Transcript Tertiary Education Systems and Labour Markets (shorter version)

Tertiary Education Systems and
Labour Markets
Report prepared for the OECD
Stephen Machin* and Sandra McNally**
1 December 2006
*Centre for Economic Performance, LSE;
Department of Economics, UCL
**Centre for Economic Performance, LSE
Issues
In the context of rapid expansion of tertiary
education:
• Is there now ‘over-supply’ of graduates?
• Is there evidence of ‘over-qualification’ and skill
mismatch?
• Are students studying the ‘right type’ of
subjects at tertiary level?
• In particular, is there a shortage of science and
technology graduates?
• Does the type of institution matter for labour
market prospects?
Labour Market Consequences
of Increasing Supply (2)
What is the outcome of changes in demand and
supply?
Compare the wage of tertiary graduates to the
wage of closest substitutes
(upper secondary or post-secondary non-tertiary
graduates). Look at changes over time.
Has the differential fallen over time on account of
the increasing supply of tertiary graduates?
Wage Differentials: Tertiary versus Upper Secondary or Post Secondary ( = 100)
For most countries here, relative wage in 1997 and/or 2002/03
1997
2003
190
180
170
160
150
140
130
120
110
100
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Source: OECD Education at a Glance
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Role of demand
Demand has been increasing faster than supply
– the only way to rationalise stable or
increasing wage premium to tertiary education
Why has demand been increasing so fast?
Weight of evidence is behind ‘skill biased
technology change’ explanation: introduction of
new technologies that are biased in favour of
skilled workers.
Evidence of ‘over-supply’?
• No. Plenty of scope for tertiary education to
keep on expanding.
• As more people obtain a tertiary education,
greater variation in the earnings of graduates.
• Explanations:
- Variation in personal characteristics of
graduates;
- Graduates studying wider range of subjects
and attending larger number of institutions.
Over-education and skill mismatch?
• Can take a long time for (usually less well
performing) graduates to find a job; some are
not in jobs that appear to be well matched to
qualifications; shortages in certain sectors are
reported
• Literature on ‘over-education’ and ‘undereducation’ (terms are sometimes misused)
• Workers who are ‘over’/’under’ educated might
still be well matched to jobs.
• Apparent ‘over’/ ‘under’ education might be a
temporary phenomenon.
Over-education and skill mismatch? (2)
• Wasmer et al. (2006) look at these issues for
several European countries. Find some
evidence that ‘over-education’ is a transitory
phenomenon.
• Only small wage penalty associated with ‘overqualification’. However, ‘skill mismatch’ is a
more serious issue.
Are graduates studying the ‘right’
subjects?
• Few academic studies estimate returns to
higher education by subject of degree,
especially if we want to compare countries and
consider changes over time.
• Machin and Puhani (2006) estimate returns by
degree subject in Britain, France, Germany
and the US using a consistent framework
Returns by field of study
• In the four countries considered, returns to a
university degree are lowest for Arts subjects
whereas they are higher for other subjects –
often highest (at least for men) in
Science/Engineering/Technology
• Requires much further research for other
countries – especially for making comparisons
over time and across countries.
How does type of institution matter? (2)
• Has higher numbers going to institutes of
tertiary education led to a decline in the quality
of tertiary education? Are new institutes
providing as good an education as longer
established institutes?
• One would expect wage returns to vary by
quality of institute attended – to the extent this
is perceived by employers
• Little empirical evidence outside the US
Further expansion
What barriers are there to tertiary education and
what should be the policy response?
• Capacity constraints?: provide more places.
• Credit constraints?: student bursaries
(especially for those from poor socio-economic
backgrounds)
• Is sufficient information available to potential
students?
Conclusions and implications
(2) Field of Study
• Much more evidence needed, especially
comparisons over time and between countries.
for
• Available evidence suggests great variation in returns
to tertiary education conditional on field of study.
• Policy response: provision of good information to
potential students; Argument for permitting fees to vary
by subject of degree and/or to provide bursaries which
are differentiated by subject area
Conclusions and implications
(3) Skill shortage and ‘mismatch’
• Problems with graduates not always having the skills
required by employers
• Policy response:
- examine the content and accreditation system of
vocational courses. Is it appropriate?
- what is the balance between employer-provided
training and that which is publicly provided?
- In the public system, what is the balance between
general education and vocational education?
Conclusions and implications
• Well founded concerns about international
mobility among science and technology
graduates and potential implications for R&D
and productivity. How can conditions of
employment be made better?
• Quality of tertiary education institutions: little
good evidence outside the US for how this
affects labour market outcomes; Priority for
data collection and analysis in other countries.