prospect for tertiary graduates above those with - less education. Yet the medium-term future of skilled pose technology (Beaudry et al. 2016); others portray this employment has become especially uncertain. After the maturity of ICT as a world in which managers are able to global massification of higher education participation re-organise labour processes through ‘digital Taylorism’, (Marginson 2016), the proportion of tertiary-educated deskilling and intensification of graduate labour, except labour in the world’s labour forces has been rising inexo- for that of a minority of elite graduates trained in glob- rably. Graduate underemployment—also termed ‘over- ally-oriented universities (Brown et al. 2004). Still others education’, and first posed as a risk in the United States envisage a future for work dominated by Artificial Intelli - during the 1970s (Freeman 1976)—has become a world- gence (AI) (British Academy and the Royal Society 2018). wide issue, especially in those many countries where The assumption that the large majority of tertiary gradu - governments in the 1990s and 2000s allowed higher ates are guaranteed high-skilled jobs appears to be no education enrolments to expand rapidly, unconnected longer valid in many countries. Already, by 2011, roughly one in three university graduates of all ages were working in non-graduate jobs in many OECD countries (Green *Correspondence: francis.green@ucl.ac.uk and Henseke 2016b). UCL Institute of Education, London, UK © The Author(s) 2021. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creat iveco mmons .org/licen ses/by/4.0/. 2 Page 2 of 13 F. Green , G. Henseke In these circumstances, while many universities and kick-starting the massification process. Yet arguably the colleges have come to focus on their employability teach- state has less independent influence in the era of ubiq - ings, and their careers and related services, their gradu- uitous mass participation; rather, from a political econ- ates’ prospects for utilising their qualifications and skills omy perspective the key driver is said to be middle-class, rest to a considerable extent on the uncertain trajec- mainly urban aspirations, which are only loosely linked tory of national graduate labour markets. We ask in this to economic imperatives (Marginson 2016). Eventually, paper: is gaining a tertiary degree becoming, over the most children from these socio-economic classes expect medium term, a less fruitful channel to success in the to complete higher education. With their aspirations labour market? Unfortunately, evidence for a sufficiently beginning to reach satiation, the ceiling to participation broad coverage of countries to form an overview tends to could only be raised further by lifting the school achieve- be scarce. Excess supply over demand, potentially of con- ments of more disadvantaged socio-economic groups. cern to a whole generation of students, may vary sharply Yet that uplift and the necessary funding have their lim- between countries. its. With lagging nations catching up those ahead of the Our focus is on Europe in the decade leading up to educational growth curve, we could expect “upward 2015, in part owing to the availability of recent data suit- convergence” to emerge between nations (defined as a able for studying graduate underemployment trends conventional ‘beta convergence’ combined with a rising in a significant number of disparate countries with dis - average trend, for a desirable indicator). A trajectory of tinctive education systems and labour markets. Europe upward convergence of tertiary education achievement is also of interest because of the EU’s expressed objec- is found within Europe from 2007 onwards (Eurofound tive of ‘upward convergence’ in several socio-economic 2019, p. 18), a dynamic which sits comfortably alongside domains, including tertiary education. Thus, an impor - the intended policy and systems harmonisation in the tant supplementary question is whether there is evi- ‘European Higher Education Area’ that is orchestrated by dence of convergence between national graduate labour the Bologna Process. markets: if there is convergence, a future is suggested for The EU’s concerns, while they embrace employment, laggard countries; if there is persistent variation or cumu- do not (at least explicitly) extend to convergence mecha- lative divergence, the analysis may indicate scope for ben- nisms in the availability of graduate jobs. Nevertheless, eficial policy-learning in low-performing countries, but if the demand for graduate labour diverges, the differing also provides a warning signal that the important objec- experiences of graduates could be detrimental to a cohe- tive of social cohesion across the European Union (Euro- sive higher education area and wider cohesion objectives. found 2019) is not being achieved in this domain. Underpinning graduate labour demand is the theory of At the outset, we recognise that a graduate labour mar- skill-biased technological change (SBTC) which charac- ket is not expected to swiftly reach an equilibrium. The terises the predominant technologies of the modern era possibility that supply can diverge significantly from as leading to a proportionately increased demand for demand, and for long durations without significant high-skilled labour. In its most recent form, SBTC has behavioural adjustments, necessitates an examination of been supplemented by the ‘task-based’ theory of chang- both graduate wages and indicators of demand along- ing occupational skills demand. This theory holds that, side supply. We study the growing supplies of tertiary with the development of recent technologies, many graduates, the evolution of high-skilled jobs and gradu- middle-level, ‘routine’ jobs are becoming more eas- ate underemployment (where graduates work in non- ily automated, displacing these employees and polaris- graduate jobs), and key trends in graduate wages: the ing the workforce—even while high-skilled, non-routine average real wage, the wage premium of graduates over jobs are expanded (Autor et  al. 2003; Goos et  al. 2014), non-graduates, and the wage penalty suffered by gradu - a process termed ‘asymmetric polarisation’. With further ates who become underemployed. internationalisation of production through offshoring to lower-income regions, the thinning out of middle-level 2 Theories of graduate labour supply, demand, jobs is extended (Blinder and Krueger 2013). These the - and under‑employment ories inhabit a global domain, with similar occupational We begin in this section with an overview of what exist- restructuring expected in all countries open to new tech- ing theory and evidence tells us. From the neoclassical nologies. As these technologies are diffused, so the occu - economic perspective, the public’s desire to participate in pational structures—including the demand for skilled tertiary education is in anticipation of higher pay driven labour—would converge. And while ‘high-skilled labour’ by employers’ demand for high skills. The state, being in is not synonymous with ‘graduate labour’—indeed, grad- full or partial control of the funding for and governance uate jobs are less prevalent in nations where there is an of higher education, was in many countries involved in abundant stock of skilled non-tertiary labour (Henseke Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 3 of 13 2 and Green 2017)—over time we can expect the demand be lower than those working in graduate jobs (Green for graduate labour to move in close parallel with the and McIntosh 2007). Nevertheless, skill heterogeneity demand for high-skilled labour. accounts for a relatively small proportion of the variation This universalism is challenged, however, by strate - in graduate underemployment between nations (Green gic human resource management theory, in particular and Henseke 2016b). For the most part, underemploy- the resource-based theory of the firm. In this approach, ment for newly qualified graduates signals an underu - managerial cultures, industrial structures and labour tilisation of their skills. Moreover, underemployment market institutions are held to affect the pace and man - matters and is non-trivial for both individuals and soci- ner in which technologies are introduced (e.g. Boxall and ety. Underemployed graduates have substantially lower Purcell 2011; Erez 2010; Green 2013, Chap. 5). Patterns of wages than their fellow graduates who have obtained inter-country variation in these cultures and institutions graduate jobs, even though they typically receive higher have also been framed within production regime theory wages than their work peers who have lower education or within welfare regime theory (Gallie 2017). Added to (Iriondo and Pérez-Amaral 2016); they are also more this mix are inter-country variations in product demand likely to be dissatisfied with their work (Allen and van structure. Empirically, the hypothesis that there has been der Velden 2001). Once scarred by being underemployed a universal asymmetric polarisation of employment over (their further skills development being thus inhibited), it recent decades is contested by Eurofound’s jobs monitor- is hard to break out into graduate employment: under- ing observatory (Eurofound 2014). In consequence, some employment is individually persistent (Baert et  al. 2013; cross-national differentiation in the trajectory of the Kiersztyn 2013; Meroni and Vera-Toscano 2017). The demand for graduate labour could be expected. The trend possibility of underemployment increases the risks for is potentially divergent if the cumulative paths of capital- young people undertaking an investment in higher edu- ist development are sufficiently differentiated by nation - cation, and (unless we factor in the wider educational ally varying managerial cultures and institutions. value of a university life) there is a potential waste of soci- What happens when the aggregate supply of graduate ety’s educational resources. labour diverges from demand? If supply comes to exceed At any time in a complex economy, a certain mini- the demand for graduate labour, any market-induced fall mum proportion of graduates will be under-employed— in the supply, prompted by changes in employment pros- a consequence of mismatches in the labour market, or pects and/or falling graduate wages, would take place restrictions on labour mobility. Some are more likely to over a long horizon, given the duration of the higher edu- experience underemployment than others—the prob- cation investment. Only inward or outward migration of ability depends, for example, on an individual’s spatial highly-educated labour could speed up the adjustment, mobility (Jauhiainen 2011). Since there is no consensus and this too is constrained. Similarly, if employers are to on a single best way of classifying underemployment one respond by changing to a high-skilled production strat- cannot easily determine what national rate of underem- egy, this is also likely to be over the long term. With mar- ployment would be high enough to raise policy issues. ket-induced responses set to take place over a long time By contrast, concern is certainly warranted where there frame, the expected consequence is a persistent disequi- is an increasing rate of underemployment since, as noted librium, with a proportion of graduates underemployed. above, such a rise could be a sign of rising imbalance in That proportion would increase if the growth of aggre - the aggregate between supply and demand for graduate gate supply exceeds the growth in demand. As expected, labour. evidence confirms that the prevalence of underemploy - Whether graduate underemployment is rising, in the ment is higher where there develops a greater excess context of HE massification and potentially divergent supply of graduates (Verhaest and van der Velden 2013; graduate labour demand, is an empirical issue, as is the Green and Henseke 2016b). question of whether there is a divergence in the experi- However, some part of graduate under-employment ence of under-employment among European nations. can be attributed, not so much to aggregate imbalance, Spells of increasing graduate underemployment have as to heterogeneity among graduates. While the qualifi - been documented, but only for a few countries for irregu- cations that underemployed graduates have gained signal lar intervals: in Germany, Poland and Sweden during the a certain academic achievement, their work skills may 1990s, in Poland again between 2006 and 2016, and in the UK between 1992 and 2006 (Rohrbach-Schmidt and Tiemann 2011; Kiersztyn 2013; Korpi and Tåhlin 2009; Green 2013, p. 131; Baran 2019). By contrast, graduate In principle, if a country’s institutions for matching graduate labour to grad- uate jobs deteriorated, one could expect a long-term increase in educational underemployment fell in Germany between 1999 and mismatches. There are, however, as yet no documented examples of this. 2012, especially among women (Henseke 2019). 2 Page 4 of 13 F. Green , G. Henseke While tracking overall graduate labour supply, labour Given that there is, therefore, only a piecemeal scat- demand and disequilibrium will reveal much of what tering of evidence about how modern graduate labour matters for graduates’ prospects, it needs to be com- markets have evolved, we pose the following specific plemented by the trend in graduates’ wages. We might questions, with the focus on Europe and the wider con- expect rising graduate wages on average, given the posi- cerns with social cohesion within the European Union tive economic growth experienced by most countries (Eurofound 2009): and the presumption of a developing knowledge econ- omy. However, the intervention of the financial crisis in i. Are the recent graduate labour supply trends 2008–9, subsequent slow growth in many countries, and universally positive, and also convergent among the long-term decline in labour’s share of GDP (ILO and Europe’s countries? OECD 2015) could be expected to be reflected in lower ii. Is the share of graduate jobs increasing universally, graduate wages. and also convergent among nations? Also informative is the evolution of the graduate wage iii. Is there a predominant or universal and convergent premium, the difference between graduates’ wages and trend towards increasing graduate under-employ- those educated to the next level down, that is, upper sec- ment? ondary. The graduate wage premium is typically seen as iv. Have graduates’ wages been growing or falling? the bellwether for the prospective student evaluating the v. Has the graduate wage premium been rising or fall- potential gains from a financial investment in higher edu - ing? cation. Whether this premium will rise or fall will depend vi. Has the wage penalty from being underemployed on the relative states of the labour markets for graduate been increasing? labour and less skilled labour. Underemployed graduates typically work at one level down the skill hierarchy, dis- placing some of those educated to upper secondary level 3 Data and measurement who in turn are obliged to take up lower-paid jobs. u Th s, To answer our questions, data is required on graduate rising underemployment of graduates is not necessar- jobs, educational attainment, and the wages of graduates ily accompanied by a downward adjustment of the wage and less-educated workers across European countries. premium, if the average wages of those with upper sec- We focus on the period 2005 to 2015, for which we have ondary education fall as far or further than those of grad- data available in a consistent series. These are the micro- uates. Moreover, relative wages may be ‘sticky’ (slow to data from the European Labour Force Survey (EU-LFS) adjust), even in flexible employment regimes. According and from the EU-Statistics on Income and Living Condi- to recent studies, while for some countries the graduate tions (EU-SILC) instrument. We use the EU-LFS to trace wage premium remained high or even increased during changes within 26 European countries in the supply of the 1990s and beyond, the premium notably fell for sig- tertiary-educated labour and the occupational position nificant spells in Poland, Portugal, Italy, Taiwan (Straw - of graduates in the labour force. We focus on tertiary inski et  al. 2018; Figueiredo et  al. 2013; Crivellaro 2016; education, whether taught at universities or other higher Almeida et al. 2017; Huang and Huang 2015). Again, this education institutions. Until 2013, in official statistics evidence is patchy. tertiary education comprised levels 5 and 6 of the Inter- Finally, the incentive to participate in tertiary educa- national Standard Classification of Education (ISCED) tion is affected not only by the expected trajectories of 1997. From 2014, ISCED-11 levels 5–8 define tertiary the average graduate wage, but also its distribution: risk education in international statistics. averse students will have an incentive to choose paths A key measurement issue concerns the concept and with lower average—yet less uncertain—rewards, such classification of ‘graduate jobs’. Borrowing from our ear - as high-level apprenticeships. Several papers have docu- lier theoretical and empirical work (Henseke and Green mented increasing differentiation among graduates along 2017), we take the concept of a graduate job to be one various domains: the subjects taken, grades achieved, where most of the skills used are usually acquired in or level reached; some of this dispersion is manifested the course of tertiary education, including many of the through variation in occupational attainment, and in par- activities surrounding it, and in the course of ensuing or ticular through underemployment because of the wage penalty that attaches to it (Martins and Pereira 2004; Hoekstra 2009; Green and Zhu 2010; Green and Henseke 2016a; Altonji et al. 2012; Figueiredo et al. 2013; Lindley We include all countries in the EU by 2005 who contributed data over the decade, plus Switzerland and Norway. and Machin 2014). h t t p s ://e c .e ur op a .e u/e ur o s t a t/st a ti stic s -e x pla ine d/inde x .ph p/L iv in g_ condi tions . Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 5 of 13 2 Table 1 Descriptive statistics Mean Standard deviation Inter-period/ country range Tertiary graduate attainment share in the labour force (%) 28.6 8.8 33.0 Share of high-skilled occupations (%) 42.2 6.9 29.7 Under-employment rate among graduates (%) 17.9 7.4 32.5 Graduates’ wages (PPP-adjusted monthly € earnings, 2015 prices) 3558.4 1217.3 5662.9 41.5 1.5 6.1 Age Percentage male 48.8 6.3 26.4 Percentage foreign born 12.2 11.0 55.0 Europe 2005/2015 Derived from unweighted country averages Base is the working-age population with tertiary qualifications coterminous periods of work. Those skills include, inter Transport industry). Nevertheless, a large majority (nine alia, cognitive skills, knowledge creation, management out of ten) sub-major groups within major groups 1–3 and planning skills, information-processing, and inter- are found, using the task-based method, to be graduate/ personal skills (Allen and Van der Velden 2011; Barone high-skilled jobs in Britain (Green and Henseke 2016a). and Ortiz 2011). There are two valid ways of operation - We use the EUSILC instrument to compute trends in alising the concept: either through job-holders reports graduate wages (inflation and PPP adjusted), the graduate of whether a graduate level qualification is required to wage premium (relative to the wages of upper-secondary get and do their job; or via task-based analysis of jobs educated workers), and the graduate underemployment to identify high-skill requirements, which in turn per- wage penalty. To compute the change in the tertiary grad- mit classifying jobs using any of three approaches: either uate wage premium, using the sample of all employed through statistical methods using survey-based task workers in each country for each year, we regress the log data (Henseke and Green 2017), or via experts’ detailed of wages against a set of education level dummies, where job title scrutiny (Figueiredo et  al. 2011; Elias and Pur- the reference category is upper secondary, and including cell 2013) or through reliance on a major-group occu- a conventional set of controls: a set of 5-year age dum- pational classifications such as ISCO-08 which is also mies, a dummy for foreign-born, their interaction with expert-based. gender, and a full set of year dummies. To compute the Here, in addition to the need for a comparable Euro- change in the graduate underemployment wage pen- pean-wide indicator, to examine trends we need a clas- alty, using the sample of all employed graduates in each sifier that is consistently defined over time. Only the country for each year we regress log wages on a dummy major-group occupational classifier meets these require - variable for employment in an occupation outside major ments. We therefore take, as our ‘graduate job’ indicator, groups 1–3, plus the same controls. being in an occupation in one of the first three ISCO-08 Table  1 shows the basic descriptive statistics for the major groups: Managers, Professionals and Technicians sample of all countries during the period of our analysis. & Associate Professionals; an alternative nomencla- ture for this classification is ‘high-skilled job’. Comparing 4 Findings across methods, not all occupations in major groups 1–3 Figure  1a addresses our first question, surrounding sup - are determined to be graduate jobs using one or other of ply. We focus on the labour force aged 30 to 59, since the alternative classifiers (an example is Managers in the almost all graduates would expect to have made the tran- sition from education to work by age 30 in all countries, and 59 is below the normal retirement age in all coun- tries. The figure depicts a familiar story: consistent with We eschew the further method of identifying the required qualification the prior massification of tertiary participation, the share level of a job as that obtained by the modal group within each occupation; of tertiary educated labour in the work force increased this method builds on the near-tautological idea that graduate jobs are what graduates do, which we consider unsound. This method is particularly prob - in all European countries, and by an average of 7.7 per- lematic when studying changing education requirements, since rising supplies centage points across all of Europe. The fastest growing of graduates then tautologically define rising graduate jobs. tertiary educated workforce was in Malta, followed by A small number of detailed jobs were reclassified into or out of these Portugal, Austria, the Czech Republic and Poland; while major groups in the 2011 ISCO revision; we assume these reflected upskill- ing or downskilling. 2 Page 6 of 13 F. Green , G. Henseke a 7.0 MT 6.0 PT AT CZ 5.0 PL LV LU SK IE SI 4.0 LT IT CY HU GR UK CH 3.0 SE FR NO NL FI ES 2.0 BE EE DE DK 1.0 0.0 0.05.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 Terary aainment in the labour force 25-64, 2005 (%) 3.0 PT 2.5 IT SI PL 2.0 FR HU NL SK AT ES 1.5 BE GR CZ DK CH NO LU DE IE UK SE 1.0 LV FI 0.5 EE 0.0 LT -0.5 Terary aainment in the labour force 25-64, 2015 (%) Fig. 1 a Convergence or divergence of Europe’s graduate labour forces? Base: all in labour force aged 25–64. Source: European Labour Force Survey, Eurostat. Key: AT Austria, BE Belgium, CH Switzerland, CY Cyprus, CZ Czech Republic, DE Germany, DK Denmark, EE Estonia, ES Spain, FI Finland, FR France, GR Greece, HU Hungary, IE Ireland, IT Italy, LT Lithuania, LV Latvia, MT Malta, NL Netherlands, NO Norway, PL Poland, PT Portugal, SE Sweden, SI Slovenia, SK Slovak Republic, UK United Kingdom. b Convergence or divergence of the future graduate labour force? Base: working age population 25–64. Country key: see a (Data Source: Wittgenstein Centre for Demography and Global Human Capital (2019)) Projected average growth rate of the terary aainment share, 2015- Average annual growth rate of the terary aainment share, 2005-2015 2030 Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 7 of 13 2 3.0 PT 2.5 LU CY LT 2.0 NO LV 1.5 PL UK SE MT FR IE 1.0 EE SI FI AT DE 0.5 CH DK HU BE NL ES 0.0 0.010.020.030.040.050.060.0 CZ -0.5 IT GR -1.0 SK -1.5 Employment share of high-skill occupaon, 2005 Fig. 2 Convergence or divergence of graduate jobs across Europe? Country key: see Fig. 1a (Source: European Labour Force Survey, authors’ analysis) the lowest was in Germany and Denmark. The figure, continue to converge; the Beta-convergence coefficient is which plots these changes against the initial share in − 1.7 (0.276). 2005, shows that the participation rate grew faster for Figure  2 turns to the changing share of graduate jobs/ those with initially low rates. To show this formally we high-skilled jobs in the workforce. It shows that the share ran a linear regression of the growth rate on the natural rose over the 2005–2015 decade in most countries, the logarithm of the tertiary attainment rate in 2005: this largest increase being in Portugal; yet, unlike with the showed Beta convergence with a coefficient of − 3.02 graduate labour supply, this rise is not universal. In four (s.e. = 0.529). This convergence is consistent with that countries (Greece, Slovakia, Italy and the Czech Repub- reported by Eurofound (2019) for a different but overlap - lic) the share fell, while in nine other countries the rate of ping time interval. Together with the rising supply, our growth was near-zero or below one percent a year. Across findings confirm that graduate labour supply exhibits Europe as a whole, the proportion of graduate jobs rose ‘upward convergence’ within Europe. by 2.8 points to reach 42.3 percent. The plot reveals neither a convergent nor a divergent tendency: rather, 5 Can we expect upward convergence to continue whether the decade long change is positive or negative in the next decade? for a country is independent of the starting point for the Figure  1b plots the projected growth in tertiary-edu- share of graduate jobs in the employment structure— cated labour until 2030 against the initial share in 2015. compare, for example, Greece and Portugal where the In almost every country, growth is expected to continue; proportion of graduate jobs began at roughly the same this prediction would only be nullified in the wholly level, then diverged remarkably, while the Netherlands’ unlikely event of a major collapse of college participation very high proportion of graduate jobs was unchanged. among the present generation of young adults. Poland, Formally, the Beta convergence coefficient estimate is Portugal, Italy, Slovenia and France are expected to have statistically insignificant, being − 0.9 (s.e. = 1.25). the fastest growing tertiary-educated working-age popu- In Fig. 3 we consider the trends in under-employment, lation, while continued tertiary expansion in Lithuania defined here as a graduate working in an occupation and Estonia may come to a halt. In all, tertiary attainment classified outside the top three ISCO-08 major groups. of the working age population will exceed 40% in more According to this figure, under-employment was on than two thirds of the countries in our sample by 2030, the rise in the majority of countries, with Slovenia, Slo- up from a quarter in 2015. Attainment is projected to vakia, the Czech Republic, Poland, Italy and Greece Growth rate of the high-skill employment share,2005-2015 2 Page 8 of 13 F. Green , G. Henseke 12.0 10.0 SI 8.0 SK CZ 6.0 PL IT 4.0 GR HU FR AT IE 2.0 SE UK NL PT NO ES CY LU DK 0.0 FI LT LV BE EE CH -2.0 DE -4.0 05 10 15 20 25 30 35 Underemployment rate (in %), 2005 Fig. 3 Convergence or divergence in graduate under-employment? Country key: see Fig. 1a (Source: European Labour Force Survey, authors’ analysis) experiencing large increases. Yet this rise is not found in relative supply, even experienced a decline in the pro- everywhere: in Germany, Estonia, Switzerland and Bel- portion who were underemployed: that small decline gium there were falls of approximately 1 percentage could be accounted for by improved matching efficiency point or more in the proportions of graduates who were between graduates and jobs, though we offer no inde - under-employed in their jobs. Taking Europe as a whole, pendent evidence for that. Referring back to Figs.  1 and the proportion under-employed rose only modestly, from 3 reveals that, in some of the cases of substantially ris- 19 to 21 percent over the decade. The scatter plot indi - ing underemployment (Slovenia, Poland and Austria), cates some Beta convergence, with a coefficient of − 3.1 the proximate cause was an especially high expansion of (s.e. = 0.87); underemployment therefore exhibits upward the graduate labour force over the decade. In other places convergence. Visually, one can see that this convergence where underemployment rose fast (Greece, Slovakia and is driven by Slovenia, Slovakia, the Czech Republic and Ireland), the proximate cause was that the proportion of Poland, all of which began the period with relatively little graduate jobs fell or barely changed over the decade. In underemployment and subsequently increased it rapidly. the case of The Czech Republic, both factors were in play. Figure  4 sheds some light on these changes in under- Figure  5 and onwards turn to the trends in gradu- employment, by plotting them against the change in the ate wages, which complement the picture of supply and “relative supply” of graduates to graduate jobs (where the demand trends we have so far identified. As can be seen latter is defined as the growth rate of the tertiary attain - in Fig.  5, real wages of 25–34  year-olds (after allowing ment share minus the growth rate of the high-skilled for inflation) if anything predominantly trended down - employment rate). The figure reveals that the changing ward over the decade: taking all European countries proportion of individual graduates who find themselves together, the real wage fell by approximately − 0.8 per- underemployed bears a direct positive relation to the cent per annum. The variation across countries is also changing relative supply. A percent change in the rela- striking. The greatest falls were seen in Greece, Portugal tive supply of graduates is associated with a 1.3 percent and the UK, while the largest annual rise (4.2 percent) (s.e = 0.28) higher growth rate of the share of underem- was recorded in Slovakia. Among the richest countries it ployed graduates. Countries at the high end of the rise was the young graduates in Switzerland who fared best in relative supply—Slovakia and the Czech Republic, (1.7 percent growth). If one compares the rewards of notably—witnessed the largest rise in the proportion of young graduates in Switzerland with those working in graduates who are underemployed; while at the low end the United Kingdom’s, their relative fortunes changed Estonia and Germany, countries with little or no change by a remarkable 53 percent over the decade. Formally, Growth rate of the share underemployed graduates (in %), 2005-2015 Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 9 of 13 2 12.00 10.00 SI 8.00 SK CZ 6.00 PL IT 4.00 GR IE FR AT 2.00 SE UK HU NL PT NO ES CY FI DK LU 0.00 LT LV BE EE CH -2.00 DE -4.00 0.01.0 2.03.0 4.05.0 6.0 Growth of the relave graduate labour supply (in %), 2005-2015 Fig. 4 Relationship of changing graduate underemployment with changes in the relative graduate labour supply. Country key: see Fig. 1a. The growth rate of the relative graduate labour supply is defines as the growth rate of tertiary attainment in the working age population net of the growth rate of the high-skill employment share (Source: ELFS, authors’ analysis) SK EE PL CH D… FI NO SE DE CZ FR LT AT BE IE ES NL -2 HU CY SI LU IT UK PT -4 GR -6 Ini‹al mean gross monthly graduate earnings, (in 2015 PPP-EUR) Fig. 5 Convergence or divergence in graduates’ wages. Income figures deflated using Eurostat’s Harmonised index of consumer prices (HICP) and converted to PPP-EUR with Purchasing Power Parity data for individual consumption across the EU-15 in 2015. The base is graduates aged 25–34. The initial income reference year varies from 2003 to 2004, with a median of 2004. The final reference year varies from 2014 to 2016 with a median of 2015. Country key: see Fig. 1a (Source: EU-SILC; authors’ analysis) graduate wages are nevertheless overall convergent, with those qualified to upper secondary level. It can be seen a Beta coefficient of − 2.4 (s.e. = 0.85). from the figure that the premium fell substantially in Figure  6 shows the graduate wage premium across Lithuania, Slovenia, Portugal, Slovakia, Poland, Hun- Europe, the comparison of the wages of graduates with gary and Greece. Five of these cases, the exceptions Average annual growth rate of gross monthly earnings Growth rate of graduate underemployment (%), 2005-2015 2 Page 10 of 13 F. Green , G. Henseke 6 Discussion This paper contributes an understanding of decade- 0.5 long change in European graduate labour markets. The key medium term trends, so crucial for the prospects of modern day students across Europe, may be summa- -0.5 rised as follows. The decade leading up to 2015 saw the predicted ongoing increase in the tertiary attainment -1 level of Europe’s workforces, and there is evidence of -1.5 substantive convergence. In answer to our first research question, then, we confirm Eurofound’s own conclu - -2 sion that the tertiary labour supply exhibits upward Fig. 6 The changing graduate wage premium. See notes to Figs. 1a convergence. In parallel with, though quite disengaged and 5 (Source: EU-SILC; authors’ analysis) from the motors of supply, there was an overall rise in the demand for graduate/high-skilled labour as defined by employment in the top three occupational major groups. However, in answer to our second question we find that the growth of demand was not ubiquitous, was overall slower than the growth of graduate sup- ply, and was non-convergent. This conclusion is prima 0.5 facie more consistent with a country-specific or a varie - ties of capitalism perspective, such as strategic human resource management theory, than the universalist -0.5 expectation of the theory of skill-biased technological -1 change. Our third empirical question asked whether there has -1.5 been a universal tendency for increasing tertiary labour -2 supply to exceed the growth of demand. Consistent with our first two sets of findings, while the predominant -2.5 trend is that the prevalence of underemployment has Fig. 7 Average annual change in the underemployment wage been spreading in Europe, the rise is modest; moreover, penalty. See notes to Figs. 1a and 5 (Source: EU-SILC; authors’ analysis) the rise was neither ubiquitous, nor convergent between countries. Where underemployment was rising espe- cially fast, the proximate reason varied across countries: in some, the supply of tertiary graduates had risen espe- cially fast, outstripping the changing occupational com- being Hungary and Lithuania, showed high increases position; in others, the rate of supply increase was no in underemployment over the period (Fig.  3). In other more than average but the employment of high-skilled countries the wage premium changes were small labour was falling. (compared with the average level), and evenly mixed In response to our fourth question, about which we between increasing and decreasing premiums. had no prior expectations, in the majority of countries Finally, Fig.  7 depicts the trend in the wage pen- graduates’ real wages fell over the period. We speculate alty for being underemployed. Overall across coun- that this fall is linked to the long-term decline in the wage tries, underemployed graduates earned around a third share of GDP in many countries coupled with slower less than graduates doing graduate jobs, though this productivity growth; the path of wages would also have pay penalty slowly declined by 0.71 percent per year. been affected by the financial crisis and recession during At the extremes the underemployment wage pen- the decade: these factors will have affected the general alty increased at a rate of more than 1.2 percentage level of wages, including those of graduates. For the fifth points per annum in Slovenia and Portugal. At the question, we found that the graduate wage premium also other extreme the penalty fell at 1.5 percent or more declined in seven countries by more than one percentage in Ireland and Austria. However, with the excep- point—Lithuania, Slovenia, Portugal, Slovakia, Poland, tion of Slovenia, there is no country in the sam- Hungary and Greece; all but the first of these exhibited ple where a substantially rising underemployed pay rising underemployment. Finally, the wage penalty from penalty is compounded by a growing prevalence of underemployment is one manifestation of dispersion underemployment. Annual change of the underemployment Change in the graduate pay premium penalty (%) in %-points EE SK DE SI ES HU BE LU IE DE LU LT FR PT UK EE AT PL CY DK NL GR DK CH NO FI NO SE SE FR FI CH CY IT CZ UK BE LT ES SI NL PT CZ SK IT PL IE HU GR AT Europe’s evolving graduate labour markets: supply, demand, underemployment and pay Page 11 of 13 2 among graduates; however, there is no general tendency a long period of time. Our contribution in this paper is to for the penalty from underemployment to increase. utilise this available European data to analyse key trends Turning to the incentives facing prospective students over a medium-term period, which can be the basis for in the medium-term future, the supply trends are eas- country-level analyses by policy-makers and researchers ier to call than the demand trends. One might specu- with access to more detailed information in particular late whether the lower premium in Portugal, Slovenia, countries. Greece, Hungary and Poland will lead to falling tertiary Our findings do not reveal an optimistic picture regard - participation in these countries. For the reasons outlined ing a convergence of national graduate labour markets by Marginson (2016)—in particular, the upward ratch- across Europe. We confirm that there has been an ongo - eting of social and economic aspirations—falling par- ing upward convergence in the proportion of graduates ticipation is by no means certain or even likely. Even if in the workforce, and that this will probably continue in participation were to fall or flat-line, an increasing sup - the present decade; yet there is no sign of upward con- ply of tertiary graduates in all of Europe’s workforces is vergence in the use of graduate labour in graduate jobs. almost certain, given the difference between the tertiary Of course, the demarcation of graduate labour mar- attainments of the young and old. Estonia and Finland kets is not fully coterminous with national borders; yet are possible exceptions. the implications for European social cohesion of these The future trend of demand for graduate labour is labour markets converging only in terms of supply are much less certain. Extrapolation from the recent decade uncertain. The findings are partly constrained, as noted would be a common first estimate, on the assumption above, by having to work with the major group 1–3 clas- that technology and demand-driven trends are likely to sification of graduate jobs as high-skilled jobs, in order to persist. However, this approach may not be valid here. plot the decade-long changes. Repeated task-based data Some predictions suggest a future for work dominated by linked to occupations, consistent across countries and disruptive, machine-learning technologies that will dis- over time, would allow an analysis based on the alterna- place skilled labour. Given the widely varying estimates tive task-based classification method. When the coun - of the impact of AI (Arntz et  al. 2017; Acemoglu and tries that participated in the first and second rounds of Restrepo 2018), and uncertain macroeconomic futures, the OECD’s Survey of Adult Skills again join the planned forecasting labour demand and wages is hazardous; and next wave of surveys, there could be the opportunity to the uncertainty is raised further by the striking between- do this for the decade beginning in 2011. It must also be country variations manifested in recent years. noted that estimates of wage premiums and wage pen- As a consequence, scholarly opinion about future pros- alties reported here cannot be treated as strictly causal pects for graduates is divided between optimists who rest estimates of treatment effects, either in the case of the their beliefs on the persistent high value of the graduate decision to undertake tertiary education, or in the case wage premium in many countries for a long time, and of taking up employment in a non-graduate job: in both pessimists who point to the seemingly high prevalence cases, to identify effects a causal estimator would require of graduate underemployment. Optimistic analysts can plausible, exogenous drivers, which are not available in support their beliefs with forecasts of rising demands for these data. Finally, we have not examined here the varia- creative and cognitive skills (Bakhshi and Yang 2015), but tions in graduate unemployment. are less common on the ground in countries with a falling Some general inferences may nevertheless be drawn graduate wage premium; pessimists (for example, Hol- for the formation of education policy, for the broader mes and Mayhew 2016; Mok 2016) highlight skills under- discourse on HE, and for research on graduate futures. utilisation and unemployment, college grade inflation Nation-wide policies to develop employability skills and rising credentialism. In our view, a nuanced judge- training in colleges and universities can improve equity ment is called for, in which both graduate excess supply and lower the costs of education to work transitions; data and wage trends are called on for a fuller ongoing access to good advice services retain an essential role understanding of trends. It is informative but not suffi - in the promotion of opportunities for disadvantaged cient for policy-makers to rely on retrospective evidence groups lacking established channels into rewarding on the wage premium to reveal important trends in grad- graduate jobs. Moreover, better careers information uate labour markets. There are complex, two-way links and guidance systems in all universities will raise pro- with unknown long-term lags between graduate wages ductivity if they improve the matches made between and the supply/demand gaps, which are yet to be mod- students’ skills and employers’ demands for skilled elled adequately. The best understanding has to come labour. However, these services should not be expected from a holistic account of information in both the wages by policy-makers to carry the burden of upholding or and occupational data that are consistently available over framing the promise of employment in graduate jobs 2 Page 12 of 13 F. Green , G. Henseke Disclaimer for modern-day students. For that, the key objective of This paper is based on EU-SILC and EU Labour Force Survey data, available on a nation’s policy should be to embed its tertiary edu- request from Eurostat. The responsibility for all conclusions drawn from the cation policies within an industrial strategy that is data lies entirely with the author(s). focused on promoting and incentivising increased lev- Authors’ contributions els of innovation. If the stimulation of innovation is The authors have made equal contributions. Both authors read and approved successful, firms are likely to need graduate skills for the final manuscript. the generation of new ideas, for effective further skill Authors’ information acquisition, for knowledge transfer, and for raising Francis Green is Professor of Work and Education Economics in UCL Institute of organisations’ absorptive capacity to profitably uti - Education, where he works at the LLAKES Centre. After graduating in Physics at Oxford University, he studied Economics at the London School of Econom- lise new technologies (Green and Mason 2015; Habibi ics, before writing his Ph.D. thesis at Birkbeck College. His research focuses on 2019). Industrial policies that do not foster innovation education, skills, the graduate labour market and job quality. are more likely to stimulate demand for less skilled Golo Henseke is Senior Research Associate (Applied Economist) at the UCL labour. Such considerations would appear to apply with Institute of Education where he has worked since 2014. He works in two ESRC particular force in the eight countries we have identi- Research centres: the Centre for Learning and Life Chances (LLAKES) and the fied as having experienced a particularly sharp rise in Centre for Global Higher Education. His research examines job quality, gradu- ate labour markets and job transitions. graduate underemployment: Slovenia, Slovakia, the Czech Republic, Poland, Italy and Greece. Funding Our findings on the diversity of trends in graduate This study is supported by the Economic and Social Research Council, the Office for Students and Research England (Grant reference ES/M010082/1), labour markets imply a need for national policy-mak- and the Centre for Global Higher Education (CGHE), UCL Institute of Educa- ers to monitor their graduate labour markets assidu- tion, London. ously alongside their tertiary education policies; they Availability of data and materials should know where their supplies and their prospective This paper is based on EU-SILC and EU Labour Force Survey data, available on demands for graduate labour are heading, and regularly request from Eurostat. The responsibility for all conclusions drawn from the survey graduates’ wages; these data can then be used data lies entirely with the authors. to inform prospective students, schools and colleges, Ethics approval and consent to participate all of whom must endeavour to make major long-term Not applicable. plans and decisions with considerable financial and life- Consent for publication changing consequences as well as possible in an uncer- Not applicable. tain world. Finally, it must be recalled that the value of tertiary Competing interests The authors declare that they have no competing interests. education does not lie only in the private financial returns. There are partly-private non-financial benefits Received: 8 September 2020 Accepted: 27 January 2021 such as better health, and external benefits for soci - ety along with universities’ public good aspects, which are quite separate from tertiary education’s links with employment (McMahon 2009). 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