Should governments of OECD countries worry about graduate underemployment?

an article by Francis Green and Golo Henseke (UCL Institute of Education) published in Oxford Review of Economic Policy Volume 32 Number 4 (Winter 2016)

Abstract

To assess potential public concerns, this paper examines theory and evidence surrounding graduate educational underemployment (overeducation) in this era of mass higher education. Using a new, validated, index of graduate jobs, we find that the prevalence of graduate underemployment across 21 countries is correlated with the aggregate supply-demand imbalance, but not with indicators of labour market flexibility.

Underemployment’s association with lower job satisfaction and pay is widespread. Yet in most countries there are external benefits (social trust, volunteering, and political efficacy) associated with higher education, even for those who are underemployed.

Taken together with existing studies we find that, in this era of mass higher education participation, under-employment is a useful indicator of the extent of macroeconomic disequilibrium in the graduate labour market.

We conclude that governments should monitor graduate underemployment, but that higher education policy should be based on social returns and should recall higher education’s wider purposes.

JEL Classification: I23, I28, J2, J3, J4

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