Over-Education in the Graduate Labour Market of UK - Literature review Example

Over-Education in the Graduate Labour Market of UK Executive Summary This study aims to review the literature on the over-education in the graduate labour market of the United Kingdom (UK). The report is meant for the government authorities and concerned establishments who looks after the country’s employment opportunity and development. Several researches have been conducted to study the behaviour of the labour market for graduates, and how this has been affected by the prevailing over-education among the students. For this particular report, data was fetched from various authentic electronic sources, books, journal articles and recent publications pertaining to the topic. It was found that, in most of the cases the individual were not satisfied with their jobs. This also resulted in huge unemployment rate. Over-education also influenced the wage earning rate and the stability condition in the labour market. Government initiatives played a crucial role in mitigating the consequences of over-education in the graduate labour market of the UK. The overall growth of the overall economy was also influenced by the prevalence of over-education. Table of Contents 1.0 Introduction 4 2.0 Analysis of the Graduate Labour Market 4 2.1 Over-Education and Its Incidence in the UK Graduate Labour Market 5 3.0 Over-education and the issue of supply and demand: 5 3.1 Human capital, mobility and experience: 6 3.2 Relationship between over-education and job satisfaction: 7 Implications on government policy makers: 8 Recommendations 9 Conclusion 9 Reference List 10 1.0 Introduction The aim of this study is to evaluate the presence of over-education in the graduate labour market of the UK. Several studies have been conducted to understand the implications of over-education in the graduate labour market. There have been several debates over the issue and attempts have been made to identify whether over education is an efficient way to determine the behaviour of labour economics. Over-education generally refers to the circumstances when an individual has achieved an educational qualification which is more than what is required for a specific job. Disequilibrium occurs in the labour market for graduates as workers are over qualified for the required job (Dolton and Silles, 2001). 2.0 Analysis of the Graduate Labour Market As per the definition of Chevalier (2003) over-education is a combination of occupational codes and self-reported measures. This helped to understand the appropriateness between the job and the qualifications. Battu and Sloane (2004) added that over-educated can also be termed as the gap between the corporate demand and the supply of the educational segment. Conditions in the graduate labour market are heading towards the betterment with time; yet, over-education is a cause of concern (Elias and Purcell, 2004). However, Mason (2002) mentioned that the level of over-education varied with the techniques of measurement and thus over-education is therefore a dynamic phenomenon. Consistent increase in the number of students graduating in UK has also contributed to the problems of over-education in the UK economy. Dolton and Silles (2001) mentioned that changes in the corporate work process has created new job opportunities but the demand for academic qualifications has decreased in comparison to practical experience and knowledge of the employees. Chevalier and Lindley (2009) stated that the global financial meltdown of 2007-08, has also resulted in many job cuts in the UK economy which is forcing the graduates to work as in jobs that have lower educational requirements. 2.1 Over-Education and Its Incidence in the UK Graduate Labour Market The analysis of the graduate labour market in the UK reveals various interesting facts and figures. This marks the significance of studying the prevalence of over-education in the labour market. The total number of graduate in the UK stands at 12 million (Office for National Statistics, 2013). The trends in the data involving the number of graduates show that a steady rise has been experienced over the last decade. Chevalier (2003) tried to show the conditions prevailing in the United Kingdom (UK) market and how over-education and skills in the labour market affected the equilibrium conditions. During that period, the number of UK graduates increased exponentially within a very short span time. Three groups were formed within the graduates namely, genuinely over-educated, apparently over-educated and matched. Lindley (2006) noticed that It was formed to compare post and pre expansion period in the labour market. In the words of Elias and Purcell (2004), growth of over-education has reduced the resource utilisation in the labour market and also reduced the demand for academic courses in the educational institutions. However, Chevalier and Lindley (2009) noticed that, the graduates who were genuinely over-educated significantly lacked non-academic skills. They had no knowledge about leadership and management. This increased unemployment rates but it did not affect the jobs that were already held. 3.0 Over-education and the issue of supply and demand: All the markets are primarily guided and designed on the basic rules of supply and demand (Belfield and Harris, 2002). With the expansion of the job market, the education sector has also gone tremendous changes in terms of accessibility and affordability. Battu and Sloane (2002) stated that increased transparency and operations of the education sector has also added to the number of graduates entering the job market. According to the Office for National Statistics (2013) the number of graduates in UK has increased by 38% in the contemporary scenario. With almost 12 million graduates in the economy, the job market is falling short in creating demand as per the educational qualification of the job hunters. Diebolt and El Murr (2004) noticed that the process of outsourcing has also contributed in the increasing trend of over-education among the UK graduates. As most of the operational functions are being outsourced to other low labour intensive countries for reducing the cost of operations, the UK economy is left with the specialist functions that require higher level of education. This has also forced the graduates to reduce the work in places that have requirements for lower academic qualification. 3.1 Human capital, mobility and experience: Battu and Sloane (2004) noted that as the corporate sector has also brought in some changes in their working approach as they have started segmenting their functions into smaller and more specific operations. This has created more demand in the job market but on the other hand has the academic qualification necessary for these job posts are limited. Thus, comparing the factor of over-education with the labour market it can be observed that the changes in the corporate work structure also is influencing the activities of the educational institutions. Belfield and Harris (2002) explained that in the contemporary scenario most the demand for real education is more in comparison to that of formal education. Graduates with better skill and knowledge must also posses practical experience in order to gain their desired job position. As mentioned in the occupational mobility theory, over-education can be reduced by aligning the education process with demands of the employment segment. Office for National Statistics (2013) reported that most of the educational institutions are now incorporating professional courses in order to develop a better future scope for the graduate students. Elias and Purcell (2004) criticised that most of the times in order to hide the lack of real world experience, individuals prefer to follow higher academic qualifications and this is giving rise to the number of over-educated graduates working in the UK economy. According to Battu and Sloane (2004), the higher number of over-educated workers also hampers growth of the corporate sector as it signifies under utilisation of human capital and will create a gap in the organisational and employee vision in the long term. Mason (2002) emphasised that the expansion of corporate sector presents a formidable scope for improving the condition of the job market. Lindley (2006) argued that often individuals face geographical barriers in pursing jobs in overseas or abroad nations. Chevalier and Lindley (2009) observed that after the recession of 2007-08, the number of students coming in to UK for graduation and other higher level academic courses have increased considerably. According to Higher Education Statistics Agency (HESA), international students formed 1/5th of the overall students in UK (The Guardian, 2014). Elias and Purcell (2004) stated that students prefer to migrate during their education process rather than when they are working. Hence, it can be gathered that the scope of better and desired job profile are enhanced if human capital mobility is also increased. 3.2 Relationship between over-education and job satisfaction: According to Dolton and Silles (2001), an over-educated workforce featured by formal education process takes longer to settle in the work environment in comparison to a workforce with real education process. Chevalier and Lindley (2009) added that most of the over-educated graduates are on a continuous look out for a better opportunity that will allow them to use their academic qualification. On the other hand, the increasing number of over-educated graduates working in lower profile jobs in UK suggests otherwise. Battu and Sloane (2002) stated that over-education is not directly related with job satisfaction but influences the decisions of the employees in terms of work suitability. Overall it can be observed that over-education is not the sole factor that influences job satisfaction and also changes in employment by over-educated workers. Implications on government policy makers: Tomlinson (2008) analysed that the increasing number of students enrolling for graduate courses in UK is giving rise to the problem of over-education as the supply in the labour market is overcoming the demand factor. However, Office for National Statistics (2013) reflected that the unemployment rate among the graduates is only 4% which is lower than dropped out graduates and non-graduate students. Over-education has initiated changes in the educational structure and modules of graduates (Mayhew, Deer and Dua, 2004). On the other hand, the essentiality of creating a professional support and practical knowledge for the students is also growing as the job market narrows down from economic instability caused by the global recession of 2007-08. Lindley (2006) mentioned that the Government has to create new job profiles in the economy for accommodating the growing number of graduates in the country. Coughlan (2014) argued that the educational institutions must assess the current and future requirements of the labour market and restructure their educational process to reduce over-education among in the labour market and enhance stability in the job market. Tomlinson (2008) highlighted that changes in educational process by educational institutions and new job creation by Government can create opportunities for the upcoming batches of graduates but the existing graduates working in lower level jobs will find it hard to accommodate in the new scenario of the labour market. Chevalier and Lindley (2009) criticised that the phenomena of over-education cannot be eliminated but reduced. Hence, the regulatory bodies of a nation can focus from preventing the spread of over-education to the future generation of labours while on the other hand, the corporate sector has to support the Government and the Educational Department by creating better job opportunities in the market. Recommendations The literature suggests that, over-education is a serious issue which has been affecting the graduate labour market in the UK. In such a situation, initiatives from the government become imperative. The government should take measures in order to see that equilibrium is maintained in the labour market for graduates. The economic activities in the country should be able to create jobs that would match the qualifications of the students. The labour market should also be structured appropriately so that job seekers identify jobs that are compatible with their skills and educational qualifications. Conclusion The literature shows vast evidence of the prevailing over-education in the graduate labour market of the UK. The impact of over-education also varies with time and region. Over-education also influences a number of macro variables starting from wages to employment conditions in a country, and the studies depict the consequences by conducting an empirical analysis and evaluations in the labour market of the UK. Steps should be taken to minimise the problems associated with over-education and the government can play a vital role. The labour market should adjust with the economic developments and the graduates should be able to match their qualifications with appropriate job opportunities. Reference List Battu, H. and Sloane, P. J., 2002. To what extent are ethnic minorities in Britain over-educated? International Journal of Manpower, 23(3), pp. 192-208. Battu, H. and Sloane, P. J., 2004. Over‐education and ethnic minorities in Britain. The Manchester School, 72(4), pp. 535-559. Belfield, C. R. and Harris, R. D., 2002. How well do theories of job matching explain variations in job satisfaction across education levels? Evidence for UK graduates. Applied Economics, 34(5), pp. 535-548. Chevalier, A. and Lindley, J., 2009. Overeducation and the skills of UK graduates. Journal of the Royal Statistical Society: Series A (Statistics in Society), 172(2), 307-337. Chevalier, A., 2003. Measuring over‐education. Economica, 70(279), pp. 509-531. Coughlan, S. 2014. UK shifts to graduate economy, but worry over skill gap. [Online] Available at: [Accessed on 1st November 2014]. Diebolt, C. and El Murr, B., 2004. A cobweb model of higher education and labour market dynamics. Brussels economic review, 47(3-4), pp. 409-430. Dolton, P. and Silles, M., 2001. Over education in the graduate labour market: some evidence from alumni data. London: Centre for the Economics of Education, London School of Economics and Political Science. Elias, P. and Purcell, K., 2004. Is mass higher education working? Evidence from the labour market experiences of recent graduates. National Institute Economic Review, 190(1), pp. 60-74. Green, F. and Zhu, Y., 2010. Over qualification, job dissatisfaction, and increasing dispersion in the returns to graduate education. Oxford Economic Papers, 62(4), pp. 740-763. Lindley, J., 2006. The over-education of UK immigrants: Evidence from the Labour Force Survey. Lindley, J., 2009. The over-education of UK immigrants and minority ethnic groups: Evidence from the Labour Force Survey. Economics of Education Review, 28(1), pp. 80-89. Mason, G., 2002. High skills utilisation under mass higher education: graduate employment in service industries in Britain. Journal of Education and Work,15(4), pp. 427-456. Mayhew, K., Deer, C. and Dua, M., 2004. The move to mass higher education in the UK: many questions and some answers. Oxford Review of Education,30(1), pp. 65-82. Office for National Statistics, 2013. Full Report - Graduates in the UK Labour Market 2013. [Online] Available at: [Accessed 1 November 2014]. The Guardian, 2014. International Students in UK: Who are they really? [Online]. Available at; [Accessed 01 November 2014]. Tomlinson, M., 2008. The degree is not enough: students’ perceptions of the role of higher education credentials for graduate work and employability. British Journal of Sociology of Education, 29(1), pp. 49-61. Read More