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Department of Economics

Education in a university is primarily sought after by students thinking that this is one’s passport to a brighter future. It is anybody’s ultimate dream to enter in an Ivy League school or take up master’s studies and pursue a PhD. A good set of credentials do work for some individuals having them find their own niche. But recent studies have shown that there are many overqualified people who land in jobs that their work experience exceeds the expectation of the job being offered or given.

Other factors like higher salary offered in urban places contribute to the movement of highly educated individuals in urban places and in the case of married women with children; they would accept or apply for a job that is near home. The influxes of graduates come from universities offering various courses to suit different interests of students. There is now a question of spending unreasonable time in school. This paper aims to discuss these factors that contribute to an overqualified and overeducated labor force. MAIN ARGUMENTS:

Almost everyone is expected to finish college and if possible, get a degree in a prestigious university only to be overeducated in the job he lands upon. Overeducation is defined as the extent to which a person acquired a level of education in excess of that which is required for their particular job. (McGUINNESS, 2004) This could cost much to the economy, the company, and the person. One would spend highly for tuition fees and school expenses only to get a job that is less than expected to the educational level one has achieved.

For some companies which shoulder educational expenses for their employees may be spending unreasonably in equipping these individuals which results to labor under-utilization. During the span of time that they are in school serving their scholarships, a significant amount of output is being taken away even at the national level. The time spent in education may be unreasonable in such that they could already contribute to the national economy if they do not spend too much time in school.

Tax revenues may also be wasted by the government to educate individuals unproductively. Education is relevant but resources must be used wisely to accommodate more services in society. Some studies have indicated that lower productivity level is associated with overeducation. In a company, evidence has shown that overeducation is associated with lower productivity. In a study conducted at US Bell companies, there is an estimated increase in output by more than 8 percent translated to almost $5 billion gain if there is a reduction in surplus schooling.

Tsang, Rumberger & Levin (1991) investigated the effects of overeducation (job satisfaction) in different levels of productivity and found that male employees who are overeducated were less satisfied in a significant level and are most likely to resign compared to the male employees who were properly matched. (McGUINNESS, 2004) The number of highly educated workers has increased at the end of the twentieth century which has not matched the demand for them. In Finland for example, there were approximately 11,000 university degrees completed in 1990 and continuously rose to 18,300 in 2004.

(Jauhiainen, 2006) And during the same era, polytechnics was established; another sector in higher education. In 2004, 21,000 qualifications were awarded in polytechnics. So there was a total of 25% of Finland’s population over 15 years old who have achieved a higher education degree. (Jauhiainen, 2006) This could be alarming if there is a great number of graduates produced more than the demand could meet. The increase in number of questions to explain the problem in wage inequality concludes that the demand for skilled/educated workers has risen faster than the supply can deliver.

It is often expected that workers are highly qualified to meet the demands of the salary that is being offered like a carrot at the end of the stick. This demand has increased in most cases. And for individuals to meet this requirement have to spend a considerable amount of academic time and energy. Overeducation is a kind of labor underutilization which happens when higher education achieved by a worker exceeds that which is required by a particular job. It is a form of underemployment that costs significant amount of money on people and economies.

In the study that was conducted by the University of Melbourne, it was found that 27. 1 per cent of individuals are overeducated and it is higher among the young, have children aged 3-6 years old, employed in big companies, and underemployed in terms of skills. This imposes a reduction in earnings by 10-20 percent and leads to low job satisfaction. (Linsley, 2005) These individuals, whose investment proportion on education is unproductive, are most likely to earn lower relative to educated individuals whose occupation fit their educational level.

Also, overeducated workers may also incur non-transitory costs in relation to their low satisfaction in their jobs. (McGUINNESS, 2004) This may lead to the easing out of the well matched employees in the economy as overeducated individuals find their place into lower level positions therefore, raising the educational level within these positions causing the previously adequately educated now, undereducated. (McGUINNESS, 2004) There are also several factors that need to be examined, education is just one part of a person’s human capital, an overeducated individual may lack the experience needed in a particular job.

The career mobility theory explains this as, at the start of the career of a particular individual, might accept a position below his/her educational level with the objective of a promotion later. Another theory called signaling theory explains that an employer does not have the way of knowing the productivity of an individual before hiring him/her and uses education as a measure to know this. These jobs are often concentrated in urban areas where they offer higher salary and attract the overeducated. (Jauhiainen, 2006) The theory of human capital seeks to give answer to differences in income.

It consists of knowledge, skills, and experience an individual can acquire. It is important to note that education is an investment in human capital. Therefore, when an individual is working which requires less education than he/she has acquired, this person in overeducated. (Jauhiainen, 2006) The theory that is most supported is the one hypothesizing that it is just a temporary factor at the start of a person’s career, as it is a negative factor in relation to tenure and age. There is a significant finding that overeducation is just a temporary set-back for some employees who tend to move higher in the career ladder.

Due to this, it is just an impermanent observation and should not be considered a serious problem. But, it must be recognized that for a few individuals, overeducation could be a permanent state which could extend for many years. In this study, it reveals that remaining in an overeducated job as one gets older, the chances become lower that this person leaves overeducation. (McIntosh, 2008) It is also important to note that if the labor market does not perform in perfect efficiency and the fact remains that there is an excess supply of educated individuals, then the presence of overeducation could be a permanent feature in the labor sector.

Plus, recent evidence shows that there is small decline in the graduates’ population as predicted. We can not deny the fact therefore, that overeducation is a constant phenomenon. CONCLUSION: Education is relevant as what has been oriented upon our minds since childhood. As the early philosophers have constantly emphasized in their discourses, love for knowledge must be each person’s objective. This concept motivates an individual to aim for higher education which is essential in his development.

But if we start looking into productivity and efficient use of resources, we must examine the way we manage what we have before us in order to achieve progress. Perhaps, we need to realign our expenditures on education and put it to a more efficient and effective way of proper use by making sure that productivity levels do not decline. We have to look into the amount of time spent in school by government employees for them to get equipped in their jobs. Money spent from revenues to sponsor scholarships by the government must be invested upon well-deserving individuals who will return the cost through years of service.

Big companies must measure productivity levels in equipping employees to ensure higher yields. Overeducation by individuals serving in jobs that may not suit them is only proper on a temporary basis. A person deteriorates if he/she is stuck in this position permanently. We are responsible for our own growth; therefore, must find channels for personal development. Employers must also ensure that their employees are not stuck in a rut for they will also benefit out of this in longer term. High level of job satisfaction in the workplace produces high levels of productivity. Works Cited Jauhiainen, S. (2006).

REGIONAL DIFFERENCES IN OVEREDUCATION. Volos, Greece: 46th Congress of the European Regional Science Association. Linsley, I. (2005). OVEREDUCATION IN THE AUSTRALIAN MARKET: ITS INCIDENCE AND EFFECTS. Melbourne: Department of Economics, University of Melbourne. McGUINNESS, S. (2004). OVEREDUCATION IN THE LABOUR MARKET: REALITY OR FICTION. Belfast: ECONOMIC RESEARCH INSTITUTE OF NORTHERN IRELAND. McIntosh, J. L. (2008, July). Sheffield Economic Research Paper Sites. Retrieved April 27, 2010, from The Theory of Differential Qualfication: Did it work? : http://www. shef. ac. uk/content/1/c6/08/69/33/SERP2008009. pdf

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