How much is a degree worth? Educational mismatch and wages in the UK. Evidence from the UK annual population survey

Event Date: 26 February 2020

Speaker: James Mitchell, University of Warwick

Time: 4.15pm

Location: Strathclyde Business School, Cathedral Wing CW404b

We analyse the determinants of educational mismatch among UK graduates and how it affects wages, using the 2017 Annual Population Survey. To account for graduates’ heterogeneity, we extend a traditional measure of overqualification based on educational attainment, with information on the skill content of occupations. We also control for unobserved skill with the inclusion of information on the selectivity of universities and degree classification, assuming that high achievers are endowed with both cognitive and non-cognitive skills that are valued on the job market. We look at the temporary versus permanent nature of the mismatch, gender differences and variations across UK regions. Our results show that more able graduates are more likely to be employed in a graduate job, independent of gender. However, female graduates are more likely to be overqualified in low skilled occupations. Being a recent graduate decreases the chances of a job match, although recent graduates are less penalised compared to non-recent graduates in terms of wages, indicating that this group of workers have additional skills that are valued on the job. Overqualified graduates in high-skilled occupation suffer a lower wage penalty compared to those in low-skilled jobs. The incidence of the educational mismatch varies across UK regions, with the highest incidence in London and the South East. Contrary to expectations, this does not result in higher wage penalties nor in lower productivity performance, suggesting that the relationship between skill mismatches, wages and productivity does not always conform to the theoretical predictions.

Published: 19 February 2020