Regional Focus: Higher education graduates in Western Europe face poor job prospects

Most countries across Western Europe have seen increases in the numbers of university students between 2000 and 2009.

There are variations and different trends around the region, although the economic recession in 2008-2009 has made employment prospects difficult and the number of unemployed higher-education graduates is rising quicker than those of other educational levels.

Tertiary level graduates benefit the economy through higher skills and consumer spending potential.

Key points

  • The proportion of Western Europe’s total population with higher education qualifications has risen from 13.6% in 2000 to 16.8% in 2009, being high in the UK (24.0%) and Finland (22.2%). The regional figure is lower than other developed regions such as North America (26.3%) and Australasia (18.4%). This is partly because Western Europe’s figures are disproportionately affected by the low ratio in Turkey (6.5% in 2009);
  • Scandinavian countries and Iceland tend to have the highest proportional numbers of university students compared to the total population, with Finland highest at 59.4 students per 1,000 people in 2009. Of the major economies in the region, the Netherlands had the lowest proportion of university students, at 13.8 per 1,000 people in 2009;
  • Stronger household spending on education has created business opportunities, ranging from direct fields such as private schools, through to indirect opportunities such as student finance, accommodation and educational materials;
  • The economic downturn in the region has greatly limited job opportunities for new graduates, with unemployment rising from 7.4% in 2008 to 9.5% in 2009. Between 2000 and 2008 the number of unemployed higher education graduates has risen quicker than the number of unemployed people with lower levels of education;
  • Higher education has important social, cultural and financial implications for consumers. Most significantly, it has a direct bearing on income levels: in Western Europe in 2009, for instance, per capita disposable incomes for consumers with a tertiary-level education was US$38,808, compared to US$16,011 for those with primary education.
Per capita average annual disposable incomes in Western Europe by educational attainment: 2000-2009
US$ per capita

Source: Euromonitor International from national statistics.

Rising enrolment

Most countries in the region have seen rising numbers of university students, particularly as finding jobs increasingly requires a degree-level education:

  • Scandinavia and Iceland have proportionately the largest numbers of university students. In Finland, there were 59.4 students per 1,000 people in 2009, whilst the figure was 51.8 per 1,000 in Iceland. This is partly because state universities in these countries do not charge tuition fees for full-time students;
  • Of the major economies, the UK had amongst the largest proportion of population with higher education qualifications as a percentage of the total population, standing at 24.0% in 2009 compared to a regional average of 16.8%. Turkey had the lowest ratio, which was equivalent to 6.5% of the total population, and reflects the lower educational attainment across much of the country;
  • Between 2000 and 2009 almost all countries saw sharp rises in the proportion of population with higher educational qualifications, such as in the Netherlands, from 18.5% to 21.9%. Turkey saw the total number of graduates rise by an annual average of 10.6% between 2004 and 2009, the most of any country in the region as growth is from a lower base.

Impact on governments

  • The rising numbers of university students has put considerable financial pressure on governments and higher education institutions. Unlike the USA, for instance, most universities in Western Europe are subsidised by the state and students are offered financial support, either with grants or soft loans. In some countries there are no tuition fees;
  • Larger numbers of unemployed graduates are a burden on the state, in that they do not generate tax revenue and may require financial support through unemployment benefits, for instance;
  • On the other hand, large numbers of well-qualified and skilled graduates create a positive impact on the business environment of an individual country, and are attractive for companies looking to relocate or expand in the region. This is partly why most governments are willing to provide large budgets for higher education, and especially as many Western European economies cannot compete with low-cost labour in areas such as Asia, and must focus on higher-skilled, higher-paid employment;
  • The economic downturn in the region risks a brain-drain phenomenon, however, whereby many well-qualified students may leave for better job opportunities. Similarly, foreign students who might have remained in Western Europe during a more positive economic climate, may return to their home countries if employment prospects are better;
  • Many governments in the region are attempting or planning to cut their spending on education – particularly at a tertiary level – in efforts to cut back on state deficits, following stimulus spending amid the global economic downturn of 2008-2009. This could restrict the number of students who are able to find places in higher education and may have a detrimental impact on higher educational standards or facilities.

Rising unemployment

  • Unemployment has risen sharply around the region due to the economic recession, from 7.4% in 2008 to 9.5% in 2009. The worst affected have been Spain, where unemployment rose from 11.3% in 2008 to 18.1% in 2009, and Ireland, where it rose from 6.3% to 12.2% mostly due to large lay-offs in sectors like construction and real estate;
  • In terms of unemployment by education level, figures suggest that for those with a higher education qualification it is easier to obtain a job than those with basic levels of education. The single highest group of unemployed people in most countries is those with secondary-level education, although places such as Finland (which suffers from structural unemployment and a skills mismatch) have a higher proportion of unemployed graduates;
  • However, the unemployed population of higher education graduates has grown, in general, more rapidly than any other type of education level, and particularly due to the recession which has made it more difficult for inexperienced new graduates to obtain jobs. Youth unemployment (aged 15-24) in the EU-27 rose from 18.4% in February 2009 to 20.6% in February 2010;
  • This suggests that there is a glut of higher education graduates in the labour market who are unable to find employment, or accept employment that they feel is commensurate with their education levels. Government policy may well focus on vocational training for specific professions, especially for countries such as Germany which are suffering from a skills shortage.
Unemployed population by education level in selected countries: 2008
%

Source: Euromonitor International from trade sources/national statistics.

Business opportunities

  • Per capita consumer expenditure on education in Western Europe rose by an average annual real rate of 3.9% between 2000 and 2008, although this was slower than overall growth in consumer spending (4.2% in real terms). The economic recession caused a dip of 9.0% in spending on education in 2009, however, as consumers cut back;
  • Rising household incomes have meant that more families are able to afford private education for their children, or to fund them through longer durations of education. The economic recession is likely to have temporarily reversed this trend;
  • This has created opportunities for businesses, ranging from private education providers to suppliers of education materials and even student finance companies and banks;
  • There are also an increasing number of foreign students in Western European universities. As a proportion of all students in higher education, foreign students rose from 5.7% in 2000 to 8.1% in 2009. The UK has a particular advantage thanks to the English language, which is attractive for many international students;
  • People with higher educational attainment tend to have much higher disposable incomes than those with lower educational levels. Region-wide, in US$ terms, average annual per capita disposable incomes for tertiary graduates in 2009 were US$38,808 compared to US$26,525 for those with secondary-level education and US$16,011 for those with primary-level education;
  • Countries with greater numbers of higher-education graduates will offer a more attractive consumer market than those with lower levels of education, given that the former have much greater disposable incomes for spending on non-essentials and luxuries.

Prospects

Poor employment prospects for graduates in 2010 are likely to push up unemployment rates around the region. Unemployment region-wide is forecast to be 10.7% in 2010 and 10.5% in 2011.

Many graduates may choose to return to further education rather than seek jobs in an unfavourable economic climate. Supporting tuition will place a greater strain on government finances, depending on the level of state support granted in each country, but will continue to create opportunities for businesses in the sector.

Annual per capita disposable incomes for those in Western Europe with tertiary education are forecast to rise by an average annual rate of 2.4% in US$ terms between 2009 and 2014, faster than growth for those with primary education levels but lower than the 2.6% forecast for those with secondary education, most likely due to rising graduate unemployment in the region.

Universities will continue to compete for students, especially foreign students who pay higher fees, although the European Commission’s Bologna process, which began in 1999, aims to create a more homogeneous system of higher education by 2010.