Overeducation and the skills of UK graduates

Summary. During the early 1990s the proportion of a cohort entering higher education in the UK doubled over a short period of time. The paper investigates the effect of the expansion on graduates’ early labour market attainment, focusing on overeducation. We define overeducation by combining occupation codes and a self‐reported measure for the appropriateness of the match between qualification and the job. We therefore define three groups of graduates: matched, apparently overeducated and genuinely overeducated. This measure is well correlated with alternative definitions of overeducation. Comparing pre‐ and post‐expansion cohorts of graduates, we find with this measure that the proportion of overeducated graduates has doubled, even though overeducation wage penalties have remained stable. We do not find that type of institution affects the probability of genuine overeducation. Apparently overeducated graduates are mostly indistinguishable from matched graduates, whereas genuinely overeducated graduates principally lack non‐academic skills and suffer a large wage penalty. Individual unobserved heterogeneity differs between the three groups of graduates but controlling for it does not alter these conclusions.