Students face debt and uncertainty despite graduate jobs surge

After months of rejection emails, Haider Malik was suddenly in high demand after he found a job in finance by pitching himself outside Canary Wharf tube station.

The plucky first-class banking graduate impressed commuters with his whiteboard and “go-getter” attitude. He had an interview for an accounting role at the property manager Canary Wharf Group within a few hours and landed a role by the end of the week.

His tale caught the imagination of news outlets as far away as Borneo. But even his extraordinary effort last November was only enough to gain a temporary contract.

Graduates such as Malik might have better luck this year. Amid signs that the pandemic may be easing, economic recovery and shortages of recruits have boosted the graduate jobs market.

At the extreme, top London law firms now offer newly-qualified solicitors eye-popping starting salaries of £150,000 a year as City companies try to cope with soaring demand for their services by hiring talented people.

In the wider economy, vacancies for university leavers are also rebounding: graduate opportunities are up by 20 per cent compared with 2019 and up 22 per cent compared to 2021, according to a recent survey by the Institute for Student Employers (ISE), a body that supports graduate recruiters.

With record numbers of young people opting for full-time education and Brexit limiting the inflow of EU talent, employers have even reshaped recruitment plans to hire more school leavers and apprentices to address shortages, says the ISE.

Meanwhile, the government and businesses alike plan to increase the added value in the economy, putting extra effort into recruiting able graduates with the right skills, in areas like maths, engineering and IT, for posts in technology and professional services.

“We fundamentally need educated young people in good careers to drive the economy, that’s not going to change,” says Stephen Isherwood, ISE chief executive. Those graduates who can take advantage of the post-pandemic hunt for talent could find themselves richly rewarded.

Bar chart of % showing Proportion of 18-year-olds accepted into UK universities

The workplace transformation

But it’s far from plain sailing. First, the number of students has risen steadily for years, increasing the demand for jobs: there were 2.5mn students in 2019-20, up from 2.3mn in 2015-16, according to the Higher Education Statistics Agency.

The recent increases cap a wholesale transformation of the workplace: of people aged 21 to 64, 42 per cent were graduates in 2017, up from 24 per cent in 2002.

The recruitment market is also still digesting the bulge in job seekers created by the pandemic, which decimated graduate opportunities in 2020-21. There were 91 applications per graduate vacancy in 2021, the highest on record for the ISE.

As Malik found, graduates were left facing rejection email after rejection email. Before landing his temporary role, Malik applied for 50 different graduate schemes and 30 to 40 entry-level roles. “Most of the time I didn’t receive a response or anything,” he says.

While the recovery is now driving a recruitment surge, the effects of this jobs crunch on those involved may be long lasting. Many graduates were forced to take poorer quality roles, according to the Institute for Fiscal Studies. It found there were fewer graduates and school leavers in full-time, skilled new jobs last year compared with 2019, but more in part-time or unskilled work, often in care homes, delivery driving or retail.

This may complicate their efforts to land the jobs they want in the long term, though Charlie Ball, head of higher education intelligence for research organisation Prospects, takes a positive view. He says: “It’s very difficult to say a graduate who decided to go work in a care home in 2020 was wasting their time and investment.”

However, it remains true that the pandemic eliminated “stepping stone” mid-skill jobs, including skilled clerical roles. The Institute of Employment Studies, a think-tank, says more people have been left in insecure and part-time work and less able to acquire the experience needed to pitch for their dream jobs.

Ball says that as the future of the office remains uncertain after the pandemic, the lack of these jobs is still an issue, especially as they are declining anyway because of automation.

Column chart of Average debt on entry to repayment in England (£'000) showing Student loan debt soars

A benefits boom

Still, those who jump through the hoops and secure good jobs will find their degrees pay off. Median salaries have risen to £35,000 for workers of any age with a degree, a premium of £9,500 over non-graduates.

For 21-to-30-year-olds, the finance and banking sector offers the highest median starting salaries of about £30,000, though some investment banking schemes offer many times this in exchange for gruelling hours. Top young lawyers are not alone in securing £150,000 a year.

Ball warns that wage rises may not keep pace with inflation for all graduates but other benefits are also being upgraded. He says: “Businesses will offer flexibility in lieu of wages. They’re likely to be big on flexible working and other perks rather than a big wage uplift.”

Many would-be applicants may not be aware of how quickly the tide is turning in their favour. Some may be working in the temporary jobs they took up to make ends meet; others have signed up in record numbers for full-time education. Sam Windett, deputy director at Learning and Work Institute, says: “We’ve seen a huge rise in full-time education and that’s something that wasn’t predicted at the start of the pandemic.” 

Some 48 per cent of 18-24-year-olds are in full-time education, the highest rate on record, compared with 43 per cent before the pandemic. Windett says: “It could be a consequence of young people sheltering in the education system and not looking for jobs at this point.”

So some employers are struggling to recruit, especially for technical posts. Although ISE’s 177 member organisations, which includes large employers such as the Civil Service, Marks and Spencer and PwC, filled 95 per cent of their positions last year, many found it difficult to recruit in roles such as IT, engineering and skilled trades roles.

Isherwood encourages graduates who think their degree subject may limit them to certain jobs to cast their nets wider. “86 per cent of employers don’t recruit by subject discipline,” he says. “The UK market is different to anywhere else in the world. The majority of the intake often don’t have a degree relevant to the subject.”

With few recruiters focusing on subjects, Isherwood says, people who were resourceful during the pandemic will stand out. “Those who said ‘there was a pandemic, I couldn’t do anything’ will struggle. Those who showed some initiative during the pandemic will be popular.”

Line chart of UK unemployment by age group ('000s) showing Young jobless in the age of Covid

A burden of debt

Students emerging from the pandemic also carry a big burden of debt. This is especially true for those who extended their studies and took on extra loans. The total outstanding student loan debt in England was £160bn at the end of 2020-21, up from £140bn in the previous year.

Undergraduate degrees now cost up to £9,250 per year in the UK. Students starting in 2007 would have paid less for the entirety of a three-year degree. When maintenance loans for living costs are also included, the average debt among those graduating in 2020 was £45,000. For those who restart degrees or take on further loans for postgraduate studies, this figure can be even higher.

Graduates will not necessarily repay everything. They begin repaying back loans once their salary reaches £27,295, paying 9 per cent of anything earned above that figure for at least 30 years. But those who earn less are not required to pay and, for most student loan plans, any outstanding balance 30 years after the first repayment is due is written off.

Last month, the government froze the salary threshold for the 2022-23 tax year, a move described by The Institute for Fiscal Studies, a think-tank, as a “tax rise by stealth”.

The pandemic generation of students, who missed out on face-to-face education, is particularly angry at this prospect. Malik, a graduate of Middlesex University, says: “When the world goes upside down in terms of coronavirus, someone should lend a hand. There was furlough, business grants, what was there for students? Nothing.”

Added to student debt are the rising costs for graduates after they leave university. A study by the think-tank Demos found that those in the 18-to-30-year-old bracket would spend more on housing and bills than other age groups — an average of nearly £1,300 per month more than over-60s.

Limited savings also mean the age group is more vulnerable to financial shocks. For graduates, the monthly debt repayments add to this burden, although graduates generate £10,000 a year in higher earning potential compared with their non-graduate peers.

Should the government increase those student loan repayments by lowering the threshold to £23,000, a graduate earning below the current threshold would have their take-home pay cut by more than £800 annually, says the Institute for Fiscal Studies.

Young people emerging from recessions are more likely to suffer financial scarring, the Resolution Foundation has found, creating barriers on the amount of money they will earn throughout their careers.

It is too early to tell if such effects will persist in today’s lively jobs market as the recovery has been much better than many analysts expected. Malik is trying to help his peers benefit. Using a newly-found social media platform, he is organising careers events for new graduates, showing the same initiative that led him to pitch himself at Canary Wharf. He says: “It’s good to tackle the issue rather than just talk.”

A slice of good fortune

When a job at a London cheese stall became available, one student knew she was in with a chance.

Playing on her surname, Leia Monger, a 22-year-old architecture graduate, told her future employers: “I’m very interested in this job of being a part-time monger, but I’m also a full-time monger.”

The stellar pitch and nominative determinism won Monger her role. Having begun at the stall in the first year of her undergraduate degree in 2017, she now works five days a week at the Borough Cheese Company, between Borough Market and King’s Cross.

What’s in a name? Leia Monger landed a job with the Borough Cheese Company © Tara Rudd

While graduates deal with stiffer competition for top graduate roles, there are opportunities for part-time work to get through their degrees and earn money after graduation. Three-quarters of hospitality businesses are increasing pay to retain staff, according to research agency CGA.

Monger says: “I think I’m lucky that I had that job all through university. I’ve been able to pick up practically full-time hours.”

Hospitality and retail, where young people are disproportionately employed, fell off a cliff during lockdowns, eating into students’ pay packets. From February 2020 to March 2021, 60 per cent of job losses were among under-25s.

However, this trend has since reversed. Jobs are in plentiful supply in these sectors and there is less competition than pre-pandemic from EU workers.

Graduates may be sheltered in the rebounding retail and hospitality sector: the latest statistics from the ONS show that the number of young people not in education, employment or training is no higher than before the pandemic, at 10.1 per cent in late 2021 compared to 11.1 per cent in late 2019.

The problem is the fierce competition for top quality jobs. Monger “loves cheese” but is seeking an architectural placement before commencing a masters degree, the next step towards qualifying as an architect, where she would like to work on public or social housing.

The job hunt is “quite demoralising”, she says. “I do really love my job, but what’s been hard is you have to rewire what you want from your [degree].

“You are taught that you have to design your career as an undergraduate. But those opportunities aren’t there.” 

Internships and short-term roles

Graduate programmes have recovered from the pandemic but “people aren’t taking short-term hires as much as they would have done,” Tristram Hooley, former head of policy at ISE, says.

Data from the organisation shows that internships are recovering, but have shifted dramatically online: 72 per cent were performed virtually in the 2020-21 financial year.

It was also “exceptionally hard” to get work experience, roles or internships or apprenticeships during the [early part of the] pandemic, when more than half of the class of 2020 had their graduate job offers deferred or rescinded or lost internships.
Charlie Ball of Propects said. “This year has not been significantly better.”

Though not as reliable a route into employment as a hiring programme, internships and placements are often a route into quality employment for young people, allowing them to build skills and networks.

Emmanuel Sosanya, a 24-year-old Kent University graduate from Dagenham, east London, has set up as a sole trader after a short-term placement with private equity company Mutares.

He started trading at 16, using demo accounts to explore foreign exchange and commodity markets while still at school. But, he admits: “Getting into finance the non-traditional way is really hard, especially from the background I have.” 

His decision to set up as a sole trader following the role is a sign of the informal way in which placements and internships can help young people. “After the internship, I thought ‘let me see if I can use this skill now properly’,” he says. He manages about $250,000 in investor capital from his family home.

Competition for internship roles is almost as fierce as those for graduate programmes, Dan Hawes of Graduate Recruitment Bureau says. For those from minority backgrounds, like Sosanya, entering white-dominated sectors like finance can also prove challenging.

Sosanya found the Mutares role through the Black Training and Enterprise Group (BTEG), a London charity which supports young people of colour into jobs. In highly competitive environments like finance, he said, “there’s a barrier”. “All the people I was working with there were Cambridge and Oxford grads and I was the only one who was black. For someone from my background, it’s harder to get into these finance roles.” 

Jeremy Crook, chief executive of BTEG, said efforts should be made to address diversity issues.

“I think there’s too much reliance on the market returning to normal,” he says. “It wasn’t particularly fair to start with.”