Britain’s failure to create sufficient high-skilled jobs for its rising proportion of graduates means the money invested in education is being squandered, while young people are left crippled by student debts, warns a new report.

The mismatch between the number of university leavers and the jobs appropriate to their skills has left the UK with more than half of its graduates in non-graduate jobs, one of the highest rates in Europe, according to research commissioned by the Chartered Institute of Personnel and Development (CIPD).

The trade group for the human resources sector said graduate over-qualification has reached “saturation point” and is squeezing lower qualified workers out of jobs. The trend also had serious consequences for the UK’s already woeful productivity performance.

“The assumption that we will transition to a more productive, higher-value, higher-skilled economy just by increasing the conveyor belt of graduates is proven to be flawed,” said CIPD chief executive Peter Cheese.

“Simply increasing the qualification level of individuals going into a job does not typically result in the skill required to do the job being enhanced – in many cases that skills premium, if it exists at all, is simply wasted. This situation is unsustainable given that the government estimates that 45% of university graduates will not earn enough to repay their student loans.”

Graduate over-qualification appears to be a particular problem for the UK, according to international comparisons in the report, “Over-qualification and skills mismatch in the graduate labour market.”

The authors said the UK has the second highest graduation rate in the OECD group of mainly advanced economies, at 54%, with only Iceland having a higher rate. By comparison, Germany has a graduation rate of just 31%, the report says.

UK’s poor record

Graduates in non-graduate jobs, 2004 and 2010. The CIPD report noted a rise in most European countries in graduates in what it deems “non-graduate jobs” between 2004 and 2010. Illustration: European Social Survey, report authors' own calculations

Using figures from the European Social Survey, the report charts a rise in most countries around the region in the proportion of graduates deemed to be in non-graduate jobs between 2004 and 2010. The authors highlight that the 2010 figure for the UK, at 58.8%, is exceeded only by Greece and Estonia. “In contrast, countries such as Germany, the Netherlands and Slovenia, which have a history of strong vocational training, have 10% or less of graduates in non-graduate jobs,” they add.

The CIPD said the findings raised urgent questions over getting better value out of the UK’s education system, raising the profile of alternatives to a degree such as apprenticeships, and how employers invest in further training.

“It’s crucial we as a nation take stock now of whether our higher education system is delivering desired returns for graduates, for organisations and society,” said Cheese.

“The government needs to ensure its productivity plan includes a specific focus on creating more high-skilled jobs and work with employers, particularly SMEs, and with key stakeholders like Local Enterprise Partnerships and Business Growth Hubs,” he added.

The report follows a claim from the Office for National Statistics in 2013 that almost half of recent graduates in the UK were in non-graduate jobs.

But more recent figures have pointed to an improving jobs market for graduates and the latest findings on those who left university last summer showed professional employment was up and salaries were higher. Two-thirds of graduates from full-time degrees were in posts classified as “professional employment”, according to the Higher Education Statistics Agency (Hesa).