This article answers the question, To what

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1 Overqualified? Recent graduates, employer needs Marc Frenette This article answers the question, To what extent, if any, have the education levels of graduates surpassed the needs of employers? In other words, what percentage of recent Canadian graduates have more postsecondary education than their main employer requires? or the most part, this question remains unexplored. It is an important issue, since overqualification has been linked to lower earnings (Sicherman, 1991; Rumberger, 1987) and to lower productivity (Tsang, Rumberger and Levin, 1991). One recent study concluded that master s graduates were more likely to be overqualified than bachelor s graduates (Lavoie and innie, 1997), but another found that they had a large earnings advantage ( innie, 1999). The latter findings seem to contradict those of Sicherman and Rumberger, a contrast this article attempts to reconcile. The term overqualified refers to someone who possesses more education than was required by the main employer (see Data sources and methodology). or several reasons, it should not be interpreted as possessing too much education. irst, graduates may use their jobs after graduation as stepping-stones to better jobs. Second, while employers may not have expected to receive job applications from highly educated candidates, they may still benefit from these graduates knowledge. Third, whether extra knowledge is required for the job or not, employers may still save time and money by screening interviewees according to their level of education. In other words, employers often use education as a proxy for skill acquisition. And fourth, it is reasonable to assume that the higher the level of education in society as a whole, the more benefits society derives. Adapted from an article in Education Quarterly Review (Statistics Canada, Catalogue no XPB) 7, no. 1 (Winter 2000). Marc renette is with the Business and Labour Market Analysis Division. He can be reached at (613) or Data sources and methodology The academic literature refers to the incidence of education above the level required as overeducation, surplus schooling or overqualification. The term overqualification seems more appropriate because it refers specifically to requirements for the job. The data used for this study are from the National Graduates Surveys (NGS) and ollow-ups to the National Graduates Surveys. 1 Three cohorts of Canadian postsecondary graduates are examined: the classes of 1982 (interviewed in 1984 and 1987), 1986 (interviewed in 1988 and 1991) and 1990 (interviewed in 1992 and 1995). The NGS provides specific field-of-study codes, 2 which the study has used to establish links between specific academic programs and the incidence of overqualification. The article focuses on graduates of college, bachelor s, master s and doctoral programs. The job requirement question used in this study is, When you were selected for that job, what level of education was needed to get the job? The question (and, thus, the overqualification variable) refers to the beginning of a particular job, not to the beginning of the respondent s employment with an employer. A respondent will not be labelled overqualified simply because the requirements of the first job with an employer were low and he or she took training in order to obtain a promotion. The level of education attained was provided by institutions, while the level of education required was provided by the graduates. The latter were asked to recollect the level the employer actually required (as opposed to the level the graduate believed was required). A graduate was considered overqualified if his or her level of education was higher than that required by the employer. Using the graduate s perception of the requirements could have restricted this research to a skills-based study, whereas using the employer s actual requirements incorporated both labour market functions of education: skill acquisition and screening (or filtering). Statistics Canada - Catalogue no XPE Spring 2001 PERSPECTIVES / 45

2 This article examines the rates of overqualification for various graduate characteristics; the rates of overqualification by at least two levels of study; and the relationship between overqualification and labour market outcomes, such as earnings and skill-use. Overqualification by at least one level In this section, percentages of overqualified graduates are analyzed across five dimensions: level of education, field of study, co-operative studies, 3 geographical region, and industry. All numbers refer to overqualification by at least one education level. The five levels of educational requirements used are below college, college, bachelor s, master s and doctorate. The study is limited to graduates who had not received a new diploma since graduating in the reference year, and had not been working part time in the interview year in order to attend school. 4 The samples are further restricted to graduates who had not obtained a higher diploma prior to the one held in the reference year. 5 Level of education Overall, roughly one-third of graduates were overqualified for their main job. The highest percentages of overqualified graduates were at the master s level a finding that applied to all cohorts and interviews. About 27% to 48% of college, bachelor s and doctoral graduates were overqualified. or master s graduates the range was 48% to 72% (Table 1). 6 or each cohort, and for all levels of education except college, the percentages of overqualified graduates dropped sometime between the second and fifth year after graduation. The rate rose for all college graduates except women in the 1990 cohort. With respect to long-term trends, post-1982 graduates with higher levels of education (master s and doctorate) were less likely to be overqualified. 7 or lower levels of education, a downward shift occurred between the 1986 and 1990 cohorts, but no significant differences were seen between the 1982 and 1990 cohorts. So why did overqualification rates fall after the mid-1980s? Changes in the labour market seem to be the main reason. The educational requirements for the jobs graduates secured (as measured by the education-required index) increased faster than the level of education attained by the graduates (as measured by the educationattained index) (Chart). 8 These aggregate numbers may not, however, tell the whole story behind the trends. It is possible that individual employers and recent graduates % increased their ability to match themselves (perhaps through better advertising and search mechanisms). Overqualification also differed by sex. Male college graduates were more likely to be overqualified than female college graduates. Male bachelor s graduates were slightly less likely to be overqualified than their female counterparts. At the master s level, men were more likely to be overqualified. Little difference was seen at the doctoral level. Study program At the college level, graduates of nursing and medical technology tended not to be overqualified. However, high rates prevailed for graduates of arts and humanities, other health (data available for women only), natural and animal sciences, protective services, secretarial services (data available for women only) and other business services. Chart: Between 1987 and 1995, overqualification rates fell for both men and women. Men Women Men Women Men Women Men Women Men Women Attained Required Source: National Graduates Surveys Note: These numbers represent indices; numbers were not available for the 1984 NGS (see note 8). 46 / Spring 2001 PERSPECTIVES Statistics Canada - Catalogue no XPE

3 Table 1: Level of overqualification for main job, by field of study 1982 cohort 1986 cohort 1990 cohort (+) 2(+) 1(+) 2(+) 1(+) 2(+) 1(+) 2(+) 1(+) 2(+) 1(+) 2(+) % College Men Arts and humanities Nursing Medical technologies Other health Electrical technologies Math and computer science General engineering Other engineering Natural and animal sciences Primary industries Protective services Social services and recreation Other social sciences Secretarial services Other business services Women Arts and humanities Nursing Medical technologies Other health Electrical technologies Math and computer science General engineering Other engineering Natural and animal sciences Primary industries Protective services Social services and recreation Other social sciences Secretarial services Other business services Bachelor s Men Education Fine arts and humanities Commerce Economics Other social sciences sciences science Other health Math and physical sciences Law Medical sciences Women Education Fine arts and humanities Commerce Economics Other social sciences sciences science Other health Math and physical sciences Law Medical sciences Statistics Canada - Catalogue no XPE Spring 2001 PERSPECTIVES / 47

4 Table 1: Level of overqualification for main job, by field of study (concluded) 1982 cohort 1986 cohort 1990 cohort (+) 2(+) 1(+) 2(+) 1(+) 2(+) 1(+) 2(+) 1(+) 2(+) 1(+) 2(+) % Master s Men Education Fine arts and humanities Commerce Economics Other social sciences sciences science Other health Math and physical sciences Law Medical sciences Women Education Fine arts and humanities Commerce Economics Other social sciences sciences science Other health Math and physical sciences Law Medical sciences Doctorate Men Education Fine arts and humanities Commerce Economics Other social sciences sciences science Other health Math and physical sciences Law Medical sciences Women Education Fine arts and humanities Commerce Economics Other social sciences sciences science Other health Math and physical sciences Law Medical sciences Source: National Graduates Surveys 48 / Spring 2001 PERSPECTIVES Statistics Canada - Catalogue no XPE

5 At the bachelor s level, both male and female graduates of engineering and computer science, law, and medical sciences had low rates of overqualification, as did female graduates of education. Both male and female graduates of fine arts and humanities and other social sciences reported high rates, as did male graduates of economics and agricultural and biological sciences. Within the master s category, education graduates tended to have high incidences of overqualification, while the reverse was true for other health graduates. Based on available evidence, high rates were apparent among medical science graduates, such as podiatrists and dermatologists. Doctoral graduates in education had high rates of overqualification, while the reverse was true in agricultural and biological sciences. Co-op graduates at the college level were generally as likely to be overqualified as non co-op graduates; those at the bachelor s level, less so. Master s graduates of both programs had roughly equal rates (Table 2). 9 The rates of overqualified graduates by region are related to each region s needs for skilled workers, as well as to the desire of such workers to live there. An economically stagnant region may require very few skilled workers, which would tend to increase the rate of overqualification if these workers were to remain. However, if they were to move to an area where their skills were in greater demand, this would reduce regional differences in rates of overqualification. Because recent graduates tend to be more mobile than the general population, 10 regional differences for each level of education were small over the study period, supporting the above hypothesis. College graduates, however, were less mobile than university graduates and had a lower dispersion in overqualification rates. Considerable differences appeared in the rates of overqualification across industries. Generally, education and health services had the lowest percentage of overqualified graduates. This held true for all levels of education except the master s degree, where industry and overqualification did not appear to be linked. or all levels of education, the private and public sectors employed similar percentages of overqualified graduates. Overqualification by two or more levels Unless otherwise stated, this section refers to the percentages of graduates overqualified by two or more levels. The six levels of educational requirements are below trade vocational, trade vocational, college, bachelor s, master s and doctorate. Higher-level graduates were less likely than other graduates to be overqualified by two or more levels. This is despite the greater number of possible levels below their own. Master s recipients, as previously stated, had the highest rates of overqualification, owing to their high proportion in jobs requiring a bachelor s degree. This suggests that, although a given job required a bachelor s, the employer may have preferred to make use of the higher degree, thus filtering out the bachelor s graduates early in the process. (This finding may help explain why master s graduates, often in jobs for which they may have been overqualified, though rarely by two or more levels, earned more than bachelor s graduates.) Roughly 31% to 43% of college graduates, 19% to 29% of bachelor s graduates, 8% to 17% of master s graduates, and 9% to 21% of doctoral graduates were overqualified by two or more levels (Table 1). This trend was less evident in the 1990s than for earlier cohorts, which contradicts the common view that recent graduates have held more burger-flipping jobs than in the past. The dispersion by field of study for college and bachelor s graduates was similar to the general results discussed earlier (see Study program ). Graduates of other health fields at the bachelor s level typically experienced much lower overqualification rates relative to other fields. At the master s level, graduates of engineering and computer science, as well as other health graduates, were unlikely to be overqualified by two or more levels. Results for doctoral graduates mirrored those noted earlier by study program. Is overqualification linked to earnings and skill use? The study employed a use-of-skills index 11 for three classes of worker: not overqualified, overqualified and overqualified by at least two levels. Although all workers classified in the third category were also in the second, the converse was not necessarily true. Comparisons between the first category and the other two are therefore the most relevant. Statistics Canada - Catalogue no XPE Spring 2001 PERSPECTIVES / 49

6 Table 2: Graduates overqualified for main job, by co-op status, region and industry Men Women 1982 cohort 1986 cohort 1990 cohort 1982 cohort 1986 cohort 1990 cohort College % Non co-op Co-op Atlantic Quebec Ontario Prairies British Columbia and the Territories Public Semi-public Private Bachelor s Non co-op Co-op Atlantic Quebec Ontario Prairies British Columbia and the Territories Public Semi-public Private Master s Non co-op Co-op Atlantic Quebec Ontario Prairies British Columbia and the Territories Public Semi-public Private Doctorate Non co-op Co-op Atlantic Quebec Ontario Prairies British Columbia and the Territories Public Semi-public Private Source: National Graduates Surveys 50 / Spring 2001 PERSPECTIVES Statistics Canada - Catalogue no XPE

7 Table 3: Mean earnings and use of skills by sex, education and level of overqualification (OQ) Mean earnings, education required Mean earnings, education attained Skills index* College Bachelor s Master s College Bachelor s Master s Doctorate College Bachelor s Master s Doctorate 1995 $ ( 000) Men 1982 cohort 1984 Not OQ (+) (+) Not OQ (+) (+) cohort 1988 Not OQ (+) (+) Not OQ (+) (+) cohort 1992 Not OQ (+) (+) Not OQ (+) (+) Women 1982 cohort 1984 Not OQ (+) (+) Not OQ (+) (+) cohort 1988 Not OQ (+) (+) Not OQ (+) (+) cohort 1992 Not OQ (+) (+) Not OQ (+) (+) Source: National Graduates Surveys * See note 11. Statistics Canada - Catalogue no XPE Spring 2001 PERSPECTIVES / 51

8 Two dimensions of earnings were considered: for two people holding jobs requiring the same level of education, did more education matter, and for two people possessing the same level of education, did the educational requirements of the job matter? Despite equal levels of requirement, people with more education generally earned more. or equal levels of educational attainment, higher requirements generally led to higher earnings for college and bachelor s graduates only (Table 3). or graduates of master s or doctoral programs, the level of education required did not seem to influence earnings greatly. These graduates had more options available to them and could thus obtain jobs with lower requirements and competitive salary packages. If employers did indeed use education as a screening device in the interview process, overqualification and skill use would not necessarily be negatively linked, though this study did find such a relationship for college and bachelor s graduates. Graduates who were overqualified used their skills to a lesser extent than their classmates who were not. or holders of graduate degrees, the drop in skill use was relatively small. As noted earlier, the high proportion of master s graduates who held jobs requiring a bachelor s degree still tended to use their skills to a large extent. 12 In other words, some of the filtering by employers may have been justified. Even when the typical master s graduate and the typical bachelor s graduate filled jobs with identical educational requirements, the former still enjoyed an earnings advantage, perhaps in recognition of relevant skills not officially required for the job. Summary Throughout the 1980s and 1990s, roughly one-third of graduates were overqualified for their main job. Depending on the year of graduation, education level and sex, anywhere from 27% to 48% of recent college, bachelor s and doctoral graduates were overqualified for their main job. At the master s level, the range was 48% to 72%. Previous studies have pointed to an earnings advantage for a master s over a bachelor s degree, while others have linked overqualification to lower earnings. This article makes two observations that may reconcile these findings. irst, master s graduates are less likely to be overqualified by two or more levels. Second, overqualification is not linked to a large drop in skill use among these graduates. or bachelor s graduates, large drops in skill use are linked to overqualification. Over the study period, the gap between the average level of education attained and that required narrowed considerably. This is due partly to the increased demand from employers for skilled workers, but could also be linked to an increased ability of employers and graduates to match themselves. Certain differences by sex were also found. Men at the college and master s levels were more likely to be overqualified than were women, whereas the reverse was true at the bachelor s level. No important differences occurred at the doctoral level. Considerable differences appeared across fields of study at the college and bachelor s levels. Holders of graduate degrees from most fields had roughly equal probabilities of being overqualified. Co-operative studies seemed to reduce the incidence of overqualification at the bachelor s level only. Small regional differences were also evident, owing perhaps to the tendency of recent graduates to expand their job search to a national level. The one exception was college graduates, who were generally less mobile than other graduates. inally, the data indicate that the semi-public sector (education and health services) had a much lower tendency to employ overqualified graduates than did the public and private sectors. This is not surprising, given that many employees in the semi-public sector are professionals (doctors, teachers and nurses). More education did lead to higher earnings for a given level of requirement; however, finding a job that required more education also led to more earnings (at least for college and bachelor s graduates). It appears that graduates of master s and doctoral programs had more options available to them; whether or not their job required as much education as they possessed did not seem to affect their earnings. Overqualified college and bachelor s graduates also tended to use fewer of their skills than did their non-overqualified colleagues. or holders of graduate degrees, no significant loss in skill use was detected. Perspectives 52 / Spring 2001 PERSPECTIVES Statistics Canada - Catalogue no XPE

9 n Notes 1 This study refers to all of these surveys as the NGS. 2 The NGS has five-digit University Student Information System (USIS) and Community College Student Information System (CCSIS) field-of-study codes. 3 or a more detailed look at co-operative education see Darch (1995). 4 Those who had received a new diploma since the reference year had less time to search for a suitable job, whereas those who worked part-time hours because they were attending school were too occupied to work full-time hours. 5 This restriction was required because no specific information is available for such diplomas (for example, the date obtained or the field of study). 6 Unless specific years are mentioned, all results in this study refer to the entire period. 7 One factor that could explain this long-term downward trend is a possible brain drain to other countries. However, little evidence is available to support this hypothesis. 8 The index is calculated as the mean of the education attained (or required), in which a doctorate obtains a score of 100, a master s 80, a bachelor s 60, a college diploma 40, a trade vocational diploma 20, and anything lower 0. Results for 1984 are unavailable since it is not possible to distinguish between jobs requiring a trade vocational diploma and jobs requiring less training. 9 Reliable results for doctoral graduates are not available, because of low sample sizes. 10 Recent graduates may be unattached or simply more willing to move to other provinces in order to start their career. See Burbidge and innie (forthcoming) for a detailed description of the mobility of recent baccalaureate graduates. Their results show that recent graduates are considerably more mobile than the general population. See innie (1998) for a description of the mobility patterns of the general population. 11 or the 1982 and 1986 cohorts, this was based on the question, Are you using the skills acquired through your educational program in your job? Positive responses were given a score of 100 and negative responses a score of 0. or the 1990 cohort, this was based on the question, To what extent do you use the skills acquired through the educational program in your job? This index can range from 0 to 100 (100 for the greatest use of skills, 66.7 for the next greatest, 33.3 for the third greatest, and 0 for the lowest). 12 This statement addresses a finding by Lavoie and innie (1997) of a high rate of overqualification among master s graduates. The authors claimed that these results may well call into question the use to which these graduates skills have been put and the relevance of doing a master s degree n References Burbidge, J. and R. innie. The Geographical Mobility of Baccalaureate Graduates. Ottawa: Human Resources Development Canada, Applied Research Branch, forthcoming. Darch, J. Labour market outcomes for university co-op graduates. Perspectives on Labour and Income (Statistics Canada, Catalogue no XPE) 7, no. 3 (Autumn 1995): innie, R. Post-secondary graduates: Holding their own in terms of employment rates and earnings patterns. Canadian Business Economics 7, no. 4 (December 1999): Interprovincial Mobility in Canada: A Longitudinal Analysis. Research Paper Series, W-98-5E.a. Ottawa: Human Resources Development Canada, Applied Research Branch, Lavoie, M. and R. innie. Science and technology careers in Canada: Analysis of recent university graduates. Education Quarterly Review (Statistics Canada, Catalogue no XPB) 4, no. 3 ( all 1997): Rumberger, R. W. The impact of surplus schooling on productivity and earnings. The Journal of Human Resources 22, no. 1 (Winter 1987): Sicherman, N. Overeducation in the labor market. Journal of Labor Economics 9, no. 2 (April 1991): Tsang, M.C., R.W. Rumberger and H.M. Levin. The impact of surplus schooling on worker productivity. Industrial Relations 2 (1991): Statistics Canada - Catalogue no XPE Spring 2001 PERSPECTIVES / 53

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