Graduate Jobs and Wages in Europe: A 21st Century Perspective

1. Graduate Jobs and Graduate Wages across Europe in the 21st centuryDr Golo Henseke, UCL Institute of EducationInternational Graduate Employability: Trajectories and Performance. Workshop 1. Employment outcomes22thJune 2018 www.researchcghe.org

3. Drivers of skilled labour demand?

4. Is this the typical European graduate labour market? Source: Patrick: https://flic.kr/p/cpV74

5. Today's outline: focus on heterogeneity among young graduates 1. Context: graduate labour supply trends, "graduate jobs" & graduate underemployment. 2. A picture of heterogeneity across Europe's graduate labour markets

6. Growth of Graduate Labour Supply, in brief • Tertiary-educated graduates have become more prevalent everywhere, but at a widely varying pace • They will go on growing everywhere for some time to come www.researchcghe.org

7. Rise of tertiary educational attainment 2005-2015 (30-34 years) Source: EU-LFS. Authors’ calculations

8. Gap in tertiary education between 30-34 and 55-59 years olds, 2015 Source: EU-LFS. Authors’ calculations

9. Growth of Graduate Jobs, in brief • Prevalence of graduate jobs varies a lot • The ‘quality’ of graduates relative to non-graduates explains some cross-country variation • Graduate jobs have grown more prevalent almost everywhere, though at a varying pace • Some occupations can switch between graduate and non-graduate www.researchcghe.org

10. Proportion of labour in graduate jobs across countries Source: Henseke and Green, 2017.

11. The prevalence of graduate jobs correlates with … • The skill level of graduates (+) • The skill level of graduates relative to skilled non-graduates (+) • The dropout rate from higher education (-) • The prevalence of generic tertiary degrees (-) With the quality and selectivity of tertiary education systems the percentage of workers in graduate jobs changes.

12. High-skill job growth (2005/2015) Source: EU-LFS. Authors’ calculations

13. Trends in Underemployment, in brief • Graduate underemployment varies considerably across countries • Graduate underemployment is increasing in some countries, but not all • If the supply of graduates grows faster than demand, on average, prevalence of underemployment rises. www.researchcghe.org

14. Underemployed graduates, observed and skills adjusted Source: Green and Henseke, 2016.

15. Change in the proportion of employed graduates in middle- or low-skilled jobs (2005/2015, ages 30-34) Source: EU-LFS. Authors’ calculations

16. Relation between relative graduate labour supply and underemployment (30-34 years) PL UK IT Source: EU-LFS. Authors’ calculations

17. Graduate Wage Trends, in brief • Great cross-national differences in the evolution of graduate earnings • Growth of average graduate earnings is closely associated with labour productivity trends • Earnings gap between graduates and lower educated groups is broadly stable in most countries www.researchcghe.org

18. Growth rate of average graduate earning (2006/2014, 25-34 years) Source: EU-SILC. Authors’ calculations

19. The changing wage differential between tertiary and (upper-) secondary education, 2006 and 2014 Source: EU-SILC. Authors’ calculations

20. Relation between relative graduate labour supply and the wage premium (25-34 years) DE IT ES SE PL Source: EU-LFS, EU-SILC. Authors’ calculations

21. Graduate Wage Dispersion, in brief • Underemployment wage penalty rose in some but not all countries. • But there is no general trends towards greater wage inequality • Where excess graduate labour supply rose faster, the underemployment wage penalty widened www.researchcghe.org

22. Underemployment wage penalty rose in some but not all countries (25-34 years) Source: EU-SILC. Authors’ calculations

23. How has wage inequality within graduates evolved? (25-34 years) GR PL ES DE Source: EU-LSF, EU-SILC. Authors’ calculations

24. Graduate Employment Clouds? • Universal rise in the supply of graduates and graduate jobs • Latter grew slower than former in many but not all countries. The result is growing underemployment • Average graduate wages stagnated or fell in most countries. Earnings growth is closely associated with trends in labour productivity • On average, when the supply of graduates outgrew graduate jobs, underemployment rose, the returns to tertiary education diminished and the underemployed wage penalty rose www.researchcghe.org

25. Green, F. (2013).Skills and Skilled Work. An Economic and Social Analysis. Oxford, Oxford University Press. http://discovery.ucl.ac.uk/1490672/ Green, F. and G. Henseke (2016a) "Should governments of OECD countries worry about graduate underemployment?" Oxford Review of Economic Policy. (http://discovery.ucl.ac.uk/1522165/ ). Green, F. and G. Henseke (2016b). "The Changing Graduate Labour Market: Analysis Using a New Indicator of Graduate Jobs". IZA Journal of Labor Policy, 5:14. (http://discovery.ucl.ac.uk/1505789/) Green, F. and G. Henseke (2017). “Graduates and ‘graduate jobs’ in Europe: a picture of growth and diversification”. CGHE Working Paper, 25. Henseke, G. and F. Green (2017) “Cross-national Deployment of “Graduate Jobs”: Analysis Using a New Indicator Based on High Skills Use". Research In Labor Economics. (http://discovery.ucl.ac.uk/1542476/) Henseke, G. (2018). “Against the Grain? Assessing Graduate Labour Market Trends in Germany Through a Task-Based Indicator of Graduate Jobs”. Social Indicators Research (http://rdcu.be/GJDs) www.researchcghe.org

26. Thank you! www.researchcghe.org

27. Additional slides in reserve

28. Relative demand and underemployment

29. Wage gap between matched and underemployed graduates, 2013

30. Growing heterogeneity? Annual % change in the graduate underemployment wage penalty 2003-2013

31. Appendix: Three steps to classifying occupations as graduate jobs • Ingredients: • data with job tasks and educational requirements of job (e.g. SAS); • an Occupation coding system: ISCO08 • Step 1: Calculate the effect of each high-skilled task on the propensity for a job to require a level 4 qualification. • Step 2: For each person, compute a score, which is the estimate of the probability that he/she will be in a graduate job, given the observed high-skilled tasks of the job, then compute the mean score for each occupation • Step 3: Split occupations into two clusters using statistical methods.

32. Step 1 We calculate the effect of each of several high-skilled tasks on the propensity for a job to require a tertiary qualification. For each person, we then compute the GSR score, which is the estimate of the probability that he/she will be in a graduate job, given the observed high-skilled tasks of the job. e.g. high-level numeracy, complex problem solving, presenting, influencing, job autonomy + more

33. Step 2 Step 3 • Use a statistical "cluster analysis" to determine twoclusters of graduate and non-graduate jobs. We compute the average GSR (predicted score) in each "minor group" (3-digit) of occupations

34. South Central Anglo Nordic Annual change in real gross earnings of graduates in high-skills employment, 2003-2013

35. A “great reversal”? • Earnings premium for college-only stopped growing in 2010 • Generalised reduced demand for advanced cognitive skills (even within high-skilled occupations), since ~2000 (Beaudry et al. 2016) • robot world and chronic macro-uncertainty

36. Concept of Graduate Jobs • "where a substantial portion of the skills used are normally acquired in the course of higher education, including many of the activities surrounding it, and of its aftermath—the years after higher education when skills are acquired in work through graduates’ acquired faculty for learning them" www.researchcghe.org

37. Nordic Central Anglo South Wage differential between tertiary and (upper-) secondary education, 2003 and 2013

38. How has wage inequality within graduates evolved? (25-34 years) Source: EU-SILC. Authors’ calculations