The Labour Market for Graduates in Scotland

This report describes how the labour market in Scotland for graduates changed between 1993/95 and 2001/03, and examines what effect the large increase in the supply of graduates in recent years has had on the labour market experience of graduates in Scotland.

The number of graduates in Scotland’s workforce has increased by around half since the mid-1990s. There is considerable dispute as to whether that has been desirable. Some people argue that there are ‘too many’ graduates, or at least ‘too many’ of the ‘wrong type’. Others contend that a modern economy needs graduate level skills to prosper. A final option is that the number and types of graduates produced match what Scotland’s labour market and economy need.

If there were too many graduates, some combination of the following would happen:

• the ‘graduate wage premium’ – the extra amount people earn because they have degrees – would fall;
• the proportion of graduates in ‘non-graduate’ jobs would rise;
• relative to people who do not have degrees, the graduate employment rate would fall.

If there were not enough graduates, some combination of the opposite would have happened.

On each of these indicators, the evidence is clear that the increased supply of graduates was absorbed by increased demand.

In 1993-95, graduates working in Scotland earned around 50% more per hour than people with SVQ Level 3 and sub-degree Level 4 qualifications – i.e. people whose qualifications entitled them to enter a degree course but who did not do so. In 2001-03, the graduate wage premium remained almost unchanged.

There was almost no change in the proportion of graduates in non-graduate jobs between 1993-95 (17%) and 2001-03 (16%).

In 1993-95, 88% of working age graduates in Scotland were in work, compared with 79% of people with SVQ Level 3 and sub-degree Level 4 qualifications. In 2001-03 the figures were 89% and 84%. Graduates’ advantage had narrowed because of the general improvement in job prospects, but the labour market advantage graduates enjoyed had been maintained.

The evidence is clear: the sharp increase in the supply of graduates was fully absorbed by a corresponding increase in demand. There are not too many graduates and no evidence of too many of the wrong type.

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