Over-education in the Graduate Labour Market of UK - Coursework Example

Over-education in the graduate labour market of UK Executive Summary The labour market in U.K is full of graduates who are involved in jobs that do not require a graduation degree. This results in over education of the candidate. This leads to job dissatisfaction and also lower wage payment. The fact that the number of the graduates is increasing every year plays a major role. The job requirements are lesser than the number of vacancies in market. Moreover, the lack of human capital also leads to over education. The graduation degree often, do not provide sufficient job related skills to the students, so, the student although end up having a graduation degree, but they do not possess sufficient vocational skills. The education system is not yet fully designed to curb this issue. There is sufficient lack of vocational and managerial skills training, which needs to be removed by changing the subject curriculum. The employers are reluctant to fully utilize the skills of the graduate employees. There is also a significant wage discrepancy among the new graduates, which enhances their perception of being over qualified. Thus, the problem of over education can only be solved if the entire education system as well as the labour market is re-oriented in order to facilitate right jobs for the right skill set. Table of Contents Introduction 4 Over education in UK labour market 4 Conclusion 7 Reference list 8 Introduction This paper is an attempt to find out the trend of the labour market in U.K, its relationship with the academic structure and whether the graduates are over qualified for the job they are doing. This study will help to understand the condition of the labour market and whether the education in the graduate level is yielding the right jobs for the students. Over the last decade the supply of graduate students has increased rapidly and also the cost to graduate has been reduced too, these factors have eventually led to lack of employment. Thus graduates end up getting jobs below their skill level (Dolton & Siles. 2003). The overcrowding of universities with prospective graduates has led to decline of their market value. This increases competition among them, as the number of people having the same level of skill, is more than the number of vacancies in the labour market. The lack of right skill versus job compatibility usually brings job dissatisfaction among the employees and also it decreases the value of graduate level education (Battu & Sloane. 2004). Over education in UK labour market Over education can arise from the deficit of human capital. Peter. J Dolton stated that, a worker may need additional education to compensate for the decencies of other aspects of human capital. To put it simply, a job requirement depends on the individual’s accumulated resource of human capital which include previous work experience, on job training, etc, and not just formal education. According to occupational mobility theory, it is suggested that, if the deficiency of skills can be rectified with training and work experience then the over qualification can be eliminated eventually. However, if the difference between the job skill requirement and the skill level of an average graduate is more, then the elimination of over education is a long term process (Dolton & Silles. 2001). The variation of college or institution quality can also explain the rise of over qualified workers. If a student graduates from a lower quality college ends up having the same job a higher level college graduate has, then the individual from the lower level college is not over qualified. The additional education provided in the higher level college may be necessary for the job requirement. But in contrast to the lower level college graduate, the higher level college graduate is definitely over qualified (National Statistics. 2013). Arnaud Chevalier and Joanne Lindley stated that, their studies only found limited evidence of lack of academic skills in over qualified graduates. So, the increase in number of graduates cannot be related to the reduction of acquired skills by the graduates (Rubb. 2003). The real difference comes in the lack of managerial and leadership skills in the genuinely over qualified workers. Moreover, the over qualified graduates had university academic skills, but they were left will unfavourable labour market and unobserved skills (Chevalier. 2003). They also stated that the quality of university education may not be the deciding factor. The graduates who pass out from new universities, were supposed to have low quality education, but they had the same probability of being over qualified, like the graduate from a reputed university. Managerial, entrepreneurial and labour market skills largely reduce the risk of over qualification. The determinants of over education before and after the rise in number of graduates, was fairly similar (Chevalier & Lindley. 2007). Francis Green’s study however shows that, over qualification can be grouped into “Formal Over qualification” and “Real over qualification”. In case of formal over qualification, the employees mentioned that, they ended up having below graduate level jobs, but they did not mention that they are under utilizing their acquired skills. This group comprised of 23% of the graduates by 2006 (Green & Zhu. 2010). Whereas, in case of Real over qualification, the employees report that they are over qualified and they also under utilize their skills. The number of “Really” over qualified workers is rising gradually. The “real” over qualification comes with significantly more job dissatisfaction than the “formal” over qualification. Considering this trend, it is stated that, whether because of increasing cost of each employees or increasing in the prevalence, the problem of over qualification would increase over time (Bauer. 2002) On the contrary, Ian Walker and Yu Zhu stated that, despite of the rapid increase of graduates in the labour market, it was seen that, there was a significant fall in the job returns of recently graduated cohorts in all subjects. This was true for both men and women. They also found that, for men as well as for women, there was an increase in number of engineering and math degree holders getting jobs of graduate level, and this return shows a rising trend. The wage penalty faced by an over educated employee can be explained by the difference between the unobserved and observed skill levels (Walker & Zhu. 2005). Se´amus McGuinness pointed out in his studies that, the determining factors of wage rates in economy are both the individual and job characteristics. The impacts of over education were likely to be a non-trivial one and the phenomenon may be costly to both the graduates and the organizations and more importantly the economy (McGuinness & Wooden. 2009). The government’s decision of pursuing 50 percent higher education target has been questioned (OECD .2005). Their studies have shown that, post expansion of graduates, the over education cases have increased in both men and women, across all the subjects. Subjects like Arts, Humanities and Social Sciences have seen a much rapid growth of over educated graduates. So, clearly if the graduation participation continues in line with government’s pursuit, then the number of over educated workers will increase, which in turn will incur additional costs on the individuals, on the organization and the economy as a whole (Meager. 2008). This phenomenon asks for re-orientation in the education system of UK by the government, and more focus should be put on vocational training and managerial courses which has greater level of skills required for jobs. Though, this strategy should help curb the over education problem, but this alone is not a sufficient solution. The problem effectively lies in the oversupply of educated individuals, than what the labour market requires. The organizations are also unwilling to change their operation processes to fully utilize the skills of the employees (McGuinness. 2006). Mary Silles along with Peter Dolton conducted a study in which they concluded that, pay differential associated with an educational discrepancy is found in the early labour market entrant. The primary determinant of over education is the low work ability of the graduates. This work ability creates a productivity differential between graduate employees and earnings. They also stated wage of an employee is dependent on the subject of graduation. The graduates of Arts and Humanities earn less than the engineering graduates and graduates working in the educational field also earn less than other faculties (Silles &Dolton. 2002). Conclusion The over education in the UK is a problem which will continue to grow, if the labour market does not re-orient its recruitment structure. The employers should find out ways of fully utilizing the skills of the new entrants, as a result, the employee will no longer be over qualified for the job and at the same time, the organizations productivity will also increase. The government also has a role to play in pursuit of reducing the over qualification of the graduates. It can make certain changes in the education system and subject curriculum. The curriculum should be so designed that it prepares the student for the labour market. The education should be in line with the skill requirements in job industry. Moreover, if the human capital deficiency can be reduced by encouraging students in to more managerial skill training, then the problem of over qualification can be kept under control. Reference list Battu, H., and Sloane, P., 2004. Over-education and ethnic minorities in Britain. The Manchester School, 72 (4), pp.535-559. Bauer, T., 2002. Educational mismatch and wages: a panel analysis. Economics of Education Review 21, pp.221–229 Chevalier, A., and Lindley, J., 2007. Over- Education and the Skills of UK graduate. Centre for the Economics of Education. August, pp.5-10. Chevalier, A., 2003. Measuring over-education. Economica, 70 (279), pp.509-531 Dolton, P., and Silles, M., 2001. Over-Education in the Graduate Labour Market: Some Evidence from Alumni Data. Centre for the Economics of Education. June, pp.17-27 Dolton, P., and Siles, M., 2003. The determinants and consequences of overeducation. In Buchel, de Grip and Mertens (eds), Overeducation in Europe, pp.189–217. Green, F., and Zhu, Y., 2010. Overqualification, job dissatisfaction, and increasing dispersion in the returns to graduate education. Oxford Economic Papers. 24 (1), pp.4-21. McGuinness, S., 2006. Overeducation In The Labour Market. Melbourne Journal of Economic Surveys, 20 (3), pp.401-414. McGuinness, S., and Wooden, M., 2009. Overskilling, job insecurity and career mobility. Industrial Relations, 48, pp.265–86. Meager, N., 2008. The Role of Training and Skills Development in Active Labour Market Policies. Institute for Employment Studies, April, pp.10-17. National Statistics. 2013. Full Report - Graduates in the UK Labour Market 2013. Office for national Statistics, November, pp.3-27. OECD.2005. Labour Market Programmes and Activation Strategies: Evaluating the Impacts, in: OECD Employment Outlook 2005, ch.4, pp.178-183. Rubb, S., 2003. Overeducation: A short or long run phenomenon for individuals? Economics of Education Review, 22, pp.389–94. Silles, M and Dolton, P. 2002. The Effects Of Over-Education On Earnings In The Graduate Labour Market. Department Of Economics. Discussion Paper Series, 126, pp.1-18. Walker, I., and Zhu, Y., 2005. The College Wage Premium, Overeducation, and the Expansion of Higher Education in the UK. Institute for the Study of Labor, 1627, pp.4-22. Read More