Over-education in the graduate labour market

Abstract

Finnish policy for economic growth, competitiveness and productivity relies hevily on rising the educational level of population. This is clearly manifested in the official target that 65 per cent of young age cohorts should receive higher education degree at some point in their life. Transformation of the educational system at the tertiary level in the 1990s has ensured that we are already approaching this high target level. According to the OECD, Finland has experienced the quickest increase in the educational attainment of its population. At the same time, the demand for skills has increased due to technological change and globalization of the Finnish economy.

This study analyses the magnitude of over-education in the Finnish graduate labour market. We employ a survey carried out by AKAVA (the Confederation of Unions for Academic Professionals) in autumn 2001. This postal survey collected information on the early career paths of 1997 graduates from three Finnish universities (Jyväskylä, Lappi and Turku). The emphasis is very much on the issue of measurement of over-education. I employ both a subjective and an objective method to assess the magnitude of over-education in this sample. The objective measure is based on Wage Structure Statistics collected by Statistics Finland. Since the two measures were calculated for same persons, I also employ a combination of these two, which enables me to analyse and characterize different types of over-education. According to the results, right after graduation 17 per cent of the employed graduates considered that they had a poor match between their job and educational level. In autumn 2001, the same figure was a bit lower (14 per cent), and approximately 11 per cent considered themselves as over-educated. These subjective estimates are considerably lower than what the previous international literature has reported. The objective statistical method leads to an estimate of 25 per cent for autumn 2001.

Over-education is much more common in the private sector than in the public sector. This is due to very strict qualification requirements in the public sector for certain occupations, e.g. for teachers and medical personnel. Over-education seems to be connected with the problems in entering the labour market. The probability of over-education increases with a pre-university vocational education degree, which means that there is a risk that people entering university via long education route cannot fully utilize the university degree they have received. The effect of over-education on wages is negative, when compared to a person with same degree-level, but a matching job. The negative effect on wages is about 10 per cent. The data available does not provide us with enough information that we could estimate the effect of over-education in a same occupation, but with excess schooling.

• ISSN: 1236-7176
• ISBN: 952-5071-79-0
• Press Release in Finnish
• Publication in PDF-format