Do we have an over-supply of graduates in Ireland? (Part 2/2)

In line with what is shown in Foley and Brinkley (2015), in this blog I search for empirical evidence in an attempt to answer the question of over-supply of graduates in Ireland. As stated in the previous blog, there would be a couple of likely consequences if there exists an over-supply of graduates. These consequences, or scenarios, are examined in much detail one by one as follows.

1. An increase in rates of graduate unemployment

Data on graduate unemployment rate is not readily available in the case of Ireland, as far as I am aware. The ONS in the UK has been releasing ‘Graduates in the UK Labour Market’ reports for a long period which enable the analysis of graduate employability. Instead, I compare unemployment rates of the labour force by level of education in Ireland between 2002 and 2012. As there seem slight changes in the way third level degrees are identified in early 2009, I present the results in two periods respectively. Nonetheless, the changes are small, and the overall trend remains.

Unemployment Rate 2002Q4 to 2009Q1
Figure 1
Unemployment Rate 2009Q2 to 2012Q2
Figure 2

It is obvious from these two figures that unemployment rates of persons with third level education are consistently lower than those of persons without. This finding is in line with international evidence.

Since 2008 there have been increases of unemployment rates across all groups, which is not surprising due to the challenging economic conditions. Even though unemployment rates of persons with third level education increased after the economic crisis, it does not suffice to argue it is resulted by an over-supply of graduates. As Foley and Brinkley (2015) similarly argued that the situation could be ‘in fact more a function of wider labour market conditions’.

As Figure 2 clearly shows, while unemployment rates of persons with third level education more or less stabilised since 2009 although they did not decline significantly either (which was the case in the UK). However, it could be claimed that unemployment rates of persons without third level education continued to worsen after the economic crisis, suggesting that graduates were still in a relatively better place than the others in the workforce.

2. A decrease in the graduate wage premium

Generally, the graduate wage premium refers to the average increase in earnings graduates can expect when compared to their non-graduate counterparts. Foley and Brinkley (2015) suggested that, ‘Oversupply of graduates would lead to a reduction in this figure, as graduates were forced down the rungs of the labour market.’

Relative earnings of tertiary-education workers 2013
Figure 3

As Figure 3 shows, relative earnings of tertiary-educated workers across the OECD countries are impressive, with Ireland ranked amongst the countries with the highest graduate wage premium. In Ireland, persons with tertiary education earned nearly 1.8 times of what earned by persons without university degrees.

More relevantly, we would like to know how this figure changes across years. In the following table, I use the OECD data to compare the trends in relative earning of tertiary-educated workers in Ireland with those in the OECD countries and the EU-21 countries between 2005 and 2013.

Table 1: Trends in relative earnings of tertiary-education workers (2005, 2010-2013)

2005 2010 2011 2012 2013
Ireland 177 175 176 182 190
OECD 154 155 159 156 156
EU-21 160 159 156 159 157

Note: 25-64 year-olds with income from employment; upper secondary education and post-secondary non-tertiary = 100.

In the EU-21 countries, relative earnings decreased slightly during the period, while thost in the OECD countries only increased by a margin. By contrast, the figure in Ireland increased significantly, with relative earnings of graduates increasing from 177 in 2005 to 190 in 2013. This clearly indicates that graduate wage premium has become more prominent in the Irish context, which is against the suggestion that there is an over-supply of graduates in Ireland.

3. What about graduate emigration?

For the analysis of Ireland, emigration is a factor that cannot be overlooked. On the national level, around 480,000 people left Ireland between April 2008 and April 2014, while a total of 338,000 came to Ireland as immigrants over the same period, suggesting that there are 141,000 net migrants who left the country in the six-year period.

It is not hard to assume that graduates in Ireland are probably more likely than the others to emigrate, given that tertiary-educated workers are in general more mobile than those without university degrees.

In 2013, the Higher Education Authority (HEA) released a publication on the destination of graduates, which shows that, “Of those graduates in employment those gaining employment overseas doubled over the last five years from 5% of the 2008 graduates to 10% of the 2012 graduates reflecting the continued need for graduates to pursue opportunities overseas, a trend that is likely due to the current economic climate in Ireland.”

Surely, the figures shown in the 1st and 2nd parts will change if these graduates would have remained in the Irish labour market, but an accurate estimation is impossible to get. In 2011/12, there were a total of 60,000 graduates from all subjects in all HEA-funded HEIs. Of these 60,000 graduates, just under 50% of them were in employment after graduation (as the rest chose to pursue further studies), which gives us 30,000 graduates in the workforce. If 10% of them emigrated from Ireland, the number would be 3,000.

Therefore, a simple question would be, if these 3,000 graduates have stayed in Ireland to seek employment, how would the whole picture change? To answer this question, we definitely need a lot more data, such as the demand from industries and the employability of graduates, which are currently missing.

Although I agree that it is likely the unemployment rates of graduates could rise up if there are more graduates entering the labour market than it is (if we think the demand of industry is stable at a certain point of time), the majority of existing data tend to argue that there is not an over-supply of graduates in Ireland.


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