The Plight of the Overeducated Worker

By Jock Finlayson

Across many advanced economies, employment has been slow to recover from the 2008-09 recession, with young adults shouldering much of the burden.  Canada has done better than most, but even here the youth unemployment rate hovers near 13 per cent, approximately double the overall rate.  There can be no doubt that, in recent years, many young adults in Canada have found the search for gainful employment tough sledding.

Overeducation A Growing Global Norm
One sign of this trend is the swelling ranks of “overqualified” or “overeducated” workers.  Most economists and human resources managers would probably agree that it isn’t necessary to complete or even attend university or college to fill entry-level positions in retail sales, administrative support, food services, or basic production.  Yet, sizeable numbers of workers in these and similar occupations have completed post-secondary education programs.

The problem of over-qualified workers isn’t new, nor is it unique to Canada.  Some recent analysis from the Organization for Economic Cooperation and Development (OECD) sheds light on the phenomenon.  As part of a larger project on skills, a survey was conducted covering 157,000 employed people across 24 OECD member countries.

Canada Has Widespread Overqualification
The results indicate that slightly more than one-fifth of workers are overqualified.  That is, they believe they have education or other credentials that are higher/more extensive than what’s necessary for their current jobs.  As it happens, Canada has one of the highest rates of overqualification at 27 per cent.  The problem is most common in Japan and the UK (approximately 30 per cent) and in the United States, where one-fifth of job-holders are over-qualified, while in the Netherlands, only 15 per cent of those surveyed describe themselves this way.

One factor that helps to explain the relatively high percentage of over-qualified workers in Canada is the dramatic increase in the share of the population with university degrees and other post-secondary credentials.  Within the OECD, Canada ranks near the top in both the level of post-secondary attainment and the gains in attainment over time.  The presence of vastly more post-secondary degree and diploma holders undoubtedly serves to inflate the number of workers who feel they are “overeducated” for their present jobs.

More Canadians at Work Adds to Challenge
Another reason why Canada might have proportionately more overqualified workers is our relatively high labour force participation rate.  In most European countries, as well as Japan, the share of the population in the workforce—whether employed or actively seeking a job—is lower than in Canada.  For example, women in Japan are markedly less likely to work than their counterparts in Canada or the U.S.; the same is true in Italy, Portugal, Greece and some other European countries.

Compared to Canadians or Americans, Europeans also tend to retire at a younger age and often have a harder time obtaining employment after finishing school.  People who weren’t working or pursuing a job were not counted as overqualified in the OECD survey referenced above.

Immigration also plays a role in shaping the labour market prospects of many workers.  Canada welcomes more newcomers relative to size of population than other developed nations, and most of them want to work.  First generation immigrants are particularly apt to feel they are overqualified for their jobs. This can reflect a combination of poor language skills, the difficulties employers encounter in assessing foreign credentials, a lack of Canadian work experience, and discrimination.

Aligning Supply and Demand for Future
In pondering the challenges facing overqualified workers, it’s important to keep the longer-term picture in mind.  Canada’s labour market is dynamic and flexible.  There is evidence that, over a period of a few years, many young Canadians who may be overqualified in their current positions will migrate to different jobs that provide a closer fit with their credentials and career interests.  In other words, being overqualified is often a temporary situation.

Here in B.C., an examination of the employment status and income performance of university graduates confirms that they tend to do better in the labour market than individuals of a similar age who lack such credentials.  An important question for policy-makers is whether this will continue to be the case going forward.  Some labour market analysts worry that Canada could be falling into a sub-optimal equilibrium, in which a rising faction of the working age population has the wrong skills or inappropriate educational preparation for the available jobs.

In any case, the frustrations felt by over-qualified workers are troubling.  As the OECD observes, “making the most of human capital means ensuring that a worker’s qualifications and skills are well matched to those required by their job.”  An increase over time in the number of overqualified employees suggests that more must be done to improve the alignment between the supply of and the demand for skills and credentials in Canada.

Jock Finlayson is executive vice president and chief policy officer with the Business Council of BC.

(PeopleTalk Spring 2015)

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