There are two sides to any market, and that includes the labour market

You’ll hear talk of ‘the labour market’ when issues of employment, unemployment, job vacancies and employability are discussed. ‘Labour’ here means simply to do with work. The term ‘labour market’ is used to describe the interactions between employers who need labour (or workers, to put it another way) and employees (those who can supply that labour or undertake that work). The study of the labour market is of interest to economists, and can be seen as a discipline in itself. Understanding how the labour market works and keeping up to date with what’s happening with job vacancies and demands is important for careers advisers too.

Picture a market in your mind’s eye

The idea of a ‘market’ helps us to envisage what is going on. So just take a moment to think of a market (or supermarket or shop) from your own experience. It might be a bustling, chaotic place with people shouting out what they are hoping to sell – or it might be extremely organised into tidy aisles stacked full of goods with special offer stickers pointing out the best buys.

You are the ‘supply’ in the graduate labour market

Whatever the setting, there are always two sides in play. On the one hand, there are people offering goods for sale (goods such as a pair of trainers or a bunch of grapes); on the other, people who are looking to buy what’s on offer. And that’s the first key point: for the market to work, you have to have supply (stuff being offered) and demand (stuff being wanted). Don’t be insulted if we now compare you to a pair of trainers or a bunch of grapes, but you are the supply in the labour market. You are available, on show, ready to be snapped up by someone with money to secure you – and a discerning eye to know a quality product (be it trainers, grapes or graduates) when it’s up for grabs.

The term supply refers to all the people who are actively seeking work – which of course includes you.

The term demand refers to all the jobs that are looking to be filled – which is, of course, what you want.

The relationship between supply and demand is critical in your jobsearch

It is clear that ‘supply’ and ‘demand’ are the two fundamental forces driving the labour market. So the relationship between supply and demand is critical. As you are part of the supply side, it is important that you think about the market from the other perspective and get a sense of how employers work and what kind of supply they are looking for (demanding). This allows you to tailor your offer (of yourself for hire) to their demand. That could be a relatively simple task: presenting your skills, knowledge and understanding in a way that makes it easy for an employer to understand exactly what you have to offer and how that fits with what they need in their workforce. Have a look at Chapter 11 for advice on making sure that your application gets past the first post. It could, however, require a complex, more lengthy task which might be that you seek to expand your skills, knowledge and understanding (that is, working on expanding your professional repertoire) by undertaking voluntary work or work shadowing, or accepting a job that you don’t really want to do now in order to get the job you want in the future: your brilliant career.

When you are looking for a job, so that you present what you have to offer in a way that the employer will easily recognise, try to think from the employer’s perspective. Look at what they want and why they want it. Then make sure that you’ve got what they want and you showcase that in your application.

Graduate labour as a distinct sector within the labour market

You may be wondering why graduates are treated as a distinct subgroup within the labour market. Defining sectors is just a way of examining the labour market in more detail, and is helpful in getting a hold on labour market information which could otherwise be unwieldy and overwhelming. Market analysts often drill into data so that they can get the low-down on a particular sector. A sector can be defined by occupation (e.g. Engineering or Business or Creative Arts) or by geography (the South East or Greater Merseyside) or by shared characteristics of the workforce (graduates). We’ll look at occupational sectors in more detail in Chapter 3 ‘Labour market information: analysis of what graduates do’, but for now we’ll look at the graduate labour market: which simply means that the demand is for graduate-level jobs, for which the jobseeker (the supply) must have an undergraduate degree (at least).

The labour market can be subdivided into sectors, which makes it easier to focus. These sectors can be defined by occupational grouping, by geographical territory, or by shared characteristics of the workforce, such as being a graduate.

What work do graduates actually do?

Every year the Higher Education Statistics Agency (HESA) asks graduates to report what they have gone on to do after they finished their degree. A questionnaire goes out to all those finishing an undergraduate degree, which includes Foundation degrees. It only goes to people who are resident in the United Kingdom or the European Union, so does not include postgraduates or overseas students who are not UK residents. It only asks about their ‘first’ destination: that is, what they were doing six months after completing their degree. Destinations include: work (paid employment); further study (perhaps at postgraduate level); looking for work; and not available for work (e.g. travelling). Chapter 3 ‘Labour market information: analysis of what graduates do’ goes into some detail about what graduates from different degrees go on to do. This makes it easy for you to check where people who did the same degree as you ended up. The results are presented by broad subject area (e.g. Social Sciences) then broken down into its particular disciplines (for Social Sciences this would include Economics and Sociology).

Is the graduate premium guaranteed?

What happens to the graduate premium in the future is largely a question of supply and demand. Even when the supply has increased, although the premium has diminished, it still represents an additional 25% in lifetime earnings. The Office for National Statistics (ONS, 2012) reported average graduate pay at £15.18 per hour, in contrast to £8.92 per hour paid on average to non-graduates in the same age range. There are, of course, big variations in the hourly pay of graduates with medicine and dentistry paying at the top of the range and arts subjects towards the bottom.

Although the recession has certainly affected graduate recruitment, economic forecasts expect the demand for graduates will rise in the coming years, and the graduate premium may have diminished, but it is still there. So there are clear economic benefits to having a degree. This may not ring true if you are battling through difficult economic times when graduate jobs are hard fought and hard won. It may be difficult to think about this now, or to believe that it’s important, but when you get towards retirement age you will look back and see what a difference having a degree has made in the long run.

The graduate premium, in labour market terms, is the difference in earnings potential for graduates as a sector of the market compared with other groups of workers. The graduate premium requires employers to pay higher wages to secure a graduate to fill their vacancy. The graduate premium means that graduate earnings over a lifetime are likely to be higher than for non-graduates.

How graduates differ from other occupational sectors

There are a couple of other significant differences when you compare graduates in the labour market with other groups of workers.

They are more mobile in the labour market, which means that they are more likely to move to another part of the country to take up work and may even work outside their country of origin. Employers are also more likely to move their graduate workers about, though will often offer incentives and rewards for doing so.

Another curious characteristic is that graduates are more likely to be given further training. This can often be in-house or on-the-job training, but can also mean sending graduate workers on specialist and/or postgraduate courses at universities.

	Most graduates now are expected to do regular evaluations of where they are at and where they are going . . . developing the individual to the point where they can take control of their life, their learning and their career.
	Carl Gilleard, Chief Executive, Association of Graduate Recruiters

It may seem odd that employers want their skilled people to get even more skilled – but they know that graduates can learn (see below) and a more highly skilled worker is more highly prized because they can do more. The flip side of being offered this kind of opportunity is that employers expect their graduate workers to progress in their careers and invest in their own professional development. Of course, expanding your professional repertoire in this way benefits you because it gives you more leverage in the labour market.

Not all graduates are the same

‘My last job was a stop-gap really: it wasn’t the job I wanted and it wasn’t the money I wanted. But I wanted to learn, I was interested and, gradually, it built. The longer I was there, the more things were handed over. So then when it came to the pay review I could say: “I’m doing this now, and I want to be paid for it.” I’d proved myself. After five years, I was earning nearly three times the salary I started on.’

Sophie, employee in small to medium-sized enterprise

‘I was a (very) mature student, already in my chosen career as a mental health recovery and rehabilitation worker. I decided to study Psychology for several reasons: I enjoyed it at A level, I never had the chance to go to university when I left school and wondered if I could do it, and the subject is closely linked to my work . . . I have much more confidence in decision making and suggestions I make at work now. I feel the knowledge I now have of theories and empirical evidence . . . enhances the experience I already had.’

Linda, BSc (Hons) Psychology

We have been talking of a graduate labour market as if all graduates are the same, but that’s clearly nonsense. Graduates are different, one from the other, because people are different. Two students may be studying on the same programme, even in the same tutor group, and yet hold very different values and so will be looking for jobs in distinctly different ways. One may be highly motivated by money; the other by job satisfaction and a work–life balance. One may be happy to relocate from one place of work to another within an organisation, or even to move from one country to another if their employer demands it or if a good job offer comes up. For other graduates, family responsibilities, emotional ties or just a strong sense of belonging may keep them in one place, and so they may restrict their jobsearch to a particular geographical area. Some graduates are changing career direction completely and have retrained in order to step out in a completely new career direction. Others will be starting out and their first graduate job may well be their first job. Some graduates will hold out for the job that matches their specification of a dream job. For others, any job will do: they just need to earn money to live. So, even though this chapter treats graduates as a set of workers sharing graduate-level qualifications, there are huge differences for individuals, who will make their own decisions and carve their own path to what is a brilliant career, for them.

• As a group, graduates earn more over the course of their working life than non-graduates.
• Graduate workers tend to move location and/or employer more than non-graduates.
• Graduates undertake more training and personal development than other workers.
• Employers will pay a premium for highly skilled workers, especially if supply is limited.
• All graduates are individuals who will carve out their own brilliant career.

Why would employers pay more for a graduate?

So why are employers prepared to pay more for workers who have a degree? Graduate employees tend to bring innovation and creativity to their work, which solves business problems and can increase productivity. That’s not to say that other groups of workers don’t do that but graduates, as a workforce and on the whole, have a proven track record for doing so. Broadly speaking, graduates are paid to think, so they add value to their work, which in turn adds value to the organisation they work for, which in turn repays the ‘graduate premium’.

How do employers know what graduates are capable of?

You might think that employers are just taking it on trust that graduates can think, and will be able to apply intellectual and cognitive abilities. Well, yes and no. Employers can take it on trust, because there are clear standards of achievement that are expected before a student can be awarded a degree. Although individual universities award their own degrees, all degrees in England, Wales and Northern Ireland work to the framework for higher education qualifications published by the Quality Assurance Agency for Higher Education. The framework sets the benchmark for what graduates should achieve in their degree, whether Foundation, Honours or Masters.

As a graduate, you are trained to think: to think critically, to think creatively, to think things through. You need to show an employer how your training in thinking can benefit their organisation or add value to their enterprise.

What graduates should be able to do

For example, on successful completion of their programme, an Honours graduate should be able to:

• understand key aspects of their field of study (including coherent and detailed knowledge);
• conduct analysis and enquiry; devise and sustain arguments, and/or solve problems;
• appreciate uncertainty and ambiguity; and
• manage their own learning.

What graduates are able to do from the employer’s perspective

All of these competencies would relate primarily to the subject or discipline you are studying, whether that is Fine Art, Computer Science or Medicine. From an employer’s point of view, that ability to think transfers into the workplace as:

• the exercise of initiative and personal responsibility;
• decision making in complex and unpredictable contexts;
• effective communication of information, ideas, problems and solutions to specialist and non-specialist audiences; and
• the learning ability needed to undertake appropriate further training of a professional or equivalent nature.

So, when an employer specifically advertises a graduate job, and demands that their employee has a first degree, they expect graduate employees to work at this level of sophistication in their workplace.

Why are small to medium-sized enterprises important?

SMEs play a huge part in the economy: in the EU, 99 per cent of all enterprises are SMEs. In the UK, annual data published by the Department of Business and Skills (BIS, 2015) shows that SMEs accounted for 99.9 per cent of all private sector businesses and 59 per cent of private-sector employment. That means a lot of people are actually working in SMEs (14.1 million at the last count) and that includes graduates. Now do you see why they are so important?

What is an SME?

SMEs are vital to the economy, both in the United Kingdom and throughout Europe. But what exactly is an SME? The letters simply stand for small to medium-sized enterprise, but we need to define these terms too in order to understand what an SME is.

What is an enterprise?

There is no one definition, but in economic terms, an enterprise is an organisation created for business venture. So an organisation intends to do business and preferably to do business that makes a profit.

Small, medium-sized – or micro?

The size of an enterprise can be determined either by the number of people or the amount of money involved. The technical terms here are headcount or turnover/balance sheet total. From an employment perspective it is probably easier to think in terms of how many people are involved in the business: the headcount. In a headcount, no distinction is made between full-time and part-time workers: so if an SME has five full-time and five part-time, that makes ten workers. In the EU, the headcount includes employees and self-employed people working in the enterprise. Whereas in the UK, the headcount applies only to employees (BIS, 2015). But both the EU and the UK agree the headcount categories for SMEs, which are as follows:

micro = headcount up to 9

small = headcount of at least 10 and up to 49

medium-sized = headcount of at least 50, up to 249.

Although we often think of SMEs as small, they can actually be very small indeed, or quite sizeable. They can often be overlooked because the individual enterprises aren’t household names. However, the opportunities in SMEs are statistically significant, and certainly worth investigating.

Include SMEs in your jobsearch. You may not have heard their name, but they are a powerful force in the labour market. They are less likely to spend much money on advertising, so do your research and consider making a speculative application to a targeted SME. They really don’t have any time to waste, so make sure you focus your application.

What employers want: skillset and mindset

Having said that graduates are in demand in the labour market because of their proven ability to think, and having shown that employers pay a ‘graduate premium’, graduates are expected to offer more than their intellect: all graduates need good employability skills. This message comes through loud and clear from employers surveyed by the Confederation of British Industry (CBI, 2011) and Universities UK. Now, there is no one agreed definitive list of employability skills – there isn’t even one agreed term. Sometimes these skills are called ‘soft skills’ or ‘transferable skills’ as well as ‘employability skills’.

It is interesting to look at these terms in turn because they give an insight into what is in demand in the labour market, which allows you to pinpoint what you, as the supply, can offer or may need to develop. There is growing evidence that employers also value mindset. This refers to a set of attitudes and behaviours that allow workers to add value to their employing organisation. Some of these attitudes benefit the employee just as much as the employer: taking pride in your work and giving your best makes for greater satisfaction and self-esteem – both key in positive psychology.

	The graduates we employ are over-qualified for work in the warehouse or the call centre. But we employ graduates because they’re more attentive, more willing to do a proper day’s work. You have to assume they’ve got the ability to do the job, but if they haven’t got it 100 per cent, it’s not going to take us long to train them.
	Julian Radley, Director, Evotel Holdings

Hard skills refer to such abilities as numeracy and literacy, managing a project or working in a team. It is relatively easy for an employer to check that you have them (have a look at Chapter 12 for more on what kind of selection tests are used and how best to succeed in them). In contrast, soft skills are less easy to test for with any scientific reliability, but they can be observed and demonstrated. So ‘soft’ here doesn’t mean that they are easier skills to acquire, but that they are more difficult to pin down for assessment. Transferable skills mean simply that the skills can be developed in one job and taken with you to another job. A good example here would be customer care.

Customer care means dealing with customers: it involves the ability to listen, to question, to understand the issue, to convey that understanding to a customer (without losing your temper!) and to work towards resolving the issue in hand to the satisfaction of both parties. Customer care is important in a wide variety of contexts: looking after patients in a hospital; dealing with complaints from corporate clients; handling irate customers in a queue or on a shop floor. What the customers/clients/patients are concerned about doesn’t matter: your skills and abilities can be used effectively no matter what the context. The transferability of these skills also means that you can develop skills in one aspect of your life that may not necessarily be paid work, and can then use them in your employment. An example of this would be the negotiation skills you have to develop as a parent (particularly of toddlers), which stand you in good stead when negotiating in a work environment.

Employers value a range of behaviours and aptitudes, which can be used in a range of employment contexts. They might be called transferable, soft or employability skills. Their name doesn’t matter, but the skills do.

Self-management

Broadly speaking, self-management is the ability to take responsibility for a role or a given task. If you accept responsibility, then a number of attitudes and behaviours will follow from that. You will probably be prepared to be flexible and you may need to be assertive as and when appropriate. You’ll need to be a self-starter, getting on with things and not waiting to be asked or to be directed. You’ll also have to be aware of the need to manage your time. A key aspect of self-management is that you are prepared to improve your own performance with every task, role or job that you do. This improvement will come from two complementary perspectives. Firstly, your own reflective practice, where you think about what you’ve done, what went well and what could be done better next time round. Secondly, feedback from others, which is likely to be a mixture of positive and negative feedback. You will learn, and take the lessons you learn with you, no matter where you go next.

Resilience

Resilience is what sustains you to keep going with a task or responsibility even when the going gets tough and you might be tempted to give up. Resilience requires your commitment to stay involved, some degree of control or influence and a sense of personal challenge to develop. Optimism plays an important part, but it has to be realistic, not hoping for some magic wand you can wave. Knowing what you’re feeling and why is also important here, as is the ability to slow down and consider alternatives when you seem to hit a blank wall.

Team-working

This is obviously about working well with others. However, in order to do that you have to be aware that your individual contribution (and success) can be separated out from that of others in your team: you have to be aware of this interdependence and have to be able to manage yourself as a team-worker, not just as an individual. The behaviours that support effective team-working are sharing ideas with others by contributing to discussions and planning, and what follows from that is the need to cooperate with others and to respect them. Negotiating and persuading skills are key here.

Business and customer awareness

Although this really is a soft skill, in that you can’t necessarily train or test people in it, you can see very clearly when people don’t have it. Some employers of graduates say that this is the employability skill most often missing in applicants and new entrants. Although you would expect it to be very much in demand in the retail and business sector, it is actually very important in service and public service sectors too. It means understanding what drives a successful business or service, but that doesn’t necessarily mean at the high strategic level. It is very much the bottom-up approach: keeping customers satisfied, understanding why you need to build customer loyalty, understanding how innovation can drive a business forward – and how the lack of innovation can mean a business grinding to a halt. It also includes an appreciation of the need to take calculated risks: not reckless, but bold nonetheless.

	Initiative is an important thing in an employee; but they’ve got to be aware of what that opportunity is, and when the opportunity comes, and then how to deal with it. We needed some marketing expertise – someone remembered marketing was on Seb’s CV, so he got the chance to step up to it.
	Julian Radley, Director, Evotel Holdings

Problem solving

Another skill that is pretty obvious, really. It will involve you analysing facts or data, and weighing up the context or situations. You’ll need to work creatively, perhaps coming at problems from different angles and looking for a variety of approaches; and in order to solve the problem, you’ll need to come up with appropriate solutions. A lot of your undergraduate work gets you to do this kind of thing, even if it isn’t immediately obvious: linguists translating unfamiliar phrases need to puzzle things out, not simply reach for the nearest dictionary.

	What happens is: we need to do something quickly and the only way to get someone quickly is to use someone that’s here. Suddenly we realise someone’s got more ability than we realised. Spotting talent is mostly by luck, which I think is wrong; we should be a bit more observant.
	Julian Radley, Director, Evotel Holdings

Project management

This skill is increasingly sought after. As a graduate employee, you may be asked to manage projects – and you need to be clear that you will probably be asked to manage more than one project at time. Effective project management calls on many of the skills listed here: communication and literacy; team-working; problem solving and resilience. You probably will have had direct experience of managing a project on your degree – just think about your final year dissertation or project or end of year show – and you had to do that while managing other ‘projects’ – your brilliant career included.

Communication and literacy

This means the ability to read, write and to get your message across, which may seem really obvious. You should be able to write clearly and be able to structure your written work so that it makes sense. You should also be able to modulate the tone of your work to reach your intended readership. You should have good communication skills (sometimes called oral literacy), which means the ability to listen carefully, check your understanding and question appropriately. Poor communication is one of the greatest sources of frustration and irritation to employers; yet you can improve on this every single day, no matter what context you are operating in.

Numeracy

You do need to get your head around what is understood by numeracy. It does not mean advanced mathematical tasks, but fairly general awareness of the importance of maths as a tool in practical day-to-day work. The confidence to tackle mathematical problems in the workplace is in demand by employers. To dismiss this because you think you can’t do maths is like saying you can’t read and write. If you haven’t got a formal qualification in maths (such as Maths GCSE grade A*–C or equivalent), you really should think about doing some basic maths programme so that you aren’t cut off from a lot of jobs that need you to have confidence with numbers on a fairly basic level.

Application of Information Technology

This includes a range of Information Technology skills such as: word processing; using spreadsheets; setting up and managing files; using email and Internet search engines appropriately and using social media for corporate communication. As IT applications develop, it is important to keep up: not just in terms of playing with the latest games or applications, but also in terms of how these new ways of working and communicating and problem solving translate into everyday work.

Foreign language skills

This is quite a tricky one to get to the bottom of, but an easy one to dismiss if you think that, if you speak English, you don’t need to worry about language competence. Languages are in demand in addition to the skill set outlined above: there are few jobs where language ability on its own is the key demand. The level of language skill can vary: in some cases technical mastery and fluency is called for, but everyday conversational ability can be useful, as can a general awareness of cultural differences. Even having a few key phrases in another language can really pave the way for effective relationships, which are at the heart of any business or dealings.

Average graduate starting salary

Analysis published annually by the Higher Education Statistical Agency (HESA) uses information on what graduates are doing six months after completion of their degree (known as their first destination) to calculate their average salary. In 2014, HESA reported the mean salary as £20,000 and the median graduate salary as £21,000. The difference between these two figures is due to the way in which averages are calculated. The mean is the sum total of all the salaries added together then divided by the number of people in the survey. It can be skewed by a relatively small number of extremely high salaries at the top end, or equally by a relatively small number of extremely low salaries at the bottom end. As the median salary is the value in the middle of the whole range of salaries, it is less affected by these two extremes. It is reasonable therefore to work with the median salary which happens to be the higher figure of £21,000.

It is important to remember that this is the average of the first destinations of all new graduates, which means that it covers every region of the UK, every single subject discipline and includes every graduate who has found employment, including those who have taken casual or non-graduate jobs which often pay less. The Association of Graduate Recruiters (AGR) also publishes an annual calculation of what their employers are paying graduates as a starting salary. Their most recent figure, published in 2015, also the median, was £28,000. The AGR reported figure is significantly higher than the HESA figure. A number of factors can explain this variation. The AGR report concentrates on graduate recruitment and graduates are, historically, paid more than other employees. Whilst AGR members are located all over the UK, many of them are recruiting in London, where salaries tend to be higher. Finally, AGR members tend to be larger organisations, which again tend to pay more.

Variations within average ranges

An average salary sits somewhere in the middle of the range; so some actual starting salaries will be higher and some will be lower (a point that is often overlooked by jobseeking graduates when considering advertised jobs). A survey of graduate employers published in 2015 reported median graduate salary at £30,000 and the highest salary (£42,000) offered by supermarket chain Aldi.

It is important to remember all the factors which can, and do, affect starting salaries. We’ve already seen regional variation, with the example of London generally commanding higher pay than elsewhere in the UK. There are also significant variations by occupational sector: oil and energy, investment banking and law have often appeared at the top end of the scale; while hospitality, retail, the public and voluntary sectors are often to be found towards the bottom end of the scale.

	The work has changed. When I was a kid you wanted to be a bus driver! You learn there are certain job markets and there needs to be a reality check, to learn what job markets pay.
	Julian Radley, Director, Evotel Holdings

Starting, not finishing salaries

It can be disheartening to read news headlines about fabulous starting salaries which seem to be very far from what is actually on offer in your own jobsearch. You can easily find out (from the HESA survey) what the average starting salary was for students from your university, which can be useful in giving you a realistic benchmark of what to expect. Having a better understanding of how these headlines come about leads to a grounded perspective of what is actually happening in the labour market you find yourself in, which in turn helps you to make sense of what is happening to you.

Points of entry

It is important here to remember that these are the average starting salaries; that is, the kind of salary you can expect when you are starting out in a designated graduate job. That starting position is your ‘point of entry’. In a survey of 16,000 undergraduates in their final year (they were due to graduate in 2010) a third were prepared to accept any (graduate) job they were offered, and a fifth admitted that they had applied to employers they weren’t really interested in simply because they felt they didn’t have much choice, given how tough the labour market was looking at that time. The key thing for them was to secure a point of entry into the labour market.

We’ve looked at transferable skills and how the skills, knowledge and understanding that you develop in one job stay with you. This means that you can evolve as a graduate worker, increasing your know-how and thereby increasing your value to an employer. It is also crucial to recognise that you can start your evolution from day one of an entry-level job. You’ll then arrive at a point where you are ready to move on, to look for a greater challenge and a better-paid job. This is what we call leverage in the job market.

Points of leverage

A longitudinal study tracked graduates not only into their first job on graduation (their point of entry – what is called the first destination in the national data collection), but also as they moved through the graduate labour market for several years further on. The researchers discovered that, three-and-a-half years after graduation, 81 per cent were in graduate occupations (that is, jobs for which a degree is required) and 87 per cent were ‘fairly satisfied’ or ‘very satisfied’ with their job. Leverage got them where they wanted to be. So, even if your point of entry is less than brilliant, you will find points of leverage towards your brilliant career.

• Graduates have proven thinking skills.
• They have shown that they are prepared to learn.
• They want to progress in their career and to develop their range of competencies (their professional repertoire).
• They can bring flexibility and innovation to an organisation.
• They bring skills, attitudes and behaviours which can enhance a company’s productivity.
• Over half of the graduate jobs advertised don’t specify the degree discipline: you can apply no matter what subject you study.
• Include small to medium-sized enterprises in your jobsearch.
• Develop transferable skills in everything you do: paid employment, voluntary work, daily life.