Over-education in the Graduate Labor Market of the United Kingdom - Term Paper Example

Over-education in the job market of the UK Executive summary The paper aims at understanding the rationale behind the increasing rate of over educated employees in the labour market of the UK. Over-education is in existence for long period of time and is no recent phenomenon. However, the issues related to the phenomenon are gradually cropping up since the 90s. In this context, the paper will provide necessary explanation for such development and its impact on job satisfaction and on government policies. In this regard, certain recommendations will be provided in the paper so that the issue is mitigated. Introduction In past few decades, a very common yet most remarkable trend in terms of social development has been observed in almost all western countries. The trend reflects that level of education is rising sharply in these countries’ population. This development was first triggered in the seventies and resulted in research by Freeman and Berg on growing demand of graduates in labour force in the United States. Eventually, the phenomenon was observed to grow in most of the developed nations (Cited in Chevalier, 2000). The literature on over-education and consequent job mismatch in context of Europe and especially the United Kingdom (UK) has gained significant interest as various researchers present their multifaceted viewpoint regarding the consequences of over-education. The paper critically assesses the UK graduate labour market and the incidence of over-education therein. Alongside, reason and implication of over-education and its impact on job satisfaction have also been discussed in the paper in an elaborate manner. UK labour market and over education Qualification of UK labour market According to the Office of National Statistics (2013), the UK labour market is currently flooding with graduates, it has been observed the level of inactivity, and unemployment is significantly high among less qualified individuals. In past few decades, steady rise has been observed in the number of graduates in the UK and statistics suggest that while the growth of graduates was 17% in 1992, it has grown 38% as of 2013. It was also observed even organisations hired greater number of graduates in 2013 instead of those with less qualification. The study also suggest that graduates and non-graduates with upper middle skills were found to be working in human resource, finance and marketing departments and as carpenters, plumbers, electricians respectively (Office of National Statistics, 2013). Over education in UK Common government policies encourage pursuing of education for economic, societal and personal development but wide participation therein has resulted in significant increase in over education in the country (Dolton and Silles, 2001). Freeman posited that as over qualified workforce settles with jobs that require comparatively less level of qualification, the demand of education will decline significantly and the equilibrium therein will be retained. However, this prediction never came true as the percentage of overeducated workforce continued to rise over the time (Dolton and Vignoles, 2000; Chevalier, 2000). Chevalier and Walker (1999) observed that between 1978 and 1996, the demand for skill was balanced with the level of supply and they concluded that over education is a short-lived disequilibrium. Contrastingly, present data on the UK labour market suggest that the situation of over education is increasingly becoming a permanent feature of the UK economy (Chevalier, 2000). Reason for over education Over education has resulted in creation of misbalance in optimal allocation of skill among various resources. A number of explanations regarding over education has been suggested by different authors. One of the prominent reasons is that over qualification is being considered as compensation for lack of certain human capital endowments such as training, experience and specific skills (Allen and Van der Velden, 2001). The reason was supported by Sicherman (1991) as the author observed that overqualified workers tend to have comparatively less experience, training and tenure of job. Authors such as Groot and Maassen Van Den Brink (2000) further added that over education also result from career interruption like women who took break because of children. Other explanations include career mobility and entry in new labour market. Other authors recognised that overeducated individuals pursue additional degrees for attaining promotions at the job sector within a small period of time. Another interesting reason that was observed in this regard is that overeducated individual initially settles for less qualified jobs so that they gain necessary experience and training prior shift to a qualification matching job or other higher position (Allen and Van der Velden, 2001; Wald, 2005). Impact of over education on job satisfaction Job satisfaction does not have one specific definition and significantly depends on the perception of the employees. The relation of over education and job satisfaction is relatively complex as perceived notion of job satisfaction differs from person to person. For instance, when labour market rigidities and family commitment are significant determinants, a worker can feel satisfied with a job he or she over qualified for. It was observed under such situation, individuals are mainly satisfied with the fact they have a job to support themselves and their family (Badillo Amador, López Nicolás and Vila Lladosa, 2008). According to Vieira (2005), job satisfaction is positively related to hourly wages, health condition of workers, permanent contract and job opportunity in public sector. Apparently, other authors reported that job satisfaction depends significantly on a range of variables such as age of workers, employer size, hours of work, compensation rate and others. Alongside, authors such as Clark contributed that overeducated female were observed to have relatively higher job satisfaction than the male, which however was rejected by research by Vieira. Authors such as Belfield and Harris and Johnson expressed that qualification mismatch have significant negative impact on job satisfaction (Cited in Vieira, 2005). Over education as a short term phenomenon A crucial issue was recognised in context of over education which has been so far gone unanswered in most situations. Rubb (2003) raised the question that whether over education is a long term phenomenon or short term phenomenon. It was observed by the author that over education is generally a result of perception of individuals to take up any kind of job instead of remaining or becoming unemployed. Authors such as Johnson and Jovanovic has further concluded from their hypothesis that a number o workers accept under qualified jobs for a temporary period of time because the cost associated with searching a matching job is relatively high. Consequently, the authors argued that over education is a short term phenomenon from individuals’ perspective but can be considered as a permanent factor from economic perspective (Rubb, 2003). Sicherman (1991) noted in this regard that entry level jobs generally offer on-the-job training and relevant experience to workers which they can use in future for better job opportunities. These prospects again make over education a short-term or temporary phenomenon. Other authors added that individuals who graduated from low quality schools may remain over educated for their entire career while individual graduating from better schools will have greater career opportunities. Therefore, over education as a short or long term phenomenon also depends upon quality of education as well (Rubb, 2003). Implication of over education on universities and government policies It has already been discussed that universities and colleges have a significant role to play in over education. Business schools and colleges across developed countries are growing at a rapid rate but most of them fail to provide placement to the students. Such situations force individuals to take up any kind of job irrespective of their personal educational qualifications to support their needs. It has been further observed that most universities and institutions are rarely concerned about job placement of students as they already receive government grants in this regard. Over education has significant negative impact on an economy as well as it has been underlined by certain authors that over education in anticipation of better job result in wastage of money. Additionally, government policies that helps universities have fund to deliver education and job placement to students will also gain criticism due to increase in number of overeducated employees in the work force (Dolton and Silles, 2001). Recommendations After analysing the existing situation regarding over education in the UK and in other developed countries, it can be recommended that governments should take measures that would help in delivering education without compromising its quality so that individuals are able to find jobs matching their qualification. Additionally, strictness should be maintained in universities and colleges so that only deserving candidates are imparted with specific kind of education. Lastly, another important which the national government should focus on is that creation of sufficient jobs in various sectors with respect to educational qualification and policies should be developed and implemented for employers not to hire overqualified employees in different positions. Conclusion Over education has become a significant issue in global labour market but in this paper the issue has been evaluated in context of the UK. It has been observed in the paper that number of graduates is growing at a rate higher than that of creation of job of similar kind. The paper evaluated various reasons of over education and its implications on job satisfaction of workforce and the job market. Lastly, recommendations to minimise the disequilibrium has been proposed so that its long term consequences are avoided. Reference list Allen, J. and Van der Velden, R., 2001. Educational mismatches versus skill mismatches: effects on wages, job satisfaction, and on‐the‐job search. Oxford economic papers, 53(3), pp. 434-452. Badillo Amador, M. L., López Nicolás, Á. and Vila Lladosa, L. E., 2008. Education and competence mismatches: job satisfaction consequences for workers. [pdf] Journal Economic Literature. Available at: [Accessed 30 October 2014]. Chevalier, A. and Walker, I., 1999. Further Results on the Returns to Education in the UK. Keele University: Unpublished mimeo. Chevalier, A., 2000. Graduate over-education in the UK. London: Centre for the Economics of Education, London School of Economics and Political Science. Dolton, P. and Silles, M., 2001. Over-Education in the Graduate Labour Market: Some Evidence from Alumni Data. [pdf] ISSN 2045-6557. Available at: [Accessed 30 October 2014]. Dolton, P. and Vignoles, A., 2000. The incidence and effects of overeducation in the UK graduate labour market. Economics of education review, 19(2), pp. 179-198. Groot, W. and Maassen Van Den Brink, H., 2000. Overeducation in the labor market: a meta-analysis. Economics of education review, 19(2), pp. 149-158. Office of National Statistics, 2013. Full Report - Graduates in the UK Labour Market 2013. [pdf] ONS. Available at: [Accessed 30 October 2014]. Rubb, S., 2003. Overeducation: a short or long run phenomenon for individuals?. Economics of education review, 22(4), pp. 389-394. Sicherman, N., 1991. Overeducation in the labor market. Journal of Labor Economics, 9(2), pp. 101-122. Vieira, J. A. C., 2005. Skill mismatches and job satisfaction. Economics letters, 89(1), pp. 39-47. Wald, S., 2005. The impact of over qualification on job search. International Journal of Manpower, 26(2), pp. 140-156. Read More