Andrew Leigh agrees that some people have more qualifications than they need for their jobs. But he’s not convinced that over-education is a problem:
The returns to education have stayed very stable over the past 20 years. If anything, there’s a bigger economic benefit to going to university today than in the past.
It is true that there is no evidence that average returns to higher education have gone down over the past twenty years. But I would not expect the statistics I have been citing to affect average returns as there have always been similar proportions of over-qualified workers, who would have consistently dragged down the averages over time. Though the statistics in my graduate mismatch paper (pdf) only go back to 1991, the time of the last enrolment boom, I also checked some earlier data.
It gets a little complicated because the job categories used by the ABS have changed over the years, but matching as much as I can we get very similar over-education statistics through the years. The earliest data I could find was from 1979, and at that time the proportion of graduates in non-graduate jobs (with the caveat in the first sentence) was 18.7%, remarkably similarly to the 19.2% I calculate for 2006. For 1986 I arrive at a figure of 19.8%. In 1996 it was 22%, but that was a temporary aberration, the unfortunate consequence of the Dawkins enrolment boom graduating into the Keating recession. It was back down to 18.9% in 1998.
There are no signficant shifts in the numbers that can’t be readily explained by the general economic situation and/or passing periods of rapid growth in student numbers. The stability of the percentage over-educated does suggest that there may be attributes of a significant minority of graduates that mean substantial over-education is a permanent aspect of the labour market.
It does, however, highlight the fact that the published average returns to education can be misleading. From my reading of the over-education literature, over-qualified people in the same job categories tend to earn slightly more than the average appropriately-qualified person in the same job category, but they earn significantly less than graduates in professional and managerial jobs. So for the graduates who do find jobs matching their qualifications, the returns are higher than advertised, but for those who do not the returns are below the average.