Have low-skill jobs really grown more than high-skill jobs in Britain?

Using your degree. Architect via Kaspars Grinvalds/www.shutterstock.com

A recent report by the Chartered Institute of Personnel and Development (CIPD) claimed that the UK is one of the very few EU countries which saw larger growth in low-skill jobs than in high-skill ones between 1996 and 2008. All this at a time when the share of graduates in the economy increased dramatically. The report received widespread attention and makes other interesting points which were summarised by the authors in an article for The Conversation.

But in our own ongoing research, we’ve concluded that the finding that low-skill jobs grew more than higher-skill ones is driven by a problem in the data used – the European Labour Force Survey. The issue (which was already known about) is that there was an implausible jump in the number of low-skill jobs in the UK in 2001 due to a change in the way occupations were classified in the survey.

But if you look at either the period before or after 2001, then the growth in high-skill jobs is higher than that in low-skill jobs in most years. After implementing a simple correction for the 2001 anomaly (and for similar problems affecting other countries), the following picture of the changes in occupations across Europe emerges.

High-skill jobs on the rise. Author provided

This confirms the finding of the CIPD report that many countries have seen their labour market “polarised”, with the share of middle skill jobs declining relative to that of low and high skill jobs. However, it is also clear that the UK has seen much stronger growth in high-skill occupations than in low-skill ones. So managerial, professional and technical jobs have expanded more than personal services and sales ones. This result is in line with those obtained independently by other academic and non-academic researchers.

The role of graduates

In a related research project, we’ve found that the UK has experienced job polarisation in each of the past three decades – with growth in high-pay occupations always exceeding that in the bottom ones. Overall, between 1979 and 2012, the employment share of middling occupations declined by about 19 percentage points – 16 of which were explained by more people doing high-paid occupations.

The graph below highlights the role that the increase in education of the labour force has played in bringing about these changes. The grey bars show the contribution of graduates and non-graduates to the changes in the employment shares of occupations at the bottom, middle and top of the pay distribution. For example, the growth at the top is almost entirely accounted for by graduates: of the 16 additional workers out of 100 found in managerial, professional and technical occupations in 2012, 15 were graduates.

Author provided

The contribution of each education group is then split into two components. To understand what these are, consider the example of graduates. When their numbers increase, we can expect the occupations in which they tend to work to grow more. This contribution, arising from the change in size of an educational group, is captured by the blue bars in the picture.

In addition, and even if their numbers do not change at all, graduates might move down the occupational ladder – in the sense that a higher proportion of them can end up in middle or low-skill occupations than in the past. The red bars capture this contribution to the change in the size of an occupation, arising from the reallocation of an education group across occupations.

The blue bars in the bottom part of the figure show that the increase in the number of graduates effectively accounts for all the growth in top-level jobs – but has made positive contributions to middle and low-skill occupations as well. The red bars show that graduates have moved slightly down the occupational ladder – but they also make clear that this accounts for only a small fraction of the overall changes observed in the UK labour market.

Unsurprisingly, the increase in education of the workforce has pushed down the employment share of low-skilled occupations, such as personal service and sales occupations. Yet the employment share of these occupations has not declined thanks to a large influx of non-graduates from middling occupations. So not only has the relative number of non-graduates decreased, but their employment has become much more concentrated in low-skill occupations.

Graduates fuelled growth in top occupations

By breaking down the results by decade, we’ve also found that the shift in graduate employment towards middle and low pay occupations has mostly occurred in the 2000s. In addition, in the past decade, wage growth has been weaker in top occupations than in middle or low-pay ones, suggesting that the relative supply of workers to these occupations might have started to outpace demand.

However, even in the 2000s, the increase in the number of graduates continued to account for the entire growth in top-pay jobs. This remains the main contribution of highly educated workers to changes in the occupational structure of the UK.

This is a particularly striking result in light of the fact that, over the same period of time, the US has instead seen its employment gradually shift towards low-pay low-skill occupations.

Median earnings in high-skill occupations remain higher than in middle or low-skill occupations and researchers have not found evidence of a decline in the average wage premium for graduates in recent times. Data for 2015 puts the median salary for young (21-30-year-old) postgraduates at £28,500, that for graduates at £25,000 – the highest since records begun in 2006 – and that for non-graduates at £18,000.

This evidence shows that the state of the graduate labour market is less gloomy than suggested in some parts of the CIPD report – and certainly in the coverage it has received in the media.