This paper surveys the economics literature on overeducation. The original motivation to study this topic were reports that the strong increase in the number of college graduates in the early 1970s in the US led to a decrease in the returns to college education. We argue that Duncan and Hoffman's augmented wage equation the workhorse model in the overeducation literature in which wages are regressed on years of overschooling, years of required schooling and years of underschooling is at best loosely related to this original motivation. We discuss measurement and estimation issues and give an overview of the main empirical findings in this literature. Finally we given an appraisal of the economic lessons learned.

https://papers.ssrn.com/sol3/Delivery.cfm/dp5523.pdf?abstractid=1771245&mirid=2

Overeducation and Mismatch in the Labor Market

This article examines the impact of surplus schooling on individual productivity and earnings. It proposes a model that divides workers' education into two components: education that is required and thus fully utilized in the job, and education that exceeds the amount required and thus may be underutilized in the job. The model is tested with data from the 1969, 1973, and 1977 Quality of Working Life Surveys (Quinn and Staines 1979). Required schooling for each occupation is derived from estimates by job incumbents and by the Dictionary of Occupational Titles. The results show thqt surplus or underutilized education is rewarded at a lower rate than required education, with the actual return dependent on the type of job.

https://www.jstor.org/stable/pdfplus/145865.pdf

The Impact of Surplus Schooling on Productivity and Earnings

This chapter surveys the economics literature on overeducation. The original motivation to study this topic reports that the strong increase in the number of college graduates in the early 1970s in the United States led to a decrease in the returns to college education. We argue that Duncan and Hoffman's augmented wage equation—the workhorse model in the overeducation literature—in which wages are regressed on years of overschooling, years of required schooling, and years of underschooling is at best loosely related to this original motivation. Next, we discuss how overschooling and underschooling at the level of individual workers have been measured, and what the incidence of overschooling and underschooling is. We then analyze in more detail Duncan and Hoffman's wage equation. We discuss the potential problems with it due to endogeneity and measurement error, and we review the results from earlier studies using this specification. We conclude that because of the issues concerning endogeneity and measurement error, the estimated returns to required/under/overschooling cannot be interpreted as causal.

/pdf/overeducation-and-mismatch-in-the-labor-market-38jxo8tjfn.pdf

Overeducation and mismatch in the labor market

Major hypotheses about temporal change in the skill levels of work correspond to notions of upgrading, downgrading, and little net change. This paper identifies reasons why research has been equivocal on the larger question. Research designs yield differing conclusions: aggregate studies suggest little net change in recent years; case studies portray more volatile upgrading and downgrading within subsectors. A comprehensive answer to the question of skill transformation will require more systematic assessment of compositional and work content shifts, more complete sampling of the temporal and spatial domain, and better concepts and measures for skill. An improved approach includes direct measurement of two primary dimensions of skill, substantive complexity and autonomy-control. A review of existing aggregate studies illustrates the methodological problems and suggests future directions and hypotheses.

Deciphering Prometheus: Temporal change in the skill level of work.

Human capital theory suggests that education enhances worker productivity and is reflected in higher individual earnings. We use data from the 1969 Survey of Working Conditions and the 1973 and 1977 Quality of Employment Surveys, and a model derived from the industrial psychology literature, to test the proposition that workers' education in excess of what their jobs require can have adverse effects on job satisfaction and other correlates of worker productivity. Our results support earlier studies that have found surplus schooling has a negative effect on job satisfaction. Our findings also indicate that the negative impact of surplus schooling on job satisfaction and turnover is more significant for workers with a higher level of surplus education. Finally, the negative effects of surplus schooling appear to change over time.

The impact of surplus schooling on worker productivity

T HE current surge of enthusiasm for education rests to a considerable degree on presumptions of its economic benefits. The recent attempts to measure "human capital" and the rate of return on it are efforts to explore the basis for these presumptions and, in this way, to establish economic criteria for education. In this paper I will criticize the use of rate of return criteria for education and suggest an alternative approach.' The objective of the first section will be to evaluate the working of the "price system" in education and the usefulness of criteria for education which are based on it. In the second section an alternative approach to the formulation of criteria for education is proposed and some illustrative empirical results presented. In the third section the application of this approach to education and manpower planning will be discussed briefly.

/pdf/economic-criteria-for-education-and-training-1i9hgorege.pdf

Richard S. Eckaus

Papers

Economic criteria for education and training