Many employers are having difficulties in finding workers with the skills that they need to expand their business and innovate successfully, a Senior Statistician in International Labour Organisation’s (ILO) Department of Statistics, Valentina Stoevska, reports.
Many people, according to his finding, are working in jobs that do not match their level of education.1 At the same time, This phenomenon points to a significant disconnect between the world of education and the world of work.
Drawing on labour force survey data on the level of education and occupations of all employed workers in over 130 countries, the ILO estimates that only about half of these workers hold jobs corresponding to their level of education. The remainder are either overeducated or undereducated for their jobs.
Workers in higher income countries are more likely to hold jobs that match their level of education. In high income countries, this is the case for around 60 per cent of the employed. The analogous shares for upper-middle- and lower-middle income countries are 52 and 43 per cent, respectively.
In low income countries, only one in four workers hold jobs corresponding to their level of education. These observations suggest that the rate of matching increases with countries’ level of development.
Overeducation and undereducation
Although overeducation and undereducation are both to be found in all countries, regardless of their income level, there are different patterns for the various country income groups. Undereducation is more prevalent in low income countries, while overeducation occurs more frequently in high income countries.
In high and upper-middle income countries, around 20 per cent of all the employed are overeducated (that is, they have more education than is required for their jobs); the corresponding share for lower middle income countries is around 12.5 per cent, while in low income countries it is less than 10 per cent. Higher rates of overeducation in higher income countries are likely to be driven by the composition of the labour force, which is characterised by a relatively high level of education.
A certain degree of overeducation will always exist because some individuals accept jobs below their level of education either because these jobs offer specific advantages (such as less demanding and stressful work, an enhanced work life balance, better social protection, shorter commuting times and increased social responsibility) or because they lack experience. For some of these workers, overeducation may only be a temporary situation.
However, when overeducation is due to labour market distortions where the supply of workers with a higher level of education exceeds the demand, it tends to be a longer term phenomenon and usually calls for policy interventions.
Undereducation is also observed in both low and high income countries. Low income countries have the highest proportion of undereducated workers: approximately 70 per cent of the employed have less education than is required for their jobs. The analogous share for lower-middle income countries is around 46 per cent, while in middle-income and high income countries it is about 20 per cent.
The main reason for undereducation is the relatively low level of educational attainment of the existing workforce and/or lack of formal qualifications, especially in low income countries. Some of these undereducated workers may still be able to do their job properly because they have gained the necessary skills through on-the-job training, experience, self learning, social activities or volunteering.
Both overeducation and undereducation can have negative consequences and costs for workers, employers and society as a whole. Overeducation can result, for example, in lower wages, lower job satisfaction, loss of motivation, a higher rate of on-the-job searching, unrealized expectations and lower returns on investment in education.
Undereducation, on the other hand, can have a negative impact on productivity, economic growth and innovation. Moreover, many undereducated workers struggle to transition from the informal to the formal economy owing to the lack of formal qualifications required for jobs in the formal sector that are similar to those they are doing informally.
Undereducation can also hinder workers from moving from low-pay industries to better-paid jobs in the services sector, and from coping with the changes brought about by technological advances, automatization and digitalization. Undereducated workers are at greater risk of losing their jobs, especially during a crisis.
Women in high income countries
When the data are disaggregated by sex, it may be seen that both women and men face difficulties in finding jobs that match their education. However, while in higher‑income countries there is no significant difference between the two sexes in terms of level of matching, women in lower-income countries are less likely than men to have jobs that correspond to their level of education.
In high-income countries, the rate of overeducation is higher for women than for men; in upper‑middle‑income countries, there are no significant differences; and in lower‑income countries, women are more likely than men to be undereducated for the jobs they perform.
These differences in the patterns of educational mismatch between women and men, and between lower‑ and higher‑income countries, suggest that as a country becomes more developed, many well‑educated women will end up in jobs that are below their level of education.
However, it should also be noted that some women may accept such jobs because they offer specific advantages (for example, as mentioned earlier, less demanding and stressful work, an enhanced work–life balance, better social protection, shorter commutes, increased social responsibility, and so on).
In order to reduce the number of women accepting jobs for which they are overeducated, policies may need to be adopted to promote an equal distribution of domestic and caregiving responsibilities between men and women, and to improve access to childcare facilities, which in turn can support a better work–life balance.
The heterogeneity in patterns of educational mismatch highlights the importance of not just considering the phenomenon at an aggregate level, but also identifying the reasons for such imbalances.
Although relevant detailed data are not currently available, the COVID‑19 pandemic has probably had an impact on the rate of educational mismatch among women, especially those with lower levels of education because they tend to be concentrated in the services industries most affected by pandemic-related restrictions, such as retail and hospitality, and because they are more likely to have to care for children.
Not only is it likely that the matching rate for women has declined, but many women have also moved into part-time employment, lost their jobs or left the labour force altogether. For example, in the United States of America, the proportion of matched female workers dropped from 60.2 per cent in 2019 to 57.1 per cent in 2020. In the Dominican Republic, which relies heavily on the tourism sector, the matching rate for women decreased in 2020 while that of men increased.
Wage earners are more likely to be matched than the self-employed
The figure below, which disaggregates matching rates by employment status, shows that wage earners tend to be better matched than the self-employed, especially in low‑income countries. The self-employed have a considerable higher undereducation rate.
While for some self-employed persons, such as own‑account workers and employers, the level of education is not the most important criterion for running a business, a large share of the undereducated in low‑income countries is made up of contributing family workers who have less than basic education.
Countries with very low matching rates tend to have wider pay gaps. This is especially pronounced in low‑ and lower-middle‑income countries, where fewer than 30 per cent of the employed hold jobs corresponding to their level of education and around 10 per cent of workers receive more than 50 per cent of total labour income.
When looking specifically at the proportion of jobs that require an advanced level of education and the proportion of workers who have such education, we may observe that in most countries there is a significant discrepancy between the two.
For example, in most low‑income countries, the proportion of such jobs exceeds the proportion of highly educated workers by more than 20 per cent. These means that in many countries policies are required to raise the level of education of those in high‑skilled jobs.
Despite the considerable progress in improving access to education and raising the level of educational attainment of people worldwide, many workers are still undereducated for the jobs they carry out, especially in low-income countries. At the same time, many people in high‑income countries are working in jobs that require a lower level of education.
Both undereducation and overeducation reflect an inadequate use of human capital and, if persistent, such mismatches can result in high economic and social costs for workers, employers and society as a whole.
To support evidence-based policymaking aimed at reducing mismatch, it is necessary to assess the extent to which the level of education of workers corresponds to the level of education required by their jobs, and also to understand the causes and consequences of both overeducation and undereducation among different population groups (such as women and men, young and older people, migrant workers).
Such information is essential for macroeconomic and human resources development planning and the formulation of appropriate policies.