The incidence and wage effects of overskilling among employed VET graduates

By Kostas Mavromaras, Seamus McGuinness, Yin King Fok Research report 19 March 2010 ISBN 978 1 921413 77 3 print; 978 1 921413 78 0 web  ·  ISSN 1837-0659

Description

When the skills workers have do not match the skills that jobs require, a number of negative labour market outcomes can occur, including productivity and efficiency losses, lowered earnings and reduced job satisfaction. Using data from the Household Income and Labour Dynamics in Australia (HILDA) survey, this study examines the degree of job mismatch experienced by workers. The mismatch between the perceived skill level of the worker and the skill level of the job is considered as overskilling. The report finds that workers with vocational qualifications, particularly at the certificate III or IV level, are less likely to experience overskilling.

Summary

About the research

When the skills workers have to offer do not balance with the skills jobs require, mismatch occurs.

Using data from the Household Income and Labour Dynamics in Australia (HILDA) survey, this study examines the extent to which workers can use their skills and abilities in their current jobs. The authors refer to the situation when a worker perceives that their job does not use all their skills as ‘overskilling’. The persistence of overskilling is a particular focus.

Overskilling can be distinguished from overeducation. The former is based on perceptions that skills are not used in a job, while the latter refers to people working in a job that does not require their level of education. While the concepts are related, they do differ; for example, early school leavers can be overskilled if they work in particularly unskilled jobs, but they could not be described as overeducated.

Mavromaras and colleagues find that, by comparison with workers with no post-school qualifications or with university qualifications, those with vocational qualifications at the certificate III or IV level are less likely to experience overskilling, and if they do, suffer fewer adverse consequences, such as periods of unemployment.

Key messages

  • Overskilling is, on average, most prevalent among those who are poorly educated. This is because poorly educated people end up in the most unskilled jobs.
  • While overskilling is associated with lower educational levels, it does occur among those with post-school qualifications. And in their case it has worse consequences.
  • The negative effects of overskilling are greatest for those with diplomas and degrees; persistence of the skills mismatch and of associated wage penalties is highest for the overskilled with a diploma or degree.

The finding that overskilling occurs among highly educated persons, and is persistent, suggests that individuals investing in education need to be aware of the range of possible outcomes—not everyone gets a high return.

Tom Karmel
Managing Director, NCVER

* This work was mostly undertaken at the Melbourne Institute of Applied Economic and Social Research.

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