The Graduate Labour Market in the 1990s by gxt64895

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									          higher
      education
                                         S E R I E S
  H I G H L I G H T S                     REPORT No. 31
                                          June 1998

THE GRADUATE LABOUR
MARKET IN THE 1990s                       The Graduate Labour Market in the 1990s
This paper provides a picture of the      From an Elite Based to a Mass                            Participation in higher education by
labour experience of higher education     Higher Education System                                  Australians aged between 17 and 64
graduates since the late 1980s. This                                                               years increased substantially, from
covers a period of major change in        Since the late 1980s the number of                       3.8 per cent in 1989 to 5.1 per cent
                                          non-overseas students enrolled in                        in 1997. For the same years, the
the supply of graduates onto the
                                          higher education has grown                               participation rates for 17–24 year
labour market. Importantly it provides
                                          substantially. As shown in Figure 1,                     olds, the age cohort most likely to
an indication regarding the labour                                                                 participate in higher education
                                          between 1988 and 1997, the number
market consequences of moving from        of higher education students in                          increased significantly, from 13.3 to
a higher education system with            Australia increased from around                          17.3 per cent.
relatively small numbers of graduates     403 000 to 595 000, an increase of                       Individuals participate in higher
to a system with a substantial share      approximately 48 per cent. The                           education at various times during
of the population graduating from         number of postgraduate students                          their lives. While the majority of
higher education.                         grew more quickly than the number                        students are most likely to attend

                                          Figure 1: Number of Students by Level of Course, 1988 to 1997

                                                      700
                                                      650
                                                      600
                                                      550
                                                      500
                                              '000s




                                                      450
                                                      400
                                                      350
                                                      300
                                                      250
                                                      200
                                                            1988


                                                                      1989


                                                                             1990


                                                                                     1991


                                                                                            1992


                                                                                                      1993


                                                                                                              1994


                                                                                                                     1995


                                                                                                                            1996


                                                                                                                                   1997




                                                                   Undergraduate    Post-Graduate Other      Post-Graduate Research


                                          Source: DEETYA 1997, Higher Education Students Time Series Tables—Australia.
                                          Note: Since 1994, ‘Bachelor’s Graduate Entry’ courses have been treated as
                                                  bachelor level courses.

                                          of students undertaking                                  higher education between the age of
DEPARTMENT OF
                                          undergraduate studies over the                           17–24 years, many will attend later
EMPLOYMENT, EDUCATION,                    same period—a 92 per cent                                in life. On the basis of current
TRAINING AND YOUTH                        increase for postgraduate students                       patterns, about 45 per cent of the
AFFAIRS                                   compared to an increase of 40 per                        current population of teenagers will
                                          cent for undergraduate students.                         enter higher education at some point
HIGHER EDUCATION                                                                                   in their lives. As a consequence of
DIVISION
                                               Table 1: Changes in the Occupational Structure of the Workforce, 1989 and 1996
The Graduate Labour Market in the 1990s




                                                                                      1989                               1996                      1989–1996

                                               Occupation                                 Employed                                    Employed      Per cent
                                                                                           persons         Employed                    persons     change on
                                                                          Number          holding a         degree       Number       holding a   occupational
                                                                         employed          degree           holders     employed       degree     employment
                                                                           ('000)           (%)              (%)          ('000)        (%)

                                               Managers                     826.1             10.3           11.0          820.0         18.9          -0.7
                                               Professionals                907.1             56.6           66.3         1142.5         64.2          26.0
                                               Para-professional            454.2              6.5            3.8          488.7         26.6           7.6
                                               Tradespersons               1207.1              1.3            2.0         1204.3          2.0          -0.2
                                               Clerks                      1295.6              4.9            8.1         1354.8          9.5           4.6
                                               Sales workers               1073.5              3.7            5.2         1439.0          6.6          34.0
                                               Plant/Machine operators      577.1              1.5            1.1          560.7          1.7          -2.8
                                               Labourers                   1174.7              1.6            2.5         1200.9          2.6           2.2
                                               Total employed              7515.4             10.3          100.0         8210.9         15.9           9.3

                                               Sources:     Australian Bureau of Statistics 1996, Labour Force Status and Education Attainment,
                                                            Australian Bureau of Statistics 1989, Transition from Education to Work, 1996.




                                          the growth in higher education            structure of the workforce were           an increased intensification of
                                          participation, the proportion of the      associated with strong growth in the      competition associated with the
                                          population with at least a first          employment of degree holders. The         process of globalisation and
                                          degree has almost doubled from 7.6        number of people employed in the          technological change which had
                                          per cent in 1989 to 13.6 per cent in      professions, where two-thirds of          affected the demand for certain
                                          1997. This varied across age              degree holders in the workforce           types of labour. Other factors
                                          groups—for example, the                   were employed in 1996, increased          included the adoption of competitive
                                          percentage of 20–24 year olds with        by 26 per cent. Indeed, with the          strategies by industry to increase the
                                          a degree has increased from 6.7 to        exception of sales workers and            quality and sophistication of their
                                          12 per cent, while that for 25–34         para-professionals, employment of         products and services and increase
                                          year olds has increased from 12.1 to      all other occupational groups either      customer service and
                                          17.5 per cent over the period.            fell or remained largely unchanged.       responsiveness to consumer needs.
                                                                                    Also of note was the strong
                                                                                                                              The process of becoming more
                                                                                    increase in the proportion of
                                          Demand for Persons with                                                             internationally competitive affects
                                                                                    employed persons who hold degrees
                                          Higher Education Qualifications                                                     the occupational composition of
                                                                                    in certain occupations. For example,
                                                                                                                              employment. Competitive strategies
                                                                                    the proportion of employed persons
                                          The increased supply of people with                                                 include adding value, increasing
                                                                                    holding degrees rose from 6.5 to
                                          qualifications has resulted in a                                                    customer service, producing high
                                                                                    26.6 per cent in para-professionals,
                                          dramatic increase in the proportion                                                 value differentiated products rather
                                                                                    10.3 to 18.9 per cent among
                                          of people in the workforce with                                                     than mass produced products, or in
                                                                                    managers, 3.7 to 6.6 per cent among
                                          higher education qualifications. In                                                 the case of primary industries,
                                                                                    sales workers and from 4.9 to 8.3
                                          1989, 10.3 per cent of the                                                          producing simple commodities. This
                                                                                    per cent in clerks.
                                          workforce had a degree                                                              process usually requires an up-
                                          qualification. By 1997 some 17.2 per      The shift in the occupational and         skilling of the workforce and a
                                          cent of workers had a degree. This        industry structure of employment          greater reliance on those workers
                                          increase represents an 82.6 per cent      over the period 1989 to 1996              with skills that can be characterised
                                          increase in the number of workers         represented continuation of longer        as knowledge or information based.
                                          with a degree from 774 000 in 1989        term trends over the last two             Indeed the strong growth of
                                          to 1 413 000 in 1997.                     decades and was similar to changes        employment in professional
                                                                                    experienced in other developed            occupations can be seen, at least in
                                          It is also apparent from Table 1 that     countries. The main factors               part, as a consequence of such
                                          changes to the occupational               contributing to these trends included     processes.
                                                                                               higher
                                        Changes in Occupational                                 education
                                                                                                      SERIES
The other major area of
                                        Destinations
occupational growth was among                                                    market conditions—that is, by
those occupations that dominate the     A number of factors may explain          looking at the occupational crowding
service sector. This includes           this low unemployment rate for           of graduates. Arts graduates
industries such as retail, health,      recent graduates. Graduates may be       exhibited the widest range of
education, business and personal        employed in occupations which            employment destinations (lowest
services which are largely insulated    display little variation in demand;      occupational crowding), followed by
from direct international               they may be reducing their supply of     science and agriculture graduates.
competition. Many professionals         labour for full-time jobs; they may      Graduates from veterinary science
such as lawyers, accountants, health    be accepting employment in a wider       demonstrated the narrowest range
workers and educationists benefited     range of employment options or           of employment destinations.
from being located in the service       employers may be finding them
sector of the economy. As well they                                              For most fields of study there was a
                                        increasingly attractive compared to
benefited from supplying services                                                longer term trend for occupational
                                        other persons.
which are usually demanded in                                                    crowding to decline—that is, there
increasing amounts as the population    As noted above the strong growth in      was a longer term widening of
becomes more wealthy.                   employment of persons holding            occupational employment
                                        degrees was associated with a            destinations of recent graduates.
Another indicator of the shift in       widening in the occupational             More specifically, graduates from all
labour demand towards persons           destinations of graduates,               fields except agriculture, arts and
holding degrees was the absolute        particularly towards clerks and sales    health have experienced a trend
fall in the unemployment rate for       workers. This may have occurred          towards a more even spread of
degree holders, from 4 per cent in      because of the increased supply of       occupational destinations. This trend
1989 to 3.5 per cent in 1997. Over      persons with degrees being pushed        has been strongest for graduates
the same period the unemployment        into a greater range of occupations,     from business/economics, law and
rate for other persons increased        or because of increased demand for       engineering. The exception to this
from 7.6 per cent to 9.8 per cent. It   such persons in those occupations.       general trend are arts graduates
is important to emphasise that this                                              who have narrowed the spread of
occurred during a period when the       Some light can be shed on this
                                        matter by analysing the pattern of       their occupational destinations as
number of persons holding degrees                                                increasing numbers were employed
in the workforce increased by           occupational destinations of recent
                                        graduates and identifying whether        in sales and clerical occupations
almost 82.6 per cent, and the                                                    over the past decade.
number of persons without degrees       these vary with economic
rose by only 3.6 per cent. The          conditions. As recent graduates are      Also there was an association
unemployment rate for degree            generally new to the full-time labour    between labour market conditions
holders fell despite a massive          force they can be expected to be         and occupational crowding. A
increase in the number of such          relatively sensitive to the changing     deterioration of the labour market,
persons entering the workforce.         market for their skills and provide an   as measured by the general full-time
                                        early indication of changes in the       unemployment rate was associated
Low unemployment rates were not         demand and supply of skills required     with a widening of employment
only enjoyed by older graduates with    by occupations in the workforce.         destinations. This indicates that
work experience as well as formal                                                more graduates were willing to
qualifications but also by recent       Over the last decade the
                                        occupational destinations of recent      consider employment in a wider
graduates, many of whom were                                                     range of occupations during poorer
new entrants to the labour force.       graduates have become more
                                        diverse. The pertinent question,         labour market conditions. Employers
This demonstrates the particularly                                               appeared to prefer employing recent
strong advantage degree holders         however, is whether recent
                                        graduates are increasing the             graduates and were keen to recruit
experience in the labour market as it                                            such jobseekers. Graduates from
could be expected that new entrants     effective demand for their skills by
                                        seeking wider employment                 business/economics, engineering,
to the labour market would have                                                  education and veterinary science
relatively high rates of                opportunities particularly when
                                        labour market conditions deteriorate.    displayed the strongest response to
unemployment as it will take some                                                labour market conditions—that is,
time for them to secure                 This was analysed by ascertaining
                                        how the dispersion of graduates'         graduates from these fields of study
employment.                                                                      substantially widened their
                                        occupational employment
                                        destinations varies with labour          employment options if employment
                                                                                 conditions deteriorated. Interestingly,
                                               law graduates appeared to           Figure 2:      Proportion of Graduate Part-time Workers Looking for
The Graduate Labour Market in the 1990s


                                               narrow the range of their                          Full-time Work and the Full-time Unemployment Rate
                                               occupational destinations
                                               during periods of generally
                                               poorer labour market                12
                                               conditions.
                                                                                   10
                                                Graduates also appeared to
                                                be willing to undertake part-       8
                                                time work where full-time
                                                                                    6
                                                work was unable to be
                                                obtained. As Figure 2               4
                                                indicates, the proportion of
                                                graduates working part-time         2
                                                who would prefer to work
                                                                                    0
                                                full-time rose during periods       1989       1990     1991      1992       1993       1994      1995       1996     1997
                                                of reduced employment
                                                                                                                           Per ce nt
                                                opportunities. In 1997 some
                                                8.7 per cent of graduates                             General full-time unemployment rate
                                                were working part-time                                Graduates w orking part-time looking for full-time employment
                                                while looking for full-time
                                                work. In general for all           Source: Australian Bureau of Statistics, The Labour Force, Cat. No. 6203.0
                                                graduates a one per cent                   Graduate Careers Council of Australia, Graduate Destination Survey
                                          increase in the full-time
                                          unemployment rate led to a 1.4 per       broad occupational destinations of            earnings. Numerous factors can
                                          cent increase in the proportion of       graduates, namely professional,               influence relative changes in
                                          graduates working part-time while        para-professional and managerial              graduate starting salaries. Individual
                                          looking for full-time work.              occupations, were only weakly                 labour markets for graduates from
                                          Education, business/economics,           affected by employment change in              different fields of study result in
                                          architecture and health graduates        general and poorly correlated with            differing sets of factors which can
                                          displayed the strongest response to      each other. They represented,                 affect their starting salaries.
                                          labour market conditions.                therefore, both relatively stable and         However, this should not be
                                          Many graduates also appeared to          diversified employment destinations           overstated as graduate labour
                                          postpone their entry to the labour       which serve to moderate the effects           markets display a marked degree of
                                          market during periods of labour          of economic change on the labour              fluidity. This was demonstrated by
                                          market tightness and were more           market demand for graduates.                  the extent to which graduates from
                                          willing to undertake further full-time                                                 different fields of study share
                                          studies (see Figure 3). There are a                                                    occupational destinations and also
                                          number of likely reasons for this. A     Graduate Starting Salaries                    by the widening of those
                                          poorer labour market will mean that                                                    occupational destinations over the
                                                                                   The other dimension of the graduate
                                          the opportunity costs associated                                                       past decade. Therefore, it is not
                                                                                   labour market experience which we
                                          with further study will be somewhat                                                    expected that a simple relationship
                                                                                   considered was graduate starting
                                          lowered as employment prospects                                                        would exist between movements in
                                                                                   salaries. Graduate starting salaries
                                          are reduced. Graduates may also be                                                     starting salaries for recent graduates
                                                                                   were compared to salaries in
                                          attempting to improve their chances                                                    from particular fields of study and
                                                                                   general to attempt to isolate the
                                          of securing employment in a                                                            the relative supply of new graduates
                                                                                   particular qualities pertaining to the
                                          generally poorer labour market by                                                      compared to the growth in
                                                                                   acquisition of a degree. Over the
                                          undertaking postgraduate studies.                                                      employment in their traditional
                                                                                   past decade graduate starting
                                          This was most marked in fields of                                                      occupational destinations.
                                                                                   salaries have generally fallen
                                          study such as science and                                                              It is possible to shed some light on
                                                                                   relative to salaries in general. In
                                          engineering, although students from                                                    the nature of the factors affecting
                                                                                   1989, graduate starting salaries
                                          other fields such as architecture,                                                     the movements in starting salaries
                                                                                   were 95 per cent of average (mean)
                                          business/economics and education                                                       by isolating the influences on
                                                                                   weekly earnings and by 1997 had
                                          demonstrated this response to labour                                                   graduate starting salaries into two
                                                                                   fallen by 18.8 per cent to
                                          market conditions. Finally                                                             broad effects:
                                                                                   78 per cent of average weekly
                                          employment change in the main
                                                                                                                                 1) the salary effect, which
                                                                                                               higher
   measures changes in the level of        law graduates to secure                                              education
                                                                                                                      SERIES
   salaries within occupations held        employment in similarly paid
   by graduates; and                       positions compared with other                      1989 initially exhibited a narrow
                                           graduates who tend to have more                    range of occupational destinations,
2) the occupational share effect,
                                           specialised degrees or less                        such as engineering and education,
   which accounts for changes in
                                           vocational degrees.                                experienced small falls in starting
   the occupational destinations of
                                                                                              salary from the occupational share
   graduates where those                   Some light can be shed on the
                                                                                              effect. Conversely, graduates in
   occupations are differently             changes in starting salaries by
                                                                                              those fields with an initially
   remunerated.                            comparing the shift in the
                                                                                              diversified range of employment
As Table 2 indicates, the changes in       occupational destinations of
                                                                                              destinations—that is, arts,
starting salaries for graduates within     graduates with the occupational
                                                                                              architecture and science—appeared
occupations, the salary effect, was        share effect on starting salaries.
                                                                                              to shift to other lower paid
far from uniform. Graduates in             The greater the widening of
                                                                                              occupations. The latter group of
general have experienced a 13 per          occupational destinations the larger
                                                                                              graduates appeared to have
cent fall in the relative level of their   the fall in starting salaries due to the
                                                                                              experienced greater competition
starting salaries from this effect.        occupational share effect. Given this
                                                                                              from graduates from the narrower
This figure should be discounted by        relationship it is useful to identify the
                                                                                              range of vocational destinations. As
some 4 to 5 percentage points. This        changing occupational destinations
                                                                                              a consequence, they appeared to be
represents the decline resulting from      of recent graduates. Professional
                                                                                              pushed into lower paid occupations.
comparing recent graduate salaries         occupations remained the chief
with an increasingly credentialled         occupational destination of most
and higher paid workforce over the         recent graduates. It appears,                      Conclusion
1989 to 1997 period. Arts, science,        however, that the occupational
architecture, business/economics,          destinations of graduates tended to                Over the past decade higher
education and veterinary science           shift from professional occupations                education graduates have enjoyed
have experienced the largest falls in      to clerical and in particular sales                considerable vocational advantages
starting salaries. There was no            occupations.                                       over non-graduates. Employment in
simple relationship between growth         Graduates in fields of study which in              the traditional professional
in the number of graduates and the                                                            occupations of graduates has grown
changes in their starting salaries.
For example, education graduates           Figure 3:            Proportion of Graduates Continuing Full-Time Studies
have experienced a decline in the
                                                                and Labour Market Conditions
relative level of their starting
salaries similar to other graduates
                                                         12                                                                         26
even though the number of
education graduates has declined by                                                                                                 24
                                                         10
30 per cent while the number of
                                                                                                                                    22
other graduates has increased by 34
per cent in general.                                     8
                                                                                                                                    20
                                              Per cent




                                                                                                                                         Per cent




The occupational share effect,                           6                                                                          18
arising from graduates changing
their occupational destinations was                                                                                                 16
                                                         4
-6 per cent overall. That is,
                                                                                                                                    14
graduates moved increasingly into
                                                         2
generally lesser paid occupations.                                                                                                  12
The exception to this was law
                                                         0                                                                          10
where graduates while widening
                                                              1989


                                                                     1990


                                                                            1991


                                                                                    1992


                                                                                            1993


                                                                                                    1994


                                                                                                            1995


                                                                                                                    1996


                                                                                                                             1997




their range of occupational
destinations moved to occupations
with broadly similar starting salaries.                                     General full-time unemployment rate (LHS)
Most law courses are taken as a                                             Per cent of graduates studying full-time (RHS)
combined degree with other fields of
study such as arts, science and
business/economics. This may assist        Source: Australian Bureau of Statistics, The Labour Force, Cat. No. 6203.0.
                                                   Graduate Careers Council of Australia, Graduate Destination Survey.
The Graduate Labour Market in the 1990s
                                                Table 2: Changes in Graduate Starting Salaries Relative to the Salaries of the Workforce,
                                                         1989–1997 (per cent)

                                                                             Agric   Arch     Arts Bus/Eco Educ Engin Health Law                Sci Vet Sci Total
                                                Salary Effect                 -4.6   -15.3   -21.2 -14.0 -13.7   -7.6 -4.1   -3.3              -16.3 -19.6 -12.8
                                                Occupational Share Effect     -4.2   -11.9   -11.8  -6.4   -1.7  -2.3 -2.6    2.1               -9.3   0.0   -6.2
                                                Total Change in Salaries     -11.0   -23.1   -32.1 -20.8 -14.8   -9.8 -7.3   -5.4              -26.0 -18.8 -18.8
                                                Change in no. of grads (%)    45.7    12.8    37.5  55.4 -29.6  34.7  14.6   92.7               56.9   2.1   33.9

                                                Source:    Graduate Careers Council of Australia, Graduate Starting Salaries, 1989–1997; Australian Bureau of
                                                           Statistics, Weekly Earnings of Employees (Distribution), Australia, Cat. No. 6310.0; DEETYA, Selected Higher
                                                           Education Statistics, 1989 and 1997.
                                                Notes:     The Occupational Share and Salary Effects do not add to the total change due to rounding and linearisation
                                                           errors.


                                                faster than employment               market conditions, it appears these        communications skills and the
                                                overall. Graduates have also         new occupations were relatively            adaptability and flexibility of
                                                gained employment in                 lower paid than their traditional          graduates will be at least as, if not
                                                occupations which previously         occupational destinations. Indeed,         more, important.
                                                have not been seen as major          with few exceptions, the stronger
                                                                                                                                This paper was prepared by Les
                                                employment destinations of           the widening of employment
                                                                                                                                Andrews and drawn from a report
                                                graduates.                           destinations the larger the fall in
                                                                                                                                prepared by Les Andrews and
                                                                                     starting salaries relative to the
                                                 This labour market advantage                                                   Tiemin Wu, The Labour Market
                                                                                     workforce as a whole. More
                                                 was shared by recent                                                           Experience of Higher Education
                                                                                     information is required about
                                          graduates which is surprising as                                                      Graduates over the Last Decade.
                                                                                     graduates’ careers paths to indicate
                                          many will be new entrants to the
                                                                                     whether this is a permanent fall in
                                          full-time workforce with little, if any,
                                                                                     income.
                                          work experience relevant to their
                                          desired employment destinations.           The changes in the employment
                                          They could be expected to be               experience of graduates even over
                                          strongly affected by changes in            the relatively short period of the last
                                          labour market conditions. Recent           decade point to a number of issues
                                          graduates, however, enjoyed                that institutions may need to
                                          relatively low rates of                    consider in the delivery of their
                                          unemployment compared to other             courses. Graduates will increasingly
                                          persons. The reasons for this are          find work outside of the commonly
                                          several. Many graduates undertook          recognised occupational
                                          further full-time study while other        destinations. This raises a number of
                                          graduates appeared to widen the            issues associated with the nature of
                                          employment options they were               the education and training they have
                                          prepared to consider during periods        received and the relevance and
                                          when employment opportunities              appropriateness for their work. It
                                          were reduced. Graduates also               will not be sufficient only for
                                          accepted part-time work during             employers to be broadly satisfied
                                          periods of poorer labour market            with the technical or field-specific
                                          conditions even though full-time           skills and knowledge of graduates.
                                          work was preferred.                        For many graduates these may not
                                                                                     be the main skills that are relevant
                                          While graduates have widened their
                                                                                     for employment. Rather the broader
                                          occupational destinations in part in
                                                                                     vocational or generic skills such as
                                          response to deterioration of labour



                                                                                                                                ISSN: 1036-9960
                                                                                                                                DEETYA No. 6169HERC98A

								
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