Description
This report examines whether expansion in education has led to credentialism in the workforce. The authors employ the ‘ORU’ model to compare the required level of education for a job and the actual level which is held by an individual in that job. This model defines an individual as being over-educated (O) for their job, having the right level of education (R), or being under-educated (U). Credentialism is then measured against the benchmark ‘right’ level for older cohorts. Findings show that younger cohorts will suffer from credentialism to the extent that more of them are over-educated compared with the older cohort. The ‘bite’ of credentialism is then measured by the wage penalty associated with this over education. However, the penalty is a modest one and on the whole additional study results in skills which are rewarded by higher wages.
A recording of the webinar Over-education, under-education and credentialism in the Australian labour market held on 6 March 2013 is available for viewing from our Webinar series page.
Summary
About the research
We know that, in general, the more years of education individuals acquire, the more money they are likely to earn. Recent responses from Australian governments to the demands for economic growth will see an increase in the proportion of workers holding educational qualifications, particularly higher-level qualifications. There is always a concern that there will not be enough jobs that require the proportionate level of education, and that the increase in those with higher-level qualifications will lead to credentialism rather than to a more skilled workforce.
Using data from the 2006 Census of Population and Housing and the Household, Income and Labour Dynamics in Australia (HILDA) Survey, Dockery and Miller examine the issue of credentialism by comparing the reference or required level of education for occupations and the actual education level held by an individual. They employ the 'ORU' model, where O refers to over-education (having more years of education than is required for the job); R refers to the reference or required level of education for a particular job; and U refers to under-education (having fewer years of education relative to the reference level). The credentialism dimension is captured by looking at whether the level of over-education is greater among younger cohorts and the extent to which there is a wage penalty attached to this 'over-education'.
Key messages
- Increasing education levels have given rise to a degree of credentialism, with young age cohorts having greater numbers who are over-educated relative to older cohorts.
- But the degree of credentialism is quite modest: the (wage) return from years of over-education is 6% compared with 9% for required years of education.
- The penalty for credentialism is about the same as that attached to labour market mismatch, whereby, as part of the usual dynamics of the labour market, individuals are in jobs for which they are over-educated.
While the authors find some evidence for credentialism, the results are somewhat reassuring for governments intent on improving education levels. While more members of younger cohorts with specific higher-level qualifications may end up in jobs not commensurate with their qualifications (relative to older cohorts), there is still a healthy return from the implied 'over-education'.
Tom Karmel
Managing Director, NCVER