The Plight of the Overeducated Worker

January 10, 2014
Jock Finlayson

The issue of “over-educated” workers has received more public attention in recent years. Across many advanced economies, the job market has been slow to recover from the punishing blow delivered by the 2008-09 recession, and younger workers in particular have carried much of the resulting burden. Canada has done better than most, but even here the youth unemployment rate hovers near 14%, roughly double the overall rate. Moreover, it is apparent that many young adults are finding the job market tough sledding once they complete their schooling and seek employment.

One feature of today’s labour market is the swelling ranks of what appear to be “over-qualified” or “over-educated” employees. Most human resource experts would agree that it isn’t necessary to complete or even attend university or college to work in retail sales, low level administrative support, food service, or basic entry-level production. Yet sizable numbers of people working in such occupations have spent time in post-secondary education.

The problem of over-qualified workers isn’t new, nor is it unique to Canada – it is widespread across the developed world. Some recent work by the Organization for Economic Cooperation and Development (OECD) sheds light on the extent and determinants of “over-qualification” in the labour market. Part of a larger report entitled The OECD Skills Outlook, this piece of analysis is based on a survey of 157,000 adults across 24 OECD member countries. The findings reported reflect the answers given by survey respondents.

According to the OECD, fully 21% of employed workers are overqualified for their current positions. That is, they believe they have formal educational or other kinds of credentials that are higher/more extensive than what is deemed necessary for the jobs they presently hold. It turns out that Canada has among the highest rates of (self-reported) over-qualification: 27%. Over-qualification is most common in Japan and UK (approximately 30%). In the United States, the figure stands at 20%; in the Netherlands, only 15% of job-holders say they are over-qualified for their existing positions.

One factor that helps to explain the high percentage of over-qualified Canadian workers is the dramatic increase in the proportion of the population with university degrees and other formal post-secondary credentials. Indeed, within the OECD Canada ranks near the very top in both the level of overall post-secondary attainment and the rise in attainment over time. The presence of many more degree and diploma holders no doubt serves to inflate the number of labour force participants who perceive that they are over-qualified for their current employment.

Another reason why Canada may have lots of self-reported over-qualified workers is a higher labour force participation rate than many other jurisdictions. In many European countries, participation in the workforce is significantly lower than in Canada. People who aren’t working or seeking employment by definition won’t be classified as over-qualified, since they don’t hold (and aren’t looking for) jobs.

Finally, it’s important to recognize that Canada’s economy is dynamic and our labour is flexible by developed country standards. There is evidence that, over a period of 3-5 years, many young workers who may be over-qualified in their current jobs migrate to different ones that are a closer fit with their educational credentials, prior experience, and career interests. In other words, being over-qualified is a temporary state of affairs for many participants in the Canadian workforce.

Still, the high incidence of reported over-qualification is troubling. As the OECD report observes, “making the most of human capital means ensuring that a worker’s qualifications and skills are well matched to those required by their job.” Among other things, a steady rise over time in the number of over-qualified workers – or of young people with qualifications that are not valued by employers – suggests a sub-optimal alignment between the supply of and the demand for skills and credentials in the Canadian labour market.

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