Over-education in the Graduate Labour Market - Coursework Example

Over-Education in the Graduate Labour Market Executive Summary This paper gives a reassess of literature based on over-education. Over-education in the graduate labour market indicates that the graduates have higher level of qualification than actually required in the job they possess i.e. the graduates are over educated for their position. This paper focuses on the over-education of the UK labour market and its incidence in the graduate labour market of the UK. It will take into account the cause of over-education and its impact on the job satisfaction of those graduates who are actually in that position. Further, it will also show the implication of over-education for government policy makers and university. Table of Contents Table of Contents 2 Introduction 3 Analysis of U.K. graduate labour market 4 Incidence of over-education 4 Reason behind occurrence of over-education 5 Impact of over-education 5 Over-education: A short-term phenomenon 6 Implication of over-education 7 Conclusion and Recommendation 7 Reference List 7 Introduction Over-education in the graduate labour market indicates that the graduates posses more education than is essentially required in respect of their job. This paper considers the over-education in perspective of graduate labour market of UK. The incident was initially conveyed to the awareness of researchers through Richard Freeman in the study of United States of America graduate employment market in the year 1976 (McGuinness, 2006). Most part of the literature has approximated the consequence of over-education on wages and it was revealed that overeducated graduates earn less in comparison to their peers, which signifies that, return on the excess education is fewer in comparison of return on the requisite education (Dolton and Vignoles, 2000). The workforce growth rate shows positive result on the occurrence of over-education, whereas, the rate of unemployment shows negative result on education rate of return (Groot and Brink, 2000). The paper will focus on the reason behind the occurrence of over-education along with its impact on the job satisfaction of the graduates. Further, it will take into account to what extent over-education is a short term phenomenon. The literature resting on over-education and therefore to its result, and the mismatch of job-education, has lately received a new interest in UK. The studies signify that, over-educated employees have lesser returns towards their education. Analysis of U.K. graduate labour market During 1986, 38% of the UK graduates are found to be overeducated in support of their first occupation and after six years also 30% of the graduates were overeducated (Dolton and Vignoles, 2000). The phenomenon of over-education was initially conveyed to the awareness of researchers through Richard Freeman. Though, the interest grew rapidly, in the late of 1980, when economist tried to know the propositions of the constant rapid growth in educational contribution rates, which has developed into a main characteristic of labour market strategy in the majority of developed economies. For example, in the UK, the recent stated intention of the Government is that, half of the graduates should gain from several form of upper education. Such strategies implicitly believe that, either there is an unmet demand especially for the graduate student, or the employers who are appointing graduates will improve their production method to take benefit of a higher educated workforce. However, if demand proves unsatisfactory or unresponsive towards changes in case of relative supply, then employees may be compelled to receive jobs even when they were overeducated for it. Over-education is considered as costly towards the firm, the individual and the economy (McGuinness, 2006). There are number of ways of determining the education required to perform a specific job. Analysts have applied a “self-assessment” method where the respondents were asked frankly regarding the least education level required to perform their jobs (Duncan and Hoffman, 2001). However, self-assessment technique may be unfair because they depend on the fairness of respondents. Those who were over-educated, and maybe more negative regarding their jobs, may possibly be less expected to complete an employment survey. Incidence of over-education The incidence of over-education in the UK graduate labour market is that, it leads to the rise in the percentage of latest graduates in low-grade skilled jobs. The percentage of latest graduates, those who completed a higher education criterion or a degree within the previous six years, engaged in lower skilled occupation has grown from 26% in 2001 to 35.9% in the last quarter of the year 2011. The jobs with higher skills normally require ability through post-compulsory learning whereas; the jobs with lower skills involve competence only by compulsory education. The recent graduates’ population who were no more in education system has grown by 41% and at present stands at the rate of 1.50 million populations. The graduates with the specialization in arts or languages are found to be more over-educated than those who have specialization in other disciplines. Training and on-the-job practice have little authority on the possibility of being more educated, but again the over-educated graduates find it difficult to enter the jobs of graduate level (Silles and Dolton, 2001). Reason behind occurrence of over-education Recession is considered as the main reason for the occurrence of over-education. Recession took place in the year 2008, but before the start of that period i.e. from 2001-2008, the rate of employment for the graduates was normally higher than that of those graduates who were still graduating. This is because, those graduates were younger and was looking to come into the workforce, while the graduates who were elder and are not in search of the work; they were intended to look after their family. Among the young individuals, recession has weakened the entry of labour market (Hofmann and Hohmeyer, 2014). During the year 2008-2009, the rate of employment for the graduates in the UK dropped from 90.2% to 86.5%. It mainly happens due to recession. During same period time, the rate of employment fell by 1.3% points i.e. from 88.5% to 87.2%. The decrease in the employment rate for all graduates has influenced the rate of employment for the entire graduates. However, the employment rates are higher for the graduates as compared to the non-graduates. The rate of employment for the recent graduates, those who have graduated in the previous two years, be likely to be more than that of those who have graduated 2-4 or 4-6 years before. The main reason behind this is that, the recent graduates are now entering the market and started to look for the work, though the older one have had additional time to find the job. Impact of over-education The impact of over-education on those graduates who are over qualified is that, they are demonstrated with a considerable wage penalty related to operating in a particular job for which they are over-educated as compared to the individuals associated with the similar degree of education (Chevalier and Lindley, 2007). Another impact is that, most of the graduates who are leaving UK advanced education, have gradually risen since the last century and is still rising. Moreover, the tendency towards growing wage inequality is noticeable within the UK graduates. At the similar time, the students having engagement in higher education have gradually risen (Silles and Dolton, 2001). There are 2 kinds of graduates: type 1 is defined as the clever graduates and type 2 is defined as plain graduates. When graduates penetrate labour market, managers can measure their type, such as by observing the degree results. Let us suppose that there exists three kinds of jobs for which graduates can apply: graduate jobs (A), intermediate jobs involving a few graduate skills (B), and jobs requiring lower educational skills (C). Two rows of graduates availing for jobs are formed in accordance of their skills. The probable outcomes intended for a match is presented in the table below: Skilled graduates who compete for the graduate jobs, many of them get the jobs; this is known as perfect match (A1). Though, genuinely over educated (B1) are those who at the finishing portion of the line might only get upgraded jobs. Less skilled candidates are not proposed graduate jobs, and therefore, they fight for upgraded jobs (B2). This sort of match is known as mismatch, when the workers come out to be more educated or over-educated for that very position. On the other hand, due to low benchmark of skill, this kind of match could be regarded as appropriate. The less talented from that crowd can only find a non graduate job (C2) and are considered as genuinely over educated. In this structure, the graduates who are skilled in the upgraded job and the graduates who do not possess much skill in the non graduate job believe that their talents are under used and so they are not satisfied with their jobs and therefore, characterized as genuinely more educated, whereas, the less talented graduates in the upgraded jobs are considered as apparently more educated. Over-education: A short-term phenomenon Surveys which are conducted in the UK, disclose that every third graduates of the University are over-educated (Brown et al, 2006). Most of the studies have shown that, over qualified employees earn less in comparison to the equally qualified employees who are engaged in job that correctly matches their education, while undereducated employees who are engaged at a particular job level which is advanced than their education level earn more. Over education is frequently perceived as a short-term phenomenon ensuing from a short of synchronization in the regulation of schooling investments and schooling requirements between individuals and firms (OECD, 2008). Implication of over-education In 2020, awareness of knowledge will be more, thereby resulting in the spectacular changes in graduate labour market (Allen, Hammarth and Teranishi, 2012). At present, the universities in UK are providing high quality learning materials and also giving personal assistance through appointments of faculty members for each student. So, the level of education is high and therefore, the students are over-educated for the respective jobs offered to them. The interference of government in the interior affairs of higher education structure has badly affected the expansion of the higher education. The changes in the tuition policies, curricular offerings, and infrastructure growth are controlled by the government (Hoare, 2007). Conclusion and Recommendation Graduates, with identical qualifications are not considered as homogenous within their endowment of talents. The difference in skills has given rise to the over belief of the extent and consequence of more education or over-education on the earnings. The paper has shown that, there are two types of over-educated graduates i.e. genuinely over-educated and apparently over-educated. With time, the genuinely more educated or over-educated candidates move towards “perfect match” position or an “upgraded job”. On the other hand, the graduates who are apparently more educated are not competent to move towards “perfect match” job because they lack the necessary “graduate skills”. The government should make some policies for the companies regarding hiring of the graduates according to their skills so that over-education cannot take place in labour market, and then the graduates will be satisfied with their jobs. Reference List Allen, W., Hammarth, M.B. and Teranishi, R.T., 2012. As the World Turns: Implications of Global Shifts in Higher Education for Theory, Research and Practice. UK: Emerland Group Publishing. Brown, P., Lauder, H., Ashton, D. and Tholen, G., 2006. Towards a High-skilled, Low-waged Economy? A Review of Global Trends in Education, Employment, and the Labour Market. Skills and Economic Performance. Chevalier, A. and Lindley, J., 2007. Over-education and the Skills of UK Graduates. London: London School of Economics. Dolton, P. and Vignoles, A., 2000. The incidence and effects of overeducation in the U.K. graduate labour market. Economics of Education Review, 19(2). Duncan, G.J. and Hoffman, S.D., 2001. The incidence and wage effects of overeducation. Economics of Education Review, 1(1). Groot, W. and Brink, H.M.V.D., 2000. Overeducation in the labor market: a meta-analysis. Economics of Education Review, 19(2). Hoare, O.R., 2007. A Case Study of Governance of Higher Education in Belize: Implication for Finance and Curricular in Higher Education. Ann Arbor: ProQuest Information and Learning Company. Hofmann, B. and Hohmeyer, K., 2014. The Effect of the Business Cycle at College Graduation on Fertility. [pdf] Available at: < http://www.iza.org/conference_files/transatlantic_2014/hofmann_b10265.pdf>. [Accessed 30 October 2014]. McGuinness, S., 2006. Overeducation in the labor market. Journal of Economic Surveys,20(3). OECD., 2008. Statics, Knowledge and Policy 2007 Measuring and Forecasting the Progress of Societies. n.h: OECD Publishing. Silles, M. and Dolton, P., 2001. Over-education in the Graduate Labour Market: Some Evidence from Alumni Data. London: Centre for the Economics of Education. Read More