Will Covid-19 cause a rise in graduate unemployment?

Research suggests that there are worrying signs from the graduate labour market in the light of the Covid-19 crisis. Tristram Hooley of the Institute of Student Employers asks if there will be a rise in graduate unemployment?

COVID-19 is already having an impact on almost every aspect of our lives. For this year’s final year students the impact has been dramatic. Many are still largely focused on finishing their programmes and graduating, but they may also be wondering what is going to happen when they leave university. And, while universities are shifting teaching and examinations online, many graduate employers are also making big changes in response to the crisis.

At the Institute of Student Employers we started to hear rumours in early to mid-March about employers cancelling activities with universities and even reneging on job offers. To investigate this further we conducted a survey which received 124 responses from graduate employers.

Disruptions to recruitment

As the crisis unfolded, many graduate employers cancelled on-campus activities designed to attract students, for example, 69 per cent reported cancelling visits to universities and 63 per cent cancelled work experience placements. The withdrawal of employers from face-to-face engagement with students is concerning, but it has been rapidly overtaken by events as most universities have also now shut down much of their face-to-face provision.

Employers have been less willing to cancel elements of their own recruitment process with only 31 per cent cancelling assessment centres and 23 per cent face-to-face interviews. For some this amounted to a complete cessation of recruitment, with one respondent writing that “all recruitment activities have been stopped for the moment”. However, most employers are seeking to move their assessment centres (60 per cent) and face-to-face interviews (71 per cent) into an online or telephone format.

The problem with this switch to online assessment is that it is logistically complex and is inevitably taking some time. Nonetheless, many employers reported that they were rapidly reorganising their recruitment process and changing the elements within it to what could be delivered online. As one respondent wrote, our “assessment centres will be cancelled, and we will rely on our video interview and online assessment tools more heavily.”

Reduced hiring

The logistical challenges of recruiting large numbers of young people during the Covid-19 crisis will have an impact on the number of graduates hired. However, more worrying than the short-term impact of Covid-19 on recruitment processes, is the longer-term impact on the demand for entry-level talent.

Image: Institute of Student Employers

 

Around a quarter of graduate employers (27 per cent) say that they will be recruiting less graduates. These impacts come on top of what our previous research had already suggested was a stagnant student labour market. What is more, reductions in hiring may be even more marked in SMEs where around 34 per cent of the graduate population typically work. Unless this downturn is addressed there is the danger that the Covid-19 generation of graduates will leave higher education with nowhere to go.

This is rapidly evolving situation and many employers report that they do not know what their response to the crisis will be or what to expect in the medium- to long-term. If those employers who are currently unsure, decide to reduce their recruitment levels, the situation for young people may worsen further.

Approaching a graduate employment cliff

This study suggests that Covid-19 is already having a substantial impact on the student labour market. In response firms have moved quickly to develop strategies and alternative working arrangements and are continuing to explore and develop new ways to work. Nonetheless they are reducing the level of recruitment planned and these reductions may continue to grow, particularly in SMEs, over the next few weeks.

In a normal year graduates would start working from July, with many graduate programmes starting in late August or early September. Evidence from EMSI shows that the number of job vacancies has gone into freefall since the start of the crisis. Meanwhile universal credit claims have rocketed upwards and the Institute of Fiscal Studies has demonstrated that the lockdown is hitting young workers hardest.

Unless this recovers quickly it will mean that as graduates reach the end of their course there are very limited opportunities for them to move into work. The decisions that employers are making to scale back graduate recruitment programmes intensifies this problem in a way that will particularly impact new entrants to the labour market.

Young people are hurtling towards a labour market cliff. As graduates leave their programmes they will have nowhere to go. Such a situation will cause problems for all graduates but will be felt more sharply by those graduates who don’t have financial and family resources to fall back on. In such a case Covid-19 may serve to exacerbate wider inequalities in the access to decent work.

Some of these issues will be short-term in nature, but there may also be long-term implications. If the economic impact of the crisis is substantial, some of the problems faced by this year’s graduates may endure and impact on those students graduating next year and beyond.

What needs to happen?

In addition to the other risks associated with Covid-19, we are facing the risk that a generation of young people are lost to the labour market. This risk needs to be taken seriously as part of the plans to address Covid-19.

For universities, this means that the provision of career support will continue to be critical over the next few months. Such support will need to be proactive, reaching out to current students and recent graduates who may not be aware of the deteriorating labour market situation. Career support also needs to be broadly framed, for example helping students to deal with health issues and manage periods of unemployment whilst maintaining their employability, as well as helping them to find and get the jobs that are available.

Government needs to recognise that this is an immediate problem that must be addressed. There is a need to establish a youth employment taskforce to respond to the problems that emerge over the next few months and beyond. Such a taskforce could monitor the situation and investigate what policy solutions might be needed. For example, is there a need to increase students’ access to career and employment support services after they graduate, to subsidise employers to provide internships or to create new mechanisms for the pooling of talent and risk.

Covid-19 threatens so many social and economic norms that it is understandable that government is struggling to address them all. However, guarding against the emergence of a lost generation should be one of the highest priorities.

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