This post looks at the history of economic downturns and graduate employment since the early 1980s – specifically the early 1980s recession, the early 1990s recession and the end of the mining boom in 2013 – to draw out potential implications for the COVID-19 recession.

Historically, each downturn peaks at worse graduate employment outcomes than the previous one. The COVID-19 recession is likely to fit this pattern and deliver record high graduate unemployment. Not only is it likely to be the most severe recession in living memory, but it has already caused massive job losses in industries that are significant graduate employers.

Past recessions

Thanks to old graduate destination survey reports being put online (scroll down here),  the employment effects of past recessions are easier to examine. The early 1980s recession triggered a four percentage point increase, on the best recent outcome in 1980, in university graduates still looking for full-time work four months after completion. But the negative effects were short-lived. By the mid-1980s employment outcomes were better than they had been in the late 1970s (chart below). Graduates of Colleges of Advanced Education had higher proportions looking for full-time work, but this appears to be mostly due to trends that started before the recession. Their results also recovered quickly.

The early 1990s recession was different. Outcomes deteriorated by more, with a new record bad outcome set in 1992, with 19 per cent of all graduates, and 29 per cent of graduates looking for full-time work, unable to find it (chart below). The recovery was much slower and never returned to late-1980s levels on the measure of proportion of graduates looking for full-time work who have found it.

 

After 2008 we see another concerning structural shift – worse outcomes despite the lack of a technical recession, the at least two consecutive negative quarters of GDP growth that occurred in the early 1980s and early 1990s recessions (chart below). And so we go into the COVID-19 recession with a graduate labour market that, although improved on the recent past, was already not delivering for many new graduates.

Graduate job numbers

Although universities try to improve graduate employability, the quality of graduate outcomes is mainly driven by the number of suitable jobs compared to the number of graduates.

What counts as a ‘graduate job’ is not straightforward. Employers and employees disagree over the same position. Deeming certain occupations as needing the skills of a graduate can be arbitrary, especially with the ABS overdue for an update of its occupational framework. But the level of professional and managerial employment is a reasonable guide to trends, despite excluding some jobs that now require degrees, and including jobs that do not.

The chart below shows that the number of 20-24 year olds in professional and managerial jobs shows a long-term upward trend over the last 30 years. But the chart also records interruptions to that trend. Job numbers fell in the early 1990s recession and then more severely as the mining boom ended.

Graduate employment by industry

Although the end of the mining boom had a big effect on graduate jobs, the most directly affected mining and construction sectors are not big graduate employers (chart below). In the COVID-19 recession much larger graduate employers are, at least in the short to medium term, taking massive hits to employment levels.

As the chart shows, in 2019 one-in-five graduates aged 20-29 years were employed in industries that have already experienced catastrophic job losses. Despite the ‘hibernation’ policies being introduced to keep businesses alive, realistically many organisations in retail, food, tourism and the arts will not survive a sustained shutdown. If that happens employment levels could be down for years.

Less than a quarter of young graduate employment is in industries, such as health, that are likely be fairly resilient after the COVID-19 crisis. While there are job losses in the health sector from postponing elective surgery, demand should rebound strongly after restrictions are lifted, presuming limited private hospital and clinic bankruptcies.

Graduate numbers

Although professional and managerial jobs for young graduates recovered strongly from 2015, that they previously dropped so much is a concerning sign for recent graduate job prospects. The end of the mining boom was a milder overall economic shock than the COVID-19 recession and did not directly hit industries that are major graduate employers.

One reason is that graduates are now a large share of the population. In the 1971 census graduates made up only 2.5 per of people aged 15 and over, and in the early 1980s recession were still only about 10 per cent of the population aged 25 to 34 years.  By 2019 that share had quadrupled to 40 per cent of 25 to 34 year olds. Rates are much higher for women than men, as seen in the chart below (although overall tertiary attainment is similar, due to men being more likely to have vocational qualifications).

In earlier recessions graduates, as a small share of the workforce, could be sheltered somewhat from economic storms. Now they are exposed to whatever big trends are on.

The flow of new graduates into the labour force

Another reason why graduates got off lightly in the early 1980s recession was that annual bachelor-degree completions were only growing slowly (chart below). Indeed, university completions were declining with what growth there was coming from the colleges of advanced education (as I have noted before, the Whitlam reforms were more ‘free CAE’ than ‘free uni’).

But in the early 1990s and the mid-2010s there was no such luck. Both were growth periods for bachelor-degree completions. Employment rates were hit on both sides of the graduate employment calculation: more graduates but fewer jobs.

During the COVID-19 recession annual numbers of domestic completions will remain high.  But it will not be a growth phase. Due to a slowdown in commencements since 2015 and double counting of individuals there are fewer new graduates than expected. That is one small piece of good news for graduate employment rates.

Migration

Another factor to consider is the effect of migration on graduate labour markets. According to ABS Education and Work survey data a third of all graduates aged 20-29 years in 2019 were migrants, defined as someone with a degree from an overseas university or a non-citizen with an Australian degree. The migrant share drops to 22 per cent if student visa holders who cannot work full-time are excluded, but this still leaves an increase of about 50,000 people between 2013 and 2019.

One driver of migration has been international students who can stay for at least two years after finishing their degree.  Increasing numbers have been granted graduate visas in recent years, although their employment outcomes are often disappointing. Perhaps they will be less inclined to stay in a recession labour market. On the other hand, with restricted international travel they may not be able to leave for a while.

But travel bans and a weak labour market will block or deter other degree-qualified migrants. Skilled migration dipped during the global financial crisis. Overall I expect that there will be fewer young migrants in the Australian labour market as a result of COVID-19, but given travel problems and the pipeline of current international students it might take a while for the numbers to drop.

No employment versus no full-time employment

Another negative aspect of the COVID-19 recession is worth noting. The rise between 2008 and 2015 of graduates seeking full-time employment but not finding it (several charts back) was made up of an unemployment increase of 6 percentage points and a working-part-time-but-looking-for-full-time increase of 10 percentage points.

Unfortunately in a survey switch from 2016 this latter number is no longer reported. But the historical numbers suggest that the effects of bad graduate labour markets have been ameliorated in the past by graduates holding on to their student jobs. These jobs are strongly skewed to the occupations most affected by COVID-19 shutdowns. As a result, their employment situation will be worse than the published aggregate numbers will suggest, as they will be unemployed rather than under-employed.

Further study

As suggested in a previous blog post, the number of postgraduate coursework students may increase as they sit out the recession. Policy does not limit student numbers. This won’t affect the reality that these students would rather work, but it would reduce how many graduates look for full-time work, and therefore the official un- or under-employment rate.

Conclusion

Despite the absence of two factors that exacerbated previous downturns, growing numbers of new degree completions and caps on postgraduate numbers, the overall COVID-19 graduate employment situation is dire. The previous record of un- and under-employment in 2014, of 32 per cent of graduates looking for full-time work being unable to find it, is likely to be exceeded by a large margin.