Measuring Over-education

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1 2003

2 Past fifty years, a cosiderable increase in participation in higher education in UK In particular, in 1985 a cohort attending tertiary education has soared from 15% to 33% Evidence of an excess supply; 40% of UK graduates have too much education for their job Evidence of 62% of male graduates, over-educated in their first job remained in a sub-graduate position six years after graduation Aim: measure over-education, analyse how it affects wages, propose policy recommendations

3 of Over-education Some definitions of over-education used in some empirical work jobs are homogeneous in their skill requirements a job analyst definition of the skill/educational requirement for each occupation (as available e.g. Dictionary of Titles) a measure of a worker s self-assessment of educational requirements a distribution of education calculated for each occupation, employees generally one standart deviation more than the mean over-educated

4 of Over-education Alternative Definition: heterogeneity of graduates two types of graduates, clever (g) and under-achiever (u) three types of job differing by their skill requirments: 1 graduate (G), 2 non-graduate jobs with intermediate skill level (upgraded job, U), 3 non-graduate job with low skill level (L) possible outcomes:

5 of Over-education How the dichotomy of the over-educated population was made: A measure of over-education: using the standard occupation code (2-digit), occupations that require degrees (graduate jobs) are: 1 managers and administrators 2 professional occupations 3 associate professional and technical occupations

6 of Over-education A measure of job satisfaction: How dis/satisfied are you with the match b/w your work and your qualifications? classifies the graduates in a non-graduate job as genuinely or apparently over-educated six possible answers ranging from very dissatisfied to very satisfied very dissatisfied and disatisfied answers are grouped to generate a dichotomous variable apparently over-educated: over-educated workers in upgraded jobs, satisfied with their match genuinely over-educated: clever graduates in upgraded jobs and under-achievers in low-skill jobs

7 Collected by postal survey in winter of 1996: a sample of two cohorts of UK graduates from 1985 and 1990 graduates from 30 higher education institutions sample of individuals only first-degree graduates younger than 25 on graduation full-time employees in 1996 living in UK without health problems sample of 4844 individuals

8 Questionnaire covers wide range of topics: schooling, academic information, family background, employment history (1, 6 and 11 years after graduation longitudinal component) dis/satisfaction with the match b/w education and employment allows for introduction of heterogeneity in graduates and jobs(apparently and genuinely over-educated) Was the degree gained in 1985/1990 a requirement in the job specification for your main employment? includes self-assessment measure

9

10 Distribution of answers to question: On reflection and in general, in what ways has your degree contributed to your getting an interesting job?

11

12 Some conclusions: Within the over-educated population, apparently over-educated have better academic credentials than genuinely over-educated suggests that latter group is composed mostly of (Lu) rather than (Uu) the skill differential observed b/w groups confirms that over-education originates from a lack of skills

13 of Over-education Hypothesis: over-education stems from heterogeneity in the skills of graduates Latent Model: OE = βx + η X: a vector of educational characteristics η: normally distributed term of unobservable components of over-education This latent model is unobserved, so we have the ordinal variable:

14 of Over-education

15 of Over-education

16 of Over-education 1 Model 1: selection between a matched job and a job for which a graduate is over-educated is based on educational skills differences between apparent and genuine over-education are not significant 2 Model 2: marginal effects of over-education including 12 dummies for subject of graduation inclusion of dummies has no effect on previous results subjects in high demand (medical science, mathematics, education, engineering): safeguards against over-education students from biology, agriculture, languages and humanities are more at risk than economists of being over-educated 3 Model 3: subsequent qualifications more qualification reduces the likelihood of over-education

17 of Over-education One step further: including unobserved skills identification relies on individuals that change category from one period to the next estimation of earning in the first job deviation between the expected and observed earning proxy for unobservable skills affecting productivity ln(w) = β X 1 X 1 + β S1 S 1 + ɛ 1 OE = βx + ɛ 1 + η Result: 50% of graduates, over-educated in their first job, made the transition to a graduate job the effect of ɛ is small but significant; graduates with a higher score are less likely to be genuinely over-educated matched graduates and apparently over-educated graduates have similar unobserved skills

18 of Over-education Some conclusions: The selection into the different types of job appears to be based on both educational achievements and unobservable skills Graduates with better education credentials obtain matched jobs For the less talented graduates, the selection between upgraded and non-graduate jobs is based on their unobservable skills graduate population is not homogeneous in skills

19 Over-education and

20 Over-education and

21 Over-educated can be divided in three groups: matched graduated, apparently and genuinely over-educated Over-educated (standing for the two last groups) have less academic credential than matched graduates Apparently over-eduacated have similar unobserved skilled as matched graduates Genuinely over-graduated have a much lower skill endowment Over-education is associated with a pay penalty of 5%-10% for apparently over-educated and 22%-26% for genuinely over-educated

Measuring Over-education

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