More necessary and less sufficient: an age-period-cohort approach to overeducation from a comparative perspective

Eyal Bar-Haim,Louis Chauvel,Anne Hartung

doi:10.1007/s10734-018-0353-z

Eyal Bar-Haim, Louis Chauvel + Show 1 more

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https://doi.org/10.1007/s10734-018-0353-z

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Abstract

In many countries, the skilled labor market has lagged educational expansion. As a result of increased competition, younger cohorts of the highly educated face decreasing returns to education or overeducation. Surprisingly, decreasing occupational outcomes do not coincide empirically with the economic returns among those with tertiary education. Regarding the process of changes in economic returns to education based on cohort transformations, we expect that the expansion of tertiary education affects specific cohorts, which find themselves facing more labor market competition. As a result, the economic returns to education should decrease among younger cohorts even when the overall returns to education remain stable over time. To study this process, we model economic returns with a new age-period-cohort-trended lag (APCTLAG) method, which allows us to compare the gap in economic returns between tertiary and less than tertiary education over cohorts. Using the Luxembourg Income Study (LIS), we analyze trends over three decades in 12 countries. Our results confirm that educational returns for tertiary education have declined over time, even though the gap between the educated and the less educated has remained similar in most of the countries. For younger cohorts, tertiary education has become more necessary to survive in the competitive labor market, but the actual economic returns have decreased—making tertiary education less sufficient than before.

Highlights

This paper provides new evidence on the variation of returns to education cohorts and countries in light of educational expansion and changes in the labor market
In a number of countries—most notably France, Luxembourg, Finland, Israel, the United Kingdom and the Netherlands—the expansion was not linear, with a substantial shift in the proportion of cohorts with tertiary education born in 1970–1975. This is in line with previous studies highlighting a massive educational expansion that occurred during the 1990s, when the aforementioned cohorts entered the higher educational system (Marginson 2016; Liu et al 2016) and can be attributed to some extent to the above-mentioned changes in the higher educational systems, at least for the UK, the Netherlands, France and Finland
In the United States and Denmark, the educational expansion began earlier, with cohorts born in 1960–1965 being its first beneficiaries

Summary

Introduction

This paper provides new evidence on the variation of returns to education cohorts and countries in light of educational expansion and changes in the labor market. The massive expansion of higher education at the second half of the twentieth century and especially since the 1990s led to concerns about a possible decline in returns to education due to the expansion, and if the labor market demand for workers with higher education would be sufficient to meet the supply of such workers (Mills 1953; Smith 1986). This is known in the literature as the prediction of “overeducation” (Freeman 1976; Sicherman 1991) or “educational inflation” (Collins 1979). Younger, better-educated cohorts face more competition in the labor market than earlier cohorts, forcing them to settle for less prestigious jobs with lower wages

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