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26/07/2016

Economist: There is a role for EU policy on overeducation among young people

Education

Economist: There is a role for EU policy on overeducation among young people

Ireland, Spain and Greece host Europe's most overeducated youth population.

[Novatis AG/Flickr]

SPECIAL REPORT / If overeducation is explained by factors such as excess supply of graduate labour, then there is a role for policy, says Adele Bergin.

Adele Bergin is a senior research officer at the Economic and Social Research Institute (ESRI) in Dublin.

Bergin spoke with EurActiv’s Henriette Jacobsen.

What are the common characteristics among those countries where overeducation is at the highest, or where it is on the rise?

Although there is a lot of variation across countries, we did find some patterns or similarities in the factors that determine overeducation across EU countries. Our results suggest that overeducation tends to rise if there is an increase in the share of workers with temporary employment contracts, an increase in the graduate share of employment, or an increase in the economy-wide unemployment rate. In addition, overeducation growth tends to fall for any given rise in the unemployment rate of low-skilled workers, and for any given rise in the percentage of workers actively seeking alternative employment.

What was the impact of the financial crisis on overeducation? 

Although this is beyond the scope of our study, it is important to note that if we look at the trends in overeducation rates across EU countries over time, for most countries, there was no significant change in the trend of overeducation during the financial crisis.

What was the worst example/case of overeducation that you came across during your research?

Our findings show that overeducation tends to rise over time in a number of European countries. However this is by no means a universal pattern, as overeducation was found to be static, even declining, in some European countries. Indeed, it is a positive finding that overeducation has not risen in the majority of countries in our study.  Our estimates suggest that overeducation rates are highest in some of the EU peripheral countries, particularly in Spain, Ireland and Greece.

Did you find that there were specific sectors where overeducation was more common?

We do not have information on field of study in our quarterly dataset, so we could not examine this question. However other research has shown that overeducation rates vary considerably across fields of study, with lower rates for “professional” fields of engineering, mathematics, sciences, law and medicine, while graduates from fields such as arts and social sciences tend to have higher rates of overeducation.

Do you think that governments in the EU are aware of the problem and doing enough to prevent it?

It is important to think about the causes and drivers of overeducation.  A number of possible effects could potentially explain the existence and persistence of overeducation at a national level. Overeducation could arise due to the supply of educated labour outstripping demand, primarily as a result of the tendency of governments in developed economies to continually seek to raise the proportion of individuals with third-level qualifications. Alternatively, it may be that the quantity of educated labour does not exceed supply, but that there exists imbalances in composition, i.e. individuals are being educated in areas where there is little demand, leading to people from certain fields of study being particularly prone to overeducation.

Finally, labour demand and supply might be perfectly synced, yet overeducation might still arise due to frictions arising from asymmetric information, institutional factors that prevent labour market clearance or variations in individual preferences related to either job mobility or work-life balance. If overeducation is explained by factors such as the excess supply of graduate labour, or imbalances in composition, then arguably there is a role for policy.

While there was a relatively high degree of cross-country consistency in the direction of particular variables on the growth of total overeducation, the direction of impacts for youth overeducation were more inconsistent across countries. The study indicates that there are strong similarities in both the general evolution, and the factors determining total overeducation across many European countries. However, while labour market variables were found to be important in determining youth overeducation, observed impacts varied substantially across countries suggesting that a bespoke policy response is likely to be necessary in most instances.

Our study confirms the view that imbalances between the demand and supply for educated labour are an important influence in explaining the existence and development of overeducation. Our results indicate that the growth in overeducation could be more effectively managed in most European countries by accounting for the level and composition of labour market demand within the educational planning process. The results suggest that greater attention should be given to the capacity of the labour market to absorb any given increase in educational supply, taking specific account of both the level and composition of current and future labour demand.

What are the consequences for countries with high levels of overeducation among young people – for example, migration?

This is beyond the scope of the study. However, other research has shown that, in terms of consequences, mismatched workers have generally been found to suffer substantial penalties in terms of both earnings and job satisfaction. 

What are the consequences for the individual if nothing is done about overeducation (for example are these people more likely to become depressed, to be forced into self-employment or moving to another country)?

This is beyond the scope of this study. However, there is a large (body of) literature that highlights the important implications overeducation has at an individual level. Overeducated workers, on average, earn less and have lower levels of job satisfaction than their well-matched counterparts. They also tend to have higher levels of job mobility, although they do not necessarily move to better job matches.