Graduate earnings and employment from the Labour Force Survey

• Summary
• Introduction
• Limitations of the survey
• Earnings by qualification levels
• Employment and earning by graduate job categories
• Employment and earning by region of work
• Reference

Summary

In this article, we look at graduates’ and non-graduates’ earnings and employment circumstances, using data from the government’s Labour Force Survey. Some of the key findings include:

• Those with A-level or equivalent only were almost 3.5 times more likely than graduates of the same age to be in a non-graduate job.
• Graduates in new graduate occupations had the highest gross mean weekly earnings. This was followed by those in traditional, modern and niche graduate occupations.
• Graduates working in London were the least likely to be in a non-graduate occupation compared with those employed in other regions.

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Introduction

This article investigates graduates’ and non-graduates’ earnings and employment, including analyses by type of occupation and region of work, using data from the government’s Labour Force Survey (LFS).

The LFS is the largest regular household survey in the UK, undertaken by the Office for National Statistics (ONS). In any three-month period, a nationally representative sample of approximately 120,000 people aged 16 or over in around 61,000 households are interviewed. Each household is interviewed in five successive quarters, during which information about the personal circumstances and employment details of those living in these households are collected.

For the analyses reported here, the information is taken from four quarters of the LFS, from March 2004 to February 2005 [A] [B]. Since the LFS collects information only on a sample of the population, to convert this information to give estimates for the whole population, the ONS has given each case in the survey a weight which can be thought of as the number of people that case represents. The ONS recommends that for LFS analysis involving earnings data, estimates of less than 30,000 people are not used as they are likely to be unreliable. For analysis using data from four consecutive quarters and not involving earnings data, the minimum publication threshold is set at 6,000. Thus, although some of the age ranges used for the analyses here were relatively large, this was to ensure a reasonable sample size.

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Limitations of the survey

The following facts must be taken into account when making inferences from this study.

• This study does not include those who are in part-time employment.
• When analysing earnings with regard to different levels of educational qualification, only the highest qualification that an individual has achieved is taken into account, regardless of what other qualifications the individual possesses.
• The analyses here have not taken into account when the respondents obtained their highest qualification. For example, a graduate aged 34 may have graduated a year ago or anytime over the last 14 years or so.

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Earnings by qualification levels

Table 1 and Figure 1 show the gross average weekly earnings of full-time employed workers by highest educational qualification level and age. With the exception at age 21-22, graduates’ weekly earnings were much higher than those who reported their highest qualifications as higher education (sub-degree) [C] or GCE A-level or equivalent. The differences in earnings between graduates and non-graduates also increased with age.

The reason why graduates aged 21-22 earned the least could be attributed, at least partly, to the fact that many new graduates needed the time to settle down in the labour market and took on lower paid jobs as a ‘stepping stone’. Meanwhile, those from the other two educational groups have had a longer period of time in the job market and this was reflected in their earnings. Graduates’ earnings, however, rapidly overtook those of the other two groups once past this age.

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Employment and earning by graduate job categories

Table 2 and Figure 2 show the occupational distribution of full-time employed workers aged 21-35 by highest educational qualification. The job classifications, SOC(HE), used were developed by Elias and Purcell for the project Researching Graduate Careers Seven Years On [1]. More explanation is given in SOC (HE).

The data reveals that the higher the level of educational qualification, the less the likelihood of being in a non-graduate occupation. For example, those with A-level or equivalent only were almost 3.5 times more likely than graduates of the same age to be in a non-graduate job.

Although only small percentages of non-graduates were found in traditional, modern, or new graduate occupations, they were relatively well-represented in niche graduate jobs. Occupations included in this category include nursing and retail managers. In fact, those with sub-degree-level higher education qualifications were more likely than graduates to be employed in this job category – 33.4% compared with 21.5% for graduates.

Table 3 shows the occupational distribution of graduates by SOC(HE) and age. Younger graduates between ages 21-25 were more than twice as likely than older graduates to be found in non-graduate occupations. Although the LFS is not a longitudinal survey following the same respondent for a number of years, and the analyses here had not taken into account when the respondents obtained their highest qualification, it is safe to assume that the majority of older graduates had been in possession of their degree qualifications for a longer period than younger graduates. Thus, older graduates have had more time to settle down in the labour market and moved from non-graduate to graduate occupations.

Table 4 shows the gross mean weekly earnings of full-time employed graduates by SOC(HE). For all three age groups studied, graduates in new graduate occupations had the highest gross mean weekly earnings. This was followed by those in traditional, modern and niche graduate occupations. Unsurprisingly, graduates in non-graduate jobs earned the least. Comparing the average earnings for graduates at age 21-25 and 31-35, graduates in new graduate occupations also show the highest jump in earnings, with those aged 31-35 earning 78.2% more than their younger counterparts.

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Employment and earning by region of work

Table 5 and Figure 3 show the gross mean weekly earnings of full-time employed workers aged 21-35 by UK region of work and highest qualification level. For all three educational groups, workers in London had the highest average weekly earnings, followed by those working in the South East and the Eastern region.

The differences in gross mean earnings between graduates and those who reported their highest educational qualification as sub-degree higher education were the highest in Scotland (31.9%) and London (27.6%), whilst the earnings differentials between graduates and those with GCE A-level or equivalent alone were the largest in Northern Ireland (39.5%) and Scotland (35.7%). This shows that although graduates working in Northern Ireland had the lowest mean weekly earnings across all regions, the financial benefits of a university education were relatively large compared with other regions. The same can also be said for Scotland.

Table 6 shows the distribution of full-time employed graduates aged 21-35 by region of work and SOC(HE). London, South East and North West were the three top hotspots for graduate employment. The three regions together accounted for just under half (49.1%) of the full-time employed graduates.

Graduates working in London were the least likely to be in a non-graduate occupation compared with those employed in other regions. Whilst Wales accounted for only 3.6% of full-time employed graduates, graduates working in the region were very well-represented in traditional and modern graduate occupations.

Graduates employed in the North East had a high percentage (23.6%) in niche graduate jobs, but were relatively poorly represented in modern graduate occupations, with only 13.5% of graduates employed in the region in these types of jobs - the lowest in the country.

Reference

1. For more information, see SOC (HE): A classification of occupations for studying the graduate labour market, Researching Graduate Careers Seven Years On research paper no.6, Peter Elias and Kate Purcell, March 2004.

Footnotes

[A] Due to the design of the LFS, combining data for four consecutive quarters means there are overlaps in samples between quarters. According to the ONS, there are advantages in doing so, such as improving sampling error (for non-earnings data). For more information, see Labour Force Survey User Guide - Volume 1: Background & Methodology, downloadable from UK Data Archive.

[B] Purchased from the Economic & Social Research Council (ESRC) Data Archive at the University of Essex.

[C] Examples of higher education (sub-degree) qualifications include HNC, HND, NVQ level 4, BTEC higher.

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