Abstract
Overeducation of university graduates is considered by many theories as a market phenomenon resulting from market imbalances, market imperfections, and/or job mobility restrictions. Thus, overeducated individuals are often considered as “victims” of labor market misfunctioning, as they are not responsible for the appearance of their overeducation. On the other hand, empirical evidence suggests that overeducation 1) affects various sectors of an economy, 2) is rather large, i.e. in EU-28 it is around 30% and 3) is persistent over time in many countries. In our paper, we take a different approach by considering overeducation as a voluntary rational choice taken by individuals when they decide their educational plans. We thus treat education not only as an investment in human capital, but also as a consumption good offering certain nonmonetary (psychic and social) benefits to university graduates. This approach suggests that overeducation may not be a temporary phenomenon and it will be higher than anticipated when considering education only as investment. Our data set is drawn from a small open economy, Greece, and it is based on graduates of three universities.
Highlights
Overeducation or vertical mismatch occurs when an individual is hired for a job advertised as requiring a lower level of education than the individual possesses, or alternatively, when an individual is employed in a job which requires a lower level of education
Empirical evidence suggests that overeducation is not small as the average percentage of overeducation in the EU-28 is around 19% for medium skilled and 29% for high skilled workers in 2013 [3], and that this high level of overeducation is persistent over time for a number of countries [1] [4]
Overeducation among university graduates is a widespread phenomenon in many countries
Summary
Overeducation or vertical mismatch occurs when an individual is hired for a job advertised as requiring a lower level of education than the individual possesses, or alternatively, when an individual is employed in a job which requires a lower level of education (see Cedefop [1]). The classical theory of human capital investment considered overeducation as an unpleasant, involuntary, small sized by-product of individuals’ investment in education that will be eliminated over time (see e.g. Mc Guinness and Pouliakas [2]). In this paper we suggest that overeducation is a voluntary choice and not an unpleasant by-product of investment into human capital since individuals are motivated in choosing their educational plans by future monetary benefits of their studies and by certain psychic benefits arising as well from their studies and which are distinct and not related to their monetary benefits. In Subsection 2.1 we present theories and models that try to explain the determinants of overeducation and their common shortcoming i.e. explaining overeducation as an unpleasant characteristic of the labor markets.
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