Rising Graduates Unemployment and the Changing Psychological Contract: Implications for HR Managers

The appropriateness of education and workplace relationships has been a topic of debate for close to a century now. Anchored on the popular aphorism ‘get an education-get a good job’ the various facets of the empirical relationships between education and vocational behavior have been explored in details from sociological, management and business administration, psychology, industrial relations, and educational perspectives (Fitzgerald & Rounds, 1989; Fitzgerald, 1986, p. 254). The interests in employability of graduates and graduate outcomes are subjects of interests to researchers owing to two principle reasons. First, the promise of well-paid employment fuels social demand for higher education, and, secondly, because governments view the expansion of higher education and the consequent increase in the numbers of graduates in the labor markets as essential for a successful economy (Brenna, 2010). Within the contexts of the labor markets, important questions relate to the basis of employers hiring decision, the competences considered critical by employers, the effectiveness of the schools for developing employability, the outcomes of non-traditional learning experiences, and so forth (Fitzgerald, 1986). Conceivably, research in vocational behaviors has reflected demographic changes, with themes of career and life transitions and person/situation matches for minorities, women, and older workers, evident throughout the 70s and 80s (London & Greller, 1991).

Conversely, since around the late 70s, many countries, in all parts of the world, are facing a labor market mismatch of university-educated workers (Richards, 1984a&b; Glytsos, 1989, 1990). In the early 90s, Glytsos (1990) pointed out that, in the frameworks of neoclassical labor markets conditions and human capital theory, such mismatches result not only in the unemployment of graduates but also in the reductions of their relative wages, and consequently, in their substitution for non-university educated workers. In recent times, the expansion into higher education, in combination with the recent economic recession, has especially resulted in high college graduate unemployment rate and competitive labor markets in majority of the worlds’ economies (Wu, 2010; US Bureau of Labor Statistics, 2011; Eurostat, 2011; Ngozo, 201; Giles, Park & Zhang, 2005). In US for example, the unemployment rate in January 2011 stood at 9.8% as compared to 3.8% documented in 2001 (US Bureau of Labor Statistics, 2011). In Europe, the unemployment rate jumped to unexpected rates of 9.9% in October, the highest since the August of 1998. In Taiwan, government reports reveal that graduate unemployment rates rose from 2.63% in 1997 to 5.86% in June 2009 (Wu, 2010). Meanwhile, Giles and colleagues (2005) report that the true unemployment rate in China, for the urban permanent residents, increased from 6.1% to 11.1%, and from 4.0% to 7.3% for all urban residents, in 2002. African wide unemployment rates meanwhile stands at a high of 8.2% (Ngozo, 2011). These high statistics would posit that while most of the talent management literature in the early to mid 2000’s was premised on the idea of talent shortages, the past few years have seen numerous organizations downsizing operations and reducing workforces, as a result of the recent global and financial conditions (Tarique & Schuler, 2010). The current economic hardships thus posit that episodes of voluntary and involuntary unemployment increasingly characterize everyone’s working life (Hartenstein & Waugh, 1994). Conversely, while, ceteris paribus, graduates –with better GPAs- are more likely to be employed (Li & Zhang, 2010), recent higher education graduates are experiencing problems in finding jobs (Tarique & Schuler, 2010).

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