Measuring Over-education

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Arnaud Chevalier

Introduction Definitions Data Determinants Wages Conclusions

Measuring Over-education

Arnaud Chevalier

Economica

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Arnaud Chevalier

Introduction

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

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Arnaud Chevalier

Definitions 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

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Arnaud Chevalier

Definitions 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:

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Arnaud Chevalier

Definitions 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}

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Arnaud Chevalier

Definitions 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 orapparently 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

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Arnaud Chevalier

Data

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 15.000 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

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Arnaud Chevalier

Data

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

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Arnaud Chevalier

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Arnaud Chevalier

Data

Distribution of answers to question:

”On reflection and in general, in what ways has your degree contributed to your getting an interesting job?”

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Arnaud Chevalier

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Arnaud Chevalier

Data

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

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Arnaud Chevalier

Determinants 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:

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Arnaud Chevalier

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Arnaud Chevalier

Determinants 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

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Arnaud Chevalier

Determinants 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) =βX1X1+βS1S1+1

OE∗=βX+b1+η Result:

50% of graduates, over-educated in their first job, made the transition to a graduate job

the effect ofis small but significant; graduates with a higher score are less likely to be genuinely over-educated

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Arnaud Chevalier

Determinants of Over-education

Some conclusions:

The selection into the different types of job appears to be based on both educational achievements andunobservable 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

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Arnaud Chevalier

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Arnaud Chevalier

Conclusions

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