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Skilled, unskilled, too skilled?

9 April 2010

A report from High Fliers Research published in February found that half the UK final year college students they interviewed believe they’ll have to take any job they’re offered, and a quarter say they’ve been forced to apply to employers that they aren’t really interested in.

We hear stories from most countries of people taking jobs they’re over-qualified for in any recession. The Insights blog asked Glenda Quintini and Paul Swaim of the OECD’s Employment Division what the impacts were on firms, workers and the economy as a whole.

Insights: Do employment data confirm what the High Fliers report implies – graduates are taking jobs they’re over-qualified for?

Paul Swaim: There’s anecdotal evidence of course, but it’s actually quite tricky to measure the extent of over-qualification, or under-qualification or the wrong qualification, come to that. Researchers have used various proxy measures to estimate how many workers hold  qualifications that appear to be a poor match for their jobs, but no real consensus view has emerged concerning how pervasive skills mismatch is in the economy as a whole. It is even harder to assess the extent to which the recession is increasing the number of graduates moving into jobs that don’t make full use of their qualifications, because detailed labour market data only become available with a considerable time lag.

Insights: How about for an individual employer – surely getting extra human capital on the cheap is a boost?

Glenda Quintini: That’s certainly what you might expect, but you have to ask what “human capital” actually means. Qualifications are one aspect, but that’s not the same as skills. A worker who’s learnt on the job, over the years, may have skills that aren’t reflected in any formal qualification. On the other hand, university graduates may vary in the skills they possess and some of them may be just as skillful as somebody who quit formal education after high school. Several studies argue that it is the less-skilled university graduates that end up in jobs that require a high school diploma.

Paul Swaim: You also have to look at the relation between earnings and productivity. If you assume that earnings do in fact reflect productivity on the current job, then there is some evidence that workers who are “over-educated” for their jobs earn somewhat more than “correctly-educated” workers in the same type of job. On the other hand, they’re probably earning less than if they were in a job normally associated with their level of education.

So employers who can hire workers who are satisfied to work in jobs they are over-qualified for may attain higher productivity than they would have got by recruiting less educated workers. While it seems likely that some employers profit from being able to hire over-qualified workers during a recession, it is hard to pick up that phenomenon in the labour market data available to us. In addition to the delay in the availability of data, which I mentioned earlier, there is also the complication that recessions tend to reduce labour productivity and profitability through a number of channels that could easily swamp any gains from an increase in over-qualification.

Glenda Quintini: Another thing you have to remember is that graduates might be happy to take any job when they’re unemployed and there aren’t so many jobs going, but once they actually start working, their attitudes can change, especially if the labour market picks up. Many studies have shown that qualification mismatch affects job satisfaction and whether people intend to stay with the firm. You could argue that mismatch damages productivity through lower job satisfaction and higher turnover.

Insights: Could productivity in the economy as a whole be affected?

Paul Swaim: Yes, but in several different ways making it hard to predict the overall effect. In the short run, it certainly is more productive for graduates take jobs they are over-qualified for rather than remaining idle. However, we should not lose sight of the fact that most of these workers would be even more productive in jobs that made full use of their qualifications and thus provide a better return on the money spent on educating them. Productivity is thus likely to suffer over a longer time horizon unless these workers move into jobs that better match their qualifications. Unfortunately, the evidence is quite mixed about how often this sort of “catching-up” occurs, once the economy begins to recover.

Insights: Any final thoughts?

Glenda Quintini: Going back to Paul’s point on wage effects, a study that derives the productivity loss economy-wide in Australia from the wage penalties experienced by mismatched workers estimates a cost of mismatch of up to 2.6% of GDP in 2005 (the paper by Mavromaras et al. (2007) is available online at as discussion paper No. 2837).

Useful links

Employment and the crisis from the forthcoming Insights From crisis to recovery

OECD Insights on Human Capital

FAQ: the crisis and employment

OECD Policy Brief on qualifications and lifelong learning

OECD work on recognition of non-formal and informal learning

The educationtoday blog has a post about the impact of recessions on graduate employment and earnings

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