04What drives the geography of new graduates?

Jobs are the most important factor influencing graduate location decisions. Research on graduate movements shows that access to employment is the key determinant of graduate movements, with those areas experiencing higher levels of economic growth better placed to attract and retain increased numbers of recent graduates.⁹

But it is not just the availability of jobs that are important. Research in the UK and elsewhere also points to the importance of career progression opportunities – known as the ‘escalator’ effect – in bigger cities, with this effect being particularly strong in knowledge-based activities.¹⁰ Unsurprisingly the escalator effect is most prominent in London, as a result of its much greater size – the new graduate labour market in London is over five times the size of second place Manchester.

Big cities are attractive to graduates. These findings help to explain the patterns seen in the charts below. Figure 18 shows that the share of graduates who grew up in a city and work in that city increases as a city gets larger.

Figure 18 also shows that bigger cities are more attractive to outsiders. The size of the bubble, which shows the number of graduates that have been attracted in from elsewhere, gets larger as the size of the graduate labour market grows. In other words, bigger cities have greater appeal to graduates who grew up in the city and those who grew up elsewhere. Both the greater availability of jobs and career progression opportunities in these cities are two reasons that help explain this observation.

But interestingly, as Figure 19 shows, there is no relationship between the size of a city and the mean graduate wage on offer. This suggests that high graduate wages are not the main reason for people moving to big cities, and that other factors such as the opportunities for career progression are more important. In medium and smaller cities such as Basildon, Newport and Worthing, however, where career progression opportunities are more limited, higher graduate wages may be playing a compensating role and helping to attract graduates to work there.

Figure 20 shows that the graduate gain tended to be larger in cities where publicly funded jobs accounted for a smaller share of new graduate positions, while the opposite is the case for knowledge intensive business services (KIBS) jobs. This again would suggest the importance of career progression, especially given that even when looking at public administration more narrowly, there is a public sector pay premium to graduate jobs in almost every city.

Many cities are reliant on the public sector for graduate-level jobs. As Figure 21 shows, the public sector tended to play a smaller role in southern cities and in bigger cities further north. In Crawley, the lowest, they accounted for one in three new graduate positions. But in Barnsley, the highest, they accounted for two in three new graduate positions. The opposite geographic pattern is seen for the share of jobs in KIBS industries.

The dominance of publicly funded sectors in the new graduate labour market in cities such as Barnsley, Chatham and Blackburn reflects the weakness of the private sector in these areas, rather than an oversized public sector. Figure 22 shows that cities that are most reliant on publicly funded sectors for new graduate jobs also tend to have the lowest numbers of private-sector positions for university leavers.

If these cities are to attract and retain a greater number of graduates, they will need to focus on policies that support the private sector to create graduate-level opportunities to complement the positions available in public administration, education and health.

Housing costs do not appear to deter graduates

As Figure 23 shows, there is no relationship, positive or negative, between graduate gain and the housing affordability ratio in cities.

But the importance of housing affordability differs for higher and lower achieving graduates. Figure 24 shows that there is a positive relationship between the share of high achieving graduates in the new graduate workforce of a city and housing affordability. The opposite is seen for shares of low achieving graduates.

While conclusions must be drawn with caution, the charts suggest that the importance of accessing job opportunities in stronger economies may be a bigger driver for higher achieving graduates than lower achieving ones and that housing cost factors do deter lower achieving graduates from staying in or moving to cities with high housing costs relative to wages.

Amenities matter but not as much as employment factors

Commentators often highlight quality of place factors as key influences on the location decisions of graduates. However, research from Sweden showed that skilled migrants gave much greater weight to jobs than the availability of amenities.¹¹ And these findings are echoed in specific studies on Brighton and Dublin.¹²

While amenities clearly have an effect it is important not to over-state their influence. Figure 25 shows the share of graduates working in higher level occupations¹³ in a city against its graduate gain. The only cities that have a graduate gain with a markedly lower share of graduates working in top occupations were Norwich, Ipswich, York and Cardiff. While these cities undoubtedly have good quality amenities their amenity offer does not appear to be exceptional compared to many other cities in the UK.¹⁴

Summary

• The availability of jobs appears to be the biggest factor influencing new graduate mobility patterns, with the availability of career progression opportunities appearing to be more important than graduate wage levels.
• Big cities are particularly attractive to graduates because their labour markets are able to offer a wide range of job and career progression opportunities.
• Many cities are reliant on the public sector for graduate-level jobs. But those cities that are more reliant on publicly funded sectors for graduate jobs tend to see smaller inflows of new graduates. This is the result of a lack of job opportunities and career progression within the private sector rather than an over-sized public sector.
• Graduates do not seem to be detered from moving to cities with high housing costs. This is particularly the case for graduates that achieved a first or upper second class degree from a Russell Group university.