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Overeducation in the Australian Labour Market : Its Incidence and Effects

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  • Ingrid Linsley
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    Abstract

    Overeducation is a form of labour underutilisation which occurs when the formal education level of a worker exceeds that which is required for the job. It is a form of underemployment that imposes significant costs on individuals and economies. Using data from the Negotiating the Life Course survey this study determines the incidence and effects of overeducation in the Australian labour market. This study found that 27.1 per cent of individuals are overeducated, and the incidence is higher among those who are young, have preschool-aged children, work in large firms and have fewer years of tenure. A positive relationship was also found between timerelated and skill-related underemployment. Overeducation is found to impose costs on individuals, reducing earnings by between 10 and 20 per cent and lowering job satisfaction.

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    Bibliographic Info

    Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 939.

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    Length: 30 pages
    Date of creation: 2005
    Date of revision:
    Handle: RePEc:mlb:wpaper:939

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    Web page: http://www.economics.unimelb.edu.au
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    Keywords: Overeducation; labour market; education; earnings;

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    References

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    1. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
    2. Mendes de Oliveira, M. & Santos, M. C. & Kiker, B. F., 2000. "The role of human capital and technological change in overeducation," Economics of Education Review, Elsevier, vol. 19(2), pages 199-206, April.
    3. Alfonso Alba-Ramírez, 1993. "Mismatch in the Spanish Labor Market: Overeducation?," Journal of Human Resources, University of Wisconsin Press, vol. 28(2), pages 259-278.
    4. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
    5. Battu, Harminder & Sloane, Peter J., 2002. "Overeducation and Ethnic Minorities in Britain," IZA Discussion Papers 650, Institute for the Study of Labor (IZA).
    6. Arnaud Chevalier, 2003. "Measuring Over-education," Economica, London School of Economics and Political Science, vol. 70(279), pages 509-531, 08.
    7. Felix Buchel & Harminder Battu, 2003. "The Theory of Differential Overqualification: Does it Work?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(1), pages 1-16, February.
    8. Groot, Wim & Maassen van den Brink, Henriette, 2000. "Overeducation in the labor market: a meta-analysis," Economics of Education Review, Elsevier, vol. 19(2), pages 149-158, April.
    9. Frank, Robert H, 1978. "Why Women Earn Less: The Theory and Estimation of Differential Overqualification," American Economic Review, American Economic Association, vol. 68(3), pages 360-73, June.
    10. P. J. Sloane & H. Battu & P. T. Seaman, 1996. "Overeducation and the formal education/experience and training trade-off," Applied Economics Letters, Taylor & Francis Journals, vol. 3(8), pages 511-515.
    11. Nachum Sicherman, 1987. "Over-Education in the Labor Market," University of Chicago - George G. Stigler Center for Study of Economy and State 48, Chicago - Center for Study of Economy and State.
    12. McGoldrick, KimMarie & Robst, John, 1996. "Gender Differences in Overeducation: A Test of the Theory of Differential Overqualification," American Economic Review, American Economic Association, vol. 86(2), pages 280-84, May.
    13. Hersch, Joni, 1991. "Education Match and Job Match," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 140-44, February.
    14. Duncan, Greg J. & Hoffman, Saul D., 1981. "The incidence and wage effects of overeducation," Economics of Education Review, Elsevier, vol. 1(1), pages 75-86, February.
    15. Dolton, Peter & Vignoles, Anna, 2000. "The incidence and effects of overeducation in the U.K. graduate labour market," Economics of Education Review, Elsevier, vol. 19(2), pages 179-198, April.
    16. Tsang, Mun C. & Levin, Henry M., 1985. "The economics of overeducation," Economics of Education Review, Elsevier, vol. 4(2), pages 93-104, April.
    17. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April.
    18. Monojit Chatterji & Paul T. Seaman & Larry D. Singell Jr., 2003. "A test of the signalling hypothesis," Oxford Economic Papers, Oxford University Press, vol. 55(2), pages 191-215, April.
    19. P. J. Sloane & H. Battu & P. T. Seaman, 1999. "Overeducation, undereducation and the British labour market," Applied Economics, Taylor & Francis Journals, vol. 31(11), pages 1437-1453.
    20. John Robst, 1995. "Career Mobility, Job Match, and Overeducation," Eastern Economic Journal, Eastern Economic Association, vol. 21(4), pages 539-550, Fall.
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    Cited by:
    1. Maite Blazquez & Silvio Rendon, 2006. "Over-Education in Multilingual Economies: Evidence from Catalonia," Working Papers 0607, Centro de Investigacion Economica, ITAM.
    2. Seamus McGuinness & Mark Wooden, 2007. "Overskilling, Job Insecurity and Career Mobility: Evidence from Australia," Melbourne Institute Working Paper Series wp2007n09, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Giuseppe Croce & Emanuela Ghignoni, 2011. "Overeducation and spatial flexibility in Italian local labour markets," Working Papers 145, University of Rome La Sapienza, Department of Public Economics.
    4. Ingrid Linsley, 2005. "Causes of Overeducation in the Australian Labour Market," Department of Economics - Working Papers Series 940, The University of Melbourne.

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