Description: This paper will explore graduates' labour market outcomes and experiences in the UK, in the context of the changing relationship between higher education and the labour market. The employability of graduates has become a central issue in educational policy, given the growing consensus that the economy has become increasingly knowledge-based at a global level (DfES, 2003). University graduates are continually seen as having access to the highest labour market returns through their investment in higher education. This paper will draw upon large-scale quantitative and qualitative data on graduate labour market outcomes and experiences (Brown and Hesketh, 2004; Elias and Purcell, 2004; Smetherham, 2004; Tomlinson, 2005). It will examine the views and experiences of students in higher education, graduates in the labour market and employers in leading-edge companies. It will further explore the extent to which students' perceptions and orientations to the labour market are matched with their realities and experiences when they enter the world of work. Where possible, it will relate this to similar studies at an international level. Methodology: This paper will draw upon extensive recent secondary data of graduates in the labour market, including the Labour Force Survey, the General Household Panel Survey and the British Cohort Study. This will be complemented by recent empirical work, both quantitative and qualitative, which has investigated the attitudes and experiences of both students in higher education and graduates in the labour market, as well as employers in graduate companies. Conclusions: The findings challenge some of the assumptions on which much UK policy is premised, in particular human capital theory. The data shows diversity amongst graduates in their labour market outcomes and the way they approach their work and employability. The data further suggests that graduates do not fair equally in terms of accessing a graduate premium or in 'cashing in' on their investment in higher education. The evidence points to discernable differences amongst graduates who are positioned differently on the basis of important factors such as gender, social and educational background and employment sector. This further highlights a mis-match in students' expectations of the labour market and their realities when they enter it, along with the under-utilisation of university knowledge and skills. The issue of graduate identity around work and employability is an important one in understanding graduate labour market experiences and outcomes. This has a significant bearing upon the way graduates approach the labour market and manage their employability. The findings of this paper have some important implications for understanding the discourse of graduate employability in the knowledge economy, and which may help future policy in this area.