What are the emerging impacts of COVID-19 on the graduate labour market?

What are the emerging impacts of COVID-19 on the graduate labour market?

covid impact webThis article was first published as part of the State of the Relationship 2020 report. 

COVID-19 has caused rapid and profound change to the UK’s labour market, including the graduate labour market. Looking beyond the headline figures, the pandemic has had a different impact on different sectors, with the graduate labour market generally less damaged and having increased virtual working. Although suffering, the graduate labour market is still operating. The long-term impact this will have on socio-economic trends is uncertain.   

 

What’s happened so far

At the time of writing (late October 2020), the graduate employment market has experienced a significant downturn . This appeared to bottom out in early May and has since undergone a slow and stuttering recovery in some sectors since restrictions on business and movement have gradually eased. Although, as this piece is being written, many local economies are returning to more restrictive measures designed to curb another resurgence of the virus.

The volume of vacancies as measured from different providers is currently running at between 55- 65% of 2019 volumes, but this disguises considerable variation between industries[1]. Only the health sector is currently operating around 2019 levels, all others are below their 2019 averages.

The most damaged industries largely do not employ graduates. However, the retail, hospitality and entertainment sectors are all important for student employment. The loss of opportunities in these industries is likely to impact the ability of many students to finance their studies. This could potentially increase drop-out rates and makes graduating numbers in future years harder to predict.

Many graduate-recruiting industries have fared better than average. In general, while currently there have been relatively few job losses in these sectors. Vacancies have been somewhat depressed, though still better than average. More Small and Medium Sized Enterprises (SMEs) operate in graduate recruiting sectors and SMEs have had a more difficult 2020 than larger businesses due to a reduced capacity to absorb shocks. 

A sector’s 2020 performance has depended on their ability to move their employees to working from home. Employers at IT and business service companies have been transitioning to a new, more virtual working environment. The majority of employees in these sectors are now working remotely at least part of the time. On the other hand, industries where remote working is not as feasible, such as manufacturing and construction, have been particularly affected by social distancing measures. Though there have been some notable exceptions where demand has maintained such as in infrastructure, food and pharmaceuticals.

While most graduate recruiting industries have not fared as poorly as the average, the jobs market for the creative industries has been an exception and particularly severely affected. The sector has been at the confluence of two particularly difficult trends – both relying on people gathering in place and being characterised by many small businesses with low profit margins and cash reserves. This has led to the whole sector being very precarious.

 

The rise of virtual working

At present, just under 30% of the workforce are working away from their normal place of work, and the majority are travelling to their workplace as usual[2]. CIPD research found that on average employers expected a doubling of their workforce working from home post-pandemic. Additionally, the majority found that homeworking had no effect or a positive effect on productivity[3].

However, as mentioned above, there are stark differences in working virtually between different sectors. It will largely be professional workers – graduates, in the most part – who will be able to take advantage of this increase in homeworking whilst manual workers and those in the service industry will not. There are a number of important implications.

Firstly, this reduces some of the geographic barriers that currently exists for many workers in applying for roles. Research has repeatedly found that the working population – including graduates - is generally not particularly mobile, with workers wanting to be in regions where they have a connection[4]. A more virtualised working environment that reduces the need for workers to relocate for employment may give graduates an incentive to apply for roles that are based further afield or in relatively expensive labour markets. Few employers believe that moving to virtual working will reduce headcount and instead adjust the opportunities available.

Secondly, consequently, recruiters may be able to access a wider and more diverse range of talent. However, there is also a danger that geographic barriers are replaced by barriers of access to technology.

Thirdly, it changes the skills that employers are seeking. Without long periods of close contact and reduced non-verbal cues, skills such as communication, teamwork and leadership are slightly different in a virtual workplace.

Fourthly, there is a danger that social divides increase between graduates and non-graduates. Generally speaking, graduates work in sectors which mean they will be able to work from home and avoid commuting. The opposite is true for the sectors which typically employ non-graduates.

Finally, there is little real information about the long term mental and physical effects on well-being of prolonged period of homeworking. The impact of reduced separation between domestic and workspaces and workers remaining at home for long periods needs to be better understood.

 

Future developments

In the long-term, the likely impact on the graduate labour market will be a declining creative industry and the rise of virtual working. 

Labour market demand projections suggest that the UK economy and employment demand is very likely to pick up in 2021. However a full labour market recovery to the position the UK was in at the start of 2020 may take longer and in sectors such as the arts, hospitality and tourism there may be a long-term step change in employment.

However, many organisations including the British Chambers of Commerce[5] and the World Economic Forum[6] counsel that skills shortages that were prevalent before the pandemic remain. In the UK this means that shortages of graduates in health, education, engineering, IT, social care and parts of business services have not really abated during pandemic and will persist into the recovery. The UK leaving the Brexit transition period and the new points-based immigration system are likely to make it harder employers to access the talent needed. 

The pandemic has had a profound impact on the UK graduate labour market in 2020. The country will be dealing with consequences for years to come. The UK has a wide skills base and a responsive education system. Nevertheless, considerable well-directed effort and co-operation between employers and education providers is essential in ensuring that graduates gain the right skills needed for the post-pandemic recovery.

This article was first published as part of the State of the Relationship 2020 report. 

[1] https://luminate.prospects.ac.uk/uk-graduate-labour-market-update-20-october

[2]https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/conditionsanddiseases/bulletins/coronavirustheukeconomyandsocietyfasterindicators/22october2020.

[3] CIPD. (2020) Embedding new ways of working: implications for the post-pandemic workplace London: Chartered Institute of Personnel and Development

[4] HECSU (2019) What do graduates do regional. Manchester: Higher Education Careers Services Unit

[5] https://www.britishchambers.org.uk/news/2020/09/bcc-publishes-workplace-training-and-development-commission-progress-report

[6] https://www.weforum.org/reports/the-future-of-jobs-report-2020/in-full/executive-summary

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