Abstract
This paper takes account of skills heterogeneity among workers with a higher education degree and proposes a new measure to differentiate between real and apparent overeducation based on the level of cognitive skills actually achieved by the individuals. This proposal is applied to the study of the wage effects of overeducation in the Spanish labor market using data from PIAAC. The results suggest that between a quarter and a half of the graduate workers who appear to be overeducated in the Spanish labor market could be considered as being only apparently overeducated since they show a lower level of skills than that corresponding to their educational level or, alternatively, a level of cognitive skills which is commensurate with their job. Different returns are found for each group of overeducated individuals both when compared with adequately educated peers within a similar level of education (with greater wage penalties for apparently overeducated workers) and when the comparison is done with well-matched co-workers doing a similar job (with a wage premium for real overeducation but no significant returns for apparently overeducated workers). These different returns by skill levels beyond what overeducation measures implies that the market distinguishes between education and skills and that educational attainment per se does not perfectly align with acquired skills, meaning that traditional measures of overeducation would overstate the actual level of skills mismatch in the labor market.
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Notes
See Hartog and Oosterbeek (1988) for the Netherlands; Verdugo and Verdugo (1989) for the United States; Dolton and Vignoles (2000) for the United Kingdom; Cohn and Ng (2000) for Hong Kong; or Murillo et al. (2012) for Spain. Extensive reviews on the effects of educational mismatch can be found in Hartog (2000) and Leuven and Oosterbeek (2011).
Whereas Chevalier (2003) distinguishes between ‘genuine’ and ‘apparent’ overeducation, other authors such as Green and Zhu (2010) prefer the terms ‘real’ and ‘formal’ overeducation. Without going deep into a terminological discussion, in this work we will refer to genuine or real (and apparent or formal) overeducation indistinctly.
We thank an anonymous referee for discussion on this point.
Previous works testing the hypothesis of heterogeneity among overeducated workers use a similar specification to that of Eq. (2). However, their definition of the variables of real and apparent overeducation bases on self-declared measures of skills (mis)match, either in a direct way (Green and Zhu 2010; Pecoraro 2014) or indirectly through the satisfaction with the education-job match (Chevalier 2003). Since their definition of the variables of interest differs from that followed in this paper, the interpretation of the results may clearly vary. This point will be further addressed when discussing the results in the last section.
See Hartog (2000) for an extensive review and discussion on the different methods generally used in the literature to measure educational mismatch.
The Heckman’s methodology (Heckman 1979) is used in all estimates to control for possible sample selection bias that could appear as result of wages being observed only for employees. Furthermore, since the PIAAC sample bases on a multistage stratified design, all estimates used the Jackknife2 procedure and sample weights to overcome potential sampling errors.
In all cases, the results from the Wald test show that the null hypothesis of equal coefficients between real and apparent overeducation is rejected at the 5 % significance level.
Alternatively, we classified overeducated workers into real and apparently overeducated using the interval within one standard deviation from the mean. The percentages of workers classified as real or apparently overeducated changed slightly, but the estimated effects on wages are qualitative and quantitative similar to those reported here (these estimations are available upon request). Since taking the interval within one standard deviation from the mean (or any value between the average of skills of well-matched graduate workers and that of undergraduates in semi-skilled occupations) is a rather arbitrary choice, we decided to use the mean value as benchmark so the classification between real and apparent overeducation under the individuals’ and jobs’ perspectives will offer an idea of the lower and upper values of the distribution between real and apparent overeducation.
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Acknowledgments
The authors acknowledge support from the Spanish Ministry of Economy and Competitiveness (Research Project ECO2014-53702-P). Lucía Mateos Romero also acknowledges support from the Spanish Ministry of Education for a FPU Program Grant.
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Mateos-Romero, L., Salinas-Jiménez, M.d.M. Skills Heterogeneity Among Graduate Workers: Real and Apparent Overeducation in the Spanish Labor Market. Soc Indic Res 132, 1247–1264 (2017). https://doi.org/10.1007/s11205-016-1338-x
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DOI: https://doi.org/10.1007/s11205-016-1338-x