By Marek Zemanik, Senior Public Policy Adviser at the CIPD in Scotland 

The last few decades have seen significant transitions in Scottish and UK labour markets. One of the most notable changes has been the exponential rise in the number and share of young people achieving degree-level qualifications. 

While some suggest that this increase  helps drive economic growth as the number of higher-level jobs increases too, others argue that there is a mismatch between what the labour market requires and what the skills system is producing. A few weeks ago, the CIPD released a report to provide additional evidence, analysing ONS Labour Force Survey data from 1992 and 2022 as well as our own Working Lives Scotland survey data.

Occupational changes 

Broadly speaking, graduates tend to have better labour market outcomes than non-graduates. They have higher employment rates, lower unemployment rates and lower inactivity rates. However, someone being in employment does not tell us what kind of employment they are in. In other words, headline labour market statistics don’t tell us how well someone’s qualifications are matched to their job. 

It is only when we start looking at differences between occupational groups that we can start to uncover some of these nuances. While working age graduates are still much more likely to be in high-skilled employment than non-graduates, the share of graduates in medium- and low-skilled employment in Scotland has more than doubled over 30 years, from 10% in 1992 to 23% in 2022. 

Figure 1 illustrates the considerable increase in the graduate share across all nine major occupational groups.

The second highest increase is  in the administrative and secretarial occupational group – a jump from 4% in 1992 to 31% in 2022. Similarly, the 23% share of graduates in sales and customer services (an increase from 4%) also suggests some skills mismatches. Furthermore, the bottom two occupational groups both had a negligible share of graduates 30 years ago – it has risen to 13% for both. Barring some exceptions, these roles generally do not require degree-level qualifications. 

This is highlighted further in UK-wide data, with large increases of graduates in book-keeper, payroll manager and wage clerk roles (37 percentage point increase since 1992) and  personal assistant and other secretarial roles (18pp) . Large increases have also been seen for security guards, bar staff or sales and retail assistants. 

The evidence of occupational filtering down is pretty clear. But what impact is this having on individuals and the labour market as a whole?

Job quality

Our analysis shows that Scottish overqualified graduates experience considerably poorer job quality across many metrics – from job autonomy and wellbeing, to skills development opportunities. We also find lower levels of job and life satisfaction. This will have an impact on performance as well as their likelihood to quit. This further underlines the importance of skills matching to individual outcomes, but also to the broader labour market. 

Overqualified graduates are much more likely to be earning lower salaries (39% of them are earning under £20,000, compared with only 10% of matched graduates), with poorer pay satisfaction - nearly twice as many overqualified graduates disagree that they get paid appropriately compared with matched graduates. 

We find that overqualified graduates are more likely to have been in their jobs for a short time, suggesting that some graduates start off in mismatched roles before moving on to jobs with a better qualification match. That said, the high levels of overqualified graduates with long tenures also supports previous research that has shown a poor initial skills match having a long-term impact on a person’s career.

Policy implications

The negative impact on the labour market as a whole, as well as for individual graduates who fail to get employment in graduate roles should be of concern to policy-makers in particular, but employers have a role to play too. 

At the heart of our recommendations is careers advice. Previous CIPD research has shown that the vast majority of young people still feel that careers services only push them towards higher education, without any meaningful help to understand alternative vocational career pathways, such as apprenticeships. The creation of a person-centred, coherent career development model that allows young people to understand their skills, the broader labour market and the range of career pathways has the potential to make a big difference. 

The overall balance between academic and vocational education needs to be re-evaluated – both in terms of government budgets and the status attached to different pathways. The apprenticeship system in Scotland in particular has evolved differently from England over the last few years, emphasising quality over quantity, but it needs to expand to encourage more vocational pathways and work-based learning. 

More funding and new policy initiatives, however, will not be enough – employer input and stimulation of skills demand will be crucial. People management and leadership are key drivers of job quality, but are also crucial in unlocking demand for skills. Much of this needs to be driven by employers, but the Scottish Government could also increase its support through its agencies. Employers also have to recognise that while qualifications mismatches exist, a focus on job design, skills development and career advancement can mitigate some of the negative findings in this report.