Can you have too many university graduates in the marketplace all looking for work? Yes, according to new research. This global trend highlights the effects a skills mismatch – between graduates and businesses, and businesses and universities – has on economic health.

Over-qualified students are now populating jobs that, traditionally, had been taken up by school leavers such as banking and real estate, to name just two. This is according to new research from Chartered Institute of Personnel and Development (CIPD), the peak body representing HR professionals in the UK. Nearly 60 per cent of graduates are in non-graduate jobs, the study found. This is coupled with another report from earlier this year, which found that 30 per cent of UK graduates regretted their degree. 

The phenomenon isn’t confined to the UK, though. In Australia, more than 30 per cent of graduates were unable to find work in 2014, with many opting to stay on at university for further study. This is the highest the figure has been since Graduate Careers Australia began measuring in 1982.

When you factor in the high cost of a university education that leaves graduates saddled with debt, it raises the question of whether degrees offer good return on investment, or if there’s a skills mismatch. Business leaders have argued for some time that alternative training, such as high-quality apprenticeships that match skills to shortages, would be a better option – not only for individuals but also or the economy.

Peter Cheese(FCPHR), CIPD chief executive, told the Guardian newspaper: “This report shows clearly how the huge increase in the supply of graduates over the past 35 years has resulted in more and more occupations and professions being colonised by people with degrees, regardless of whether they actually need them to do the job.”

Meanwhile, much needed skills and training are being abandoned as apprenticeship funding is cut. Nationally, the number of apprentices and trainees as of 31 March 2016 was 286,500, a decrease of 10.2 per cent from 31 March 2015. The over-abundance of university graduates opting for jobs that don’t meet their career expectations ultimately has a demoralising effect on them and is bad for business, says Cheese.

“This situation is bad for employers and the economy, as this type of qualification and skills mismatch is associated with lower levels of employee engagement and loyalty, and will undermine attempts to boost productivity.”

While there is no suggestion that countries should give up on ambitions to have a world-class education system, the changing economic needs of nations demands that students are offered better career advice, he suggests.

Many in academia and business argue that practical work experience needs to happen long before young people commit themselves to a course or career path. This will mean they they get real insight into what a job entails and can decide whether it’s the right choice for them.

Only one in seven undergraduate students in the natural and physical sciences participates in an industry placement, for example. And only three in 100 participate in a longer term placement, according to the Office of the Chief Scientist.

Australia’s former Chief Scientist, Professor Ian Chubb AC, has said changes are needed, as studies consistently show that industry placements were invaluable to students of STEM (science, technology, engineering and mathematics).

“In the decades ahead, we will need people trained in STEM to be working in every industry, in many roles, including roles we haven’t yet imagined,” Chubb says.

The problem cited by some experts is that universities are too slow to react to the rapidly changing developments occurring in business. This means that by the time a graduate is ready for work, his or her skills and knowledge is already out of date. What you end up with is a large highly-skilled young workforce that, nevertheless, lacks the requisite skills to do the job.

And it’s a global problem. In India, for example, among some disciplines the skills gap appears to be staggering – 75 per cent of IT graduates are deemed ‘unemployable’, 55 per cent in manufacturing, 55 per cent in healthcare and 50 per cent in banking and insurance, according to a Higher Education in India report.

Research by the National Centre for Vocational Education Research (NCVER) last year suggested that reforming training qualifications could provide workers with stronger capabilities, helping them to better adapt to a changing labour market and reducing the growing skills mismatch.

Linking qualifications and the labour market through capabilities and vocational streams brings into question whether the answer to Australia’s skills paradox is in providing more generalist degrees, or placing greater emphasis on generic or employability skills in the vocational education and training (VET) sector.

Narrowly focused qualifications can lead to a skills mismatch as graduates move into the workforce, it says. The NCVER report suggests developing qualifications that prepare students for ‘vocational streams’, based on occupations with shared practices, knowledge, skills and attributes.

“This would provide graduates with more transferrable skills, helping them adapt to a changing labour market.”