Alternative paths to success? The jobs landscape facing young non-graduates today

From photos of jumping A level students to guides to freshers’ week, at this time of year it can feel like university is the only route taken by teenagers. But in fact, fewer than half of young people follow this seemingly well-trodden path at 18. And, as this morning’s ONS publication about non-graduates’ employment patterns reminds us, non-graduates are a diverse group with diverse outcomes in the world of work.

During 2017, the employment rate for non-graduates aged 22-29 was 78 per cent, compared to 90 per cent for their similarly-aged graduate counterparts. The proportion of young non-graduates classed as ‘economically inactive’ (meaning those not available nor looking for work) was 17 per cent, compared to just 6 percent for young graduates.

It would be wrong to think of non-graduates as a homogeneous block. As the chart below illustrates, roughly 60 per cent of today’s 22-29 year-olds are without a bachelor’s degree. But educational attainment varies widely within this group: 7 per cent of 22-29 year-olds have a Level 4 or 5 qualification (higher education below degree-level), nearly a quarter (24 per cent) have a Level 3 (A level or equivalent) qualification and just below a quarter (23 per cent) have a Level 2 (GCSE or equivalent) qualification. Another 8 per cent either have no formal qualifications or qualifications classed as ‘other.’

Source: RF analysis of ONS, Labour Force Survey

This variation in qualifications naturally lends itself to variation in work. Half (52 per cent) of young non-graduates are in lower-skilled work like elementary (e.g. cleaners, security guards), plant and machine, or sales and caring jobs.[1] But one-in-eight (12 per cent) worked in a ‘graduate job’ during 2017, in roles that range from engineering and business professionals, to human resource officers, and wholesale and retail managers.

As you’d therefore expect, pay varies too. As the chart below shows, hourly wages are higher for non-graduates with a Level 3 qualification (A level or equivalent) than a Level 2 qualification (GCSEs or equivalent). But there are notable differences by kind of qualification. For example, women with Level 3 qualifications in more ‘academic’ subjects like English or Maths typically earned more 14 per cent more per hour than those with more ‘vocational’ Level 3 qualifications (£10.13 vs £8.89). It’s worth noting that women consistently earn less than men with the same level of qualifications. The greater salience of part-time work for women, and the dearth of well-paid positions, is likely to be the main driver of this gap.

Source: RF analysis of ONS, Labour Force Survey

ource: RF analysis of ONS, Labour Force Survey

This variation in pay is also reflected in non-graduate pay progression over time, or at least the potential range of pay. As the chart below illustrates, men aged between 35 and 50 with Level 2 qualifications are much more concentrated in the lower end of the annual pay scale. The most common salary for those with a Level 2 vocational qualification is around £18,000 a year, with very few earning more than £50,000. However, those with Level 3 academic qualifications are much more evenly spread across the distribution, with a greater proportion rising to above-average wages than their lower-qualified counterparts.

Source: RF analysis of ONS, Labour Force Survey

While there may be some compositional factors at play, this suggests that the progression opportunities available to those with lower and/or vocational qualifications are more limited. A clear takeaway from this, and brought home in a recent OECD report, is the need to raise basic skills among the UK’s workforce and promoting lifelong learning.

But it’s worth dwelling too on examples of better news. Despite the overall picture, some sectors do seem to offer better pay potential for non-grads when their skills match with opportunities. This appears to be the case in industries with a smaller overall proportion of graduates – such as manufacturing and construction – but some graduate-heavy sectors like finance can also offer routes to those with non-graduate academic qualifications. However, as the chart below shows, compared to previous cohorts, today’s workers in their 20s and 30s are receiving less training than their predecessors did at the same age.

Source: RF analysis of ONS, Labour Force Survey

All this is backward-looking, based on what we know about young people who have moved through the current or previous system. The coming years represent a moment of deep change in the offer to young non-grads today. Some of these shifts are in direct response to the limited opportunities outlined above. This is especially true for those taking the vocational route. T levels and the apprenticeship levy in particular are major policy areas for the government, with the latter intended to counteract the decline in employers offering work-related training. These two policy moves are not in isolation; the National Retraining Scheme and a new focus on progression for those receiving Universal Credit could have a positive impact with some encouraging early evidence.

The introduction of these policies, however, has not always been smooth sailing. Question marks hang over the quality of apprenticeships on offer and employer knowledge of T levels. To tackle this, our Intergenerational Commission recommended that the Department for Education shift their primary focus away from quantity, and onto the quality, of apprenticeships, that Ofsted step up its inspection of apprenticeship providers (which the Department for Education today announced they would do) and that the government promote and monitor gaps in T level provision.

Ensuring these flagship policies are delivered effectively is key to giving today’s non-grads the best possible chance in tomorrow’s labour market – and might even lead to a few more smiling photos of those not taking the university route.

Reference

[1] The ONS release also characterises ‘skilled trades’ occupations as “lower-skilled, lower paid jobs” bringing the total proportion of 22-29 year-old non-graduates in these roles to 62 per cent.