It pays to be a graduate

WITH A third of school leavers now entering higher education, is a degree still a good investment? Does it improve employability? The growth in demand for graduates seems set to continue, although possibly at a slower pace, according to the latest survey by the Association of Graduate Recruiters (AGR).

By autumn 1998, when the survey was carried out, there had been an increase of 6.4 per cent on the numbers recruited in 1997. Further growth of 5.1 per cent is forecast for this year. Moreover, almost half the employers (46.8 per cent) were unable to fill all their vacancies in 1998. These trends appear to be reflected in graduate starting salaries which are rising at a faster rate than average earnings.

The biannual Graduate Salaries and Vacancies Survey carried out by the Institute for Employment Studies (IES) and published by AGR at the year end and in July, looks at trends in the graduate job market, records starting salaries, reports on unfilled vacancies, and forecasts the number of vacancies and starting salary levels for the coming year.

About a quarter of graduate openings are in industry. The survey found that the rate of growth in recruitment differed between the industrial and non-industrial sectors. By last autumn non-industrial recruiters had taken on 9.4 per cent more graduates than in 1997, while industrial employers had recruited 1.9 per cent fewer. However, the survey notes: "The decline in the number of recruits to the industrial sector can be explained by a shortfall in recruitment rather than a decline in interest in new graduates".

In fact, the rate of growth in the number of vacancies was similar in the industrial and the non-industrial sectors, but by the time the survey was carried out only 4.4 per cent of non-industrial vacancies remained unfilled, while industrial recruiters still had over one in eight of their vacancies to fill.

Obviously, a shortfall of one vacancy in several hundred is not as serious as a shortfall of one in five. The survey found that shortfalls become a serious issue when employers are unable to fill one in four or five of their graduate vacancies. Of those organisations experiencing a shortfall, almost half the industrial employers and a third of non-industrial had recruitment shortfalls of 20 per cent or more.

Although fewer non-industrial employers reported shortfalls than in 1997, marginally more did so in the industrial sector. The most serious skill shortages were in scientific, technical, engineering, R&D and information technology functions. The survey found that: "The impact of shortfalls in these areas was thought by respondents to be particularly severe, as these graduates were needed to support the critical functions in many industrial organisations". In follow-up interviews, several recruiters reported problems with electrical engineering and related areas. Even so, several reported that they would rather under-recruit than relax their standards.

In 1998 the median starting salary for first-degree graduates was pounds 16,600 excluding any London allowances. This was up 5.4 per cent on the year before. The pay gap between the industrial and non-industrial sectors narrowed somewhat, with the industrial median up 6.5 per cent on 1997 at pounds 16,500 and the non-industrial up 4.3 per cent at pounds 16,700.

To attract the best qualified, over half the employers were prepared to pay more for particular qualifications. A PhD or DPhil was likely to attract an extra pounds 2,000 and a Master's degree pounds 900. Mature graduates, those from particular disciplines (mainly scientific, engineering and information technology) and those with relevant work experience on average received an extra pounds 1,000.

Caution is also being shown in starting salaries this year. Employers expect median starting salaries in both the industrial and non-industrial sectors will be only 2.9 per cent higher than last year at pounds 17,000. This is the smallest increase seen in recent years.

With recent warnings of imminent recession, could this buoyant graduate market collapse? Although the AGR and IES detect some hesitancy, graduate recruiters are relatively optimistic about their activity in the next three years. Roughly equal proportions expect to maintain current levels of recruitment (42 per cent) or increase it (43 per cent). Less than 5 per cent expect to decrease their graduate recruitment.