Over Education in the Graduate Labour Market - Research Paper Example

Over-Education in the Graduate Labour Market Executive Summary The UK government has come up with policies that have seen the number of graduates in the labor force within the past decades improve. The result has been a wider pool of graduates than there were a few decades back. However, this improvement has had its setbacks as well as more graduates are accepting jobs that do not require a degree. Nonetheless as studies show, this is just a coping mechanism as finally most of that match their skills. This paper also captures how over education affects the productivity and job satisfaction of graduates facing this crisis. Over-education in the graduate labour market 1.0 Introduction The UK economy has increased the number of graduates in the labour force in the past two decades. In the UK, six in every ten individuals is a graduate. More people have refused to settle for the school exams such as GCSEs or A-levels by going a step further to get graduate level education. Among the European Union countries, the UK has the highest number of adults who have graduate-level qualifications (Zhang, 2007). Despite the financial crisis, investment in higher education in the UK is still high. The share of graduates has grown by 10 per cent, but the prevalence of overeducated graduates has remained stable at 30 percent (McGuiness, 2006). 2.0 The UK graduate labour market in general More women and the youth from minority groups have pursued higher education in recent years. These two groups have seen a better presentation in the graduate group than the workforce. Studies also show that graduates expect to get graduate level jobs three years or later after graduation and has settled for the idea to build a foundation for their careers (Zhang, 2007, p.46). In other studies, it is right to say that higher education may not be recognising the potential of non-traditional students. Only traditional students have higher degree classifications, higher satisfaction ratings in terms of experience and better outcome in the workforce. Graduates stand greater chances of attaining employment than non-graduates. They also stand a better position to hold management level jobs than the latter. Research also shows non-graduates between the ages of 21 and 30 have the highest rate of unemployment (Walter & Zhu, 2007). With time, graduate’s wages increase annually unlike that of non-graduates. Nonetheless, there are some jobs that are non-graduate, which require graduate skills from a degree. Most employers are focusing on skills and quality than knowledge. It is common practice, therefore, for graduates to take up a non-graduate job or voluntary work to add to their CV. 3.0 Over-education and its incidence in the UK graduate labour market According to research, approximately one in every five graduates in the UK is too educated for their job (Chevalier & Lindley, 2007, p.56). There is the widely-held notion that college education is a good investment for a successful future. Despite being one of the most crucial changes in the modern world, rising higher education brings about the problem of over education on remuneration. Studies have shown that graduates accept jobs that do not require skills attained at university level (O’Leary, &Sloane, p.101). The discrepancy between the requirements of the labour market and the skills acquired by graduates reduces the rate of return in education and results in skill under utilisation. Overqualified graduates have the same or lower wages than graduates who have the same qualifications and are in the right jobs. These overqualified graduates also show a consistent pattern in low job satisfaction. Another indication is that graduates may have accepted a lower paying job because of convenience factors such as location or little input required. Over qualification in the UK does not bring about job dissatisfaction if not coupled up with a skill mismatch (Green, & Mcintosh, 2007). 4.0 Factors leading to over education Over-education results when individuals have more than enough skills to perform their job functions. The implication of over education is that there is an inefficient allocation of resources. The government has invested numerous resources in the adoption of higher education and, consequently, more people have attained graduate level education than the previous decade (Dillow, 2007). Over-education is a more current phenomenon, and there is a need to fix the ensnaring problem. There are various theories that explain the phenomenon of over education: 4.1 The human capital theory The human capital theory explains the causes of over education. The theory assumes that increased productivity by the worker is an increasing task of the human capital level. It also implies that the attributes of the employee controls earnings. Over-education causes the correlative wages of graduates to fall. Employers have a wider pool of educated labour and substitute low-skilled labour with higher skilled labour. The Human capital theory predicts the lack of equilibrium in the occurrence of over education. The economic costs associated with over education are only temporary as companies adjust their production processes, and people invest less in education (Carmen & Pastore, 2013). 4.2 The Career mobility theory Career mobility theory implies that new entrants into the labour force accept jobs that they are more qualified for to gain experience through training. The reason to this culture is so that these graduates can improve their eligibility to secure a job in the future. The implication that the theory makes is that over education is a characteristic of a well-functioning workforce. It also assumes that training, education and experience are interchangeable and directly related to earnings and productivity. Individuals only take lower jobs because they believe in time they will rise the ranks to achieve top management positions. 4.3 The job competition theory The job competition theory states that graduates compete for the most paying jobs in the market. There arises a labour queue when companies match well-educated graduates to high paying jobs and a job queue crops up through competition by workers. Companies classify workers according to the prospective training costs. Highly educated graduates incur less on the job training costs. The assumption in this theory is that a graduate’s education has no role in determining earnings. The primary determinant of earnings is the job characteristics. Over-education, results to non-graduates settling in low-skill jobs, unemployment, and accepting low paying jobs. Over education has a negative implication on the economy by creating uneven investments in education and significant income inequalities (Sharpes, 2010). 4.4 The assignment theory The assignment approach incorporates both demand and supply in the study of over education. The assumption is that the graduate’s education is in positive correlation with their productivity. To this effect, not all graduates have the same amount of productivity in performing the same task. Over-education occurs when graduates get jobs that they do not have a comparative advantage in relation to their skills. Skills are not fully utilized and hence a reduction in productivity (Sharpes, 2010). Implementing government policies and matching jobs with the best-skilled graduates are some of the solutions to over education. There are more theories such as the spatial mobility theory, the differential over qualification theory and job signaling theory that further explains the phenomenon of over education. When over education arises, the question of investment in education becomes apparent as the supply of an educated workforce exceeds the demand. In the face of the apparent problem of over education, the advantages of having a highly educated population demean the issues brought by over education. 5.0 Over education and Job Satisfaction Graduates who are over-educated have a low job satisfaction. It is quite a paradox that graduates in well-paying jobs are the least happy. The more skilled they are, the more expectations they tend to have and chances are that these expectations do not materialize. However, this is not to mean that over qualified graduates have low wages. They usually have lower wages than those who have correctly matched jobs. Wages are a determinant for job satisfaction. When graduates in mismatching jobs compare their salaries to those with matching jobs there ensures a feeling of job dissatisfaction (Felstead et al., 2007). Overeducated employees find their promotion prospects lower than those who adequately educated. Employers, on the other hand, do not upgrade the tasks given to the over-educated (De Grip, 2008). 6.0 Over Education as a Short Term Phenomenon  The UK has seen a phenomenal change in the number of people with tertiary degrees in recent years. The ensuing question has been whether the demand for graduates has matched with the supply. Various studies have claimed that there are more graduates in the current decade employed in jobs that do not match their skills in the UK (Walker & Zhu, 2008). This substantial increase in the number of graduates within a short period has also contributed to over education. The phenomenon of over education is short term because over-educated graduates try as much as possible to get jobs that match their skills at any opportune time. The friction of the labour market also contributes to this phenomenon. Research findings say that 38 per cent graduates are over-educated in their first job, and only 30 percent stayed in that for the next six years. Firms usually upgrade the tasks they give to graduates hence making the paradox of over education a short-term phenomenon (Lemieux, 2006). Over-education, exist for as long as it takes graduates to find jobs that match their skills and declines with occupational versatility. 7.0 Implications of over-education for Universities and Government policy makers To manage the large number of school leavers joining tertiary institutions, Universities have added more degree programmes to the traditional programmes. Some of these added degree programmes do not adequately equip students for the labour force resulting in under qualified graduates (Barcena-Marti , Budria & Moro-Egido 2011). The government has invested more in tertiary institutions over the recent years in a bid to empower the workforce. The government policy makers have put up policies that have seen more funding allocated towards the growth of education. In emancipating the general population through education, the economy of the UK in general has improved, and it is among the best in the world. However, the looming issue of over education is still a temporary phenomenon that is always facing the work force. 8.0 Conclusion This paper researches the incidence of Over-education and its impact in the UK. Investigations have shown that 52 per cent of graduates who recently joined the labour market and 22 per cent of those already in the labour market are working in jobs where they do not require their qualification. Over-education is a typical temporary phenomenon for any standard functional workforce. Graduates in a bid to cope, need to take non-graduate jobs before securing a job that match their skills. On the other hand, over education reduces the rate of return on education because graduates get significant financial penalty when they are in mismatching jobs. 9.0 Recommendations 1 .The occurrence of over education is not only an individual’s problem but the employers as well. The government also recruits the pool of cohort graduates just like firms in the private sector. Therefore, the government should come up with policies to curb over education. The government can influence the demand and supply of labour by adopting macroeconomic policies. 2. Universities can in a bid to curb over education equip graduates with managerial and leadership skills that promote entrepreneurship. Reference List Barcena-Martin E.; Budria S., Moro-Egido A. I. (2011), Skill mismatches and wages among European university graduates, MPRA Paper No. 33673. Carmen, A. Pastore F. (2013) Delayed graduation and Over-education: A test of the human capital model versus the screening hypothesis, Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit, No. 6413. DILLOW, C. (2007). The end of politics: New Labour and the folly of managerialism. Petersfield, Hampshire, Great Britain, Harriman House. DILLOW, C. (2007). The end of politics: New Labour and the folly of managerialism. Petersfield, Hampshire, Great Britain, Harriman House. SHARPES, D. K. (2010). Handbook on international studies in education. Charlotte, NC, Information Age Pub. ZHANG, S. M. (2007). A study of over-education in the UK. Sheffield, University of Sheffield. Walker I. and Y. Zhu (2005). The college wage premium, over-education and the expansion of higher education in the UK, IZA DP 1627. Chevalier, A. and Lindley, J. (2007) Over-education and the skills of UK graduates, Discussion Paper No. 0079.; London, Centre for the Economics of Education, LSE. 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