El caso de los iones “rápidos”

There are at least nine theories relevant to education mismatch, as indicated in Table 4.2. Table 4.2: Summary of the Main Features of Mismatch Theories

Theory Authors Persistence Main characteristic Human capital

theory Becker (1964) Temporary The mismatch can easily be solved via individuals or firm adjustment Matching theory Pissarides (2000) Temporary Both individuals and firms look for _matches Job competition

model Thurow (1975) Persistent

Labour market allocation is based on hierarchy of workers and jobs' education level

Assignment theory Sattinger (1993) Temporary _{or persistent} Takes into account individuals' preferences on job/sector/wage maximisation Career/job mobility theory Sicherman and Galor (1990) Temporary or persistent

Individuals are unable to properly signal their skills become overeducated Search frictions Gautier et al. Temporary Lack of information in the beginning of _{one’s career}

(2010) Signalling /

screening Spence (1973) Persistent

Informational asymmetry exists in the labour market, education acts as an important signal

Preferences Gottschalk and _{Hansen (2003)}

The same productivity exists among workers, college workers voluntarily choose to work in the non-college sector in equilibrium Technological change theory Mendes De Oliveira et al. (2000) Temporary or persistent

Rapid technological change increases the undereducated, both individuals and firms look for matches

Adapted from: Capsada-Munsech, 2017.

The job competition theory offers a demand side explanation, in contrast to the supply side approach of the human capital and career mobility theories. There are several alternative theories to explain the mismatch such as: the assignment models, search and

frictions, signalling/screening, technological change theory, and preferences. However, this part only elaborates some of the key theories that have been used in most of education mismatch studies, i.e. the human capital, job competition theory, assignment, the career mobility (Linsley, 2005), signalling and screening, and technological change theory. Human Capital Theory

The discussion under this section focuses on the human capital theory in relation to education mismatch or overeducation. As briefly explained in part 3.2.1, the human capital theory argues that education endows an individual with productivity-enhancing ability, and workers will always be paid by their marginal product (Becker, 1975). One of the propositions of the theory is that firms are willing to fully utilise the skills of their workforce by adapting their production processes in response to any changes in the relative supply of labour. Consequently, wages will always be equal to the individual worker’s marginal product, which in turn will be determined by the level of human capital that they have accumulated through either formal education or on-the-job training. Also, overeducation or undereducation will not exist in equilibrium since there will be no under- utilisations of human capital in the labour market.

According to the theory, overeducation is associated with worker’s under-utilisation and wage rates which are below the marginal product; overeducation would appear entirely inconsistent with this view of the labour market. However, as overeducation will become apparent, some economists have continued to argue that the human capital theory remains fully consistent despite the existence of overeducation. Overeducation phenomenon does not certainly overturn human capital theory as it is entirely plausible that workers will be overeducated in the short run (temporary), at the same time as firms adjust their production processes in order to fully utilise the individuals’ human capital or alternatively for as long as it takes workers to find a more appropriate match through job search. Thus, the human capital theory can be rationalised by allowing for the existence of short-run disequilibria.

The explanation of overeducation is also provided by empirical framework, adopted for testing the human capital theory; this could also be entirely consistent with the neoclassical view. The standard approach was developed by Mincer (1974) and is based on wages regression centred on years of schooling which is replaced by overeducation

Becker (1975) argues is directly substitutable with schooling, are ignored in this case. Thus, this specification implies that individuals with more schooling may be compensating for a lack of work-related human capital, and the apparent lower wages of these ‘overeducated’ may be attributable to an omitted variables problem, such as a lack of controls for less formal measures of human capital accumulation. Furthermore, it may also be the case that overeducated workers are in some way less able relative to their adequately matched counterparts; hence, lower wages are merely a reflection of lower ability and/or productivity.

In addition, Freeman (1976) examines overeducation using US universities data and empirically finds that the long-run mismatch arose in the US in 1970’s because the supply of university graduates increased more rapidly than the demand for it. As a result, many individuals with higher education levels were unable to find jobs that require something similar to their education attainment. Long-run mismatch also contributes to the short-run mismatch in the form of overeducation for many individuals. Nonetheless, even in the absence of any long-run mismatches, short-run mismatches would continue to exist due to the difficulty of finding a job without mismatches in a reasonable amount of time (Sattinger, 2012).

Kiker et al. (1997) also study the mismatch in Portuguese labour market using the 1991 Quadros de Pessoal data, where years of schooling variable is used to calculate the mismatch using several different approaches (explained previously in the objective measure part), and find that oth overeducation and undereducation exist in the market. Moreover, the phenomenon of overeducation should be a transitory situation (temporary), where workers accumulate human capital which eventually allows them to improve their job situation.

Furthermore, Green et al. (1999) offer a sensible explanation for overeducation; it is related to the fact that the quality and type of education acquired differs by institution and depends on the curriculum studied. Not all school graduates are equal in terms of their skills and productivity, or that educational human capital cannot be characterised as a homogenous stock. As such, worker productivity and earning will vary according to the quality and type of education obtained (grade, place of study, curriculum studied, etc.) and equally based on the demand for these different types of skills.

The Job Competition Model

The job competition model offers a demand side explanation for the existence of overeducation. This model is based on Thurow’s (1975) book entitled ‘Generating Inequality’. The model suggests that job characteristics may be the only factor to determine wages. The central element of the Job Competition Model is based around the observation (Thurow cites US surveys) that the majority of workplace skills are acquired through on-the-job training as opposed to formal education. Therefore, the labour market is not a bidding market for selling existing skills but a training market where training slots must be allocated to different workers. How these training slots are distributed across individuals depends on factors determining where individuals are located within a particular job queue and the distribution of jobs (training opportunities) in the economy. Once individuals reach the top of the queue and are allocated a job, their wages will be pre-determined by the characteristics of the job in question. Thus, the marginal product resides in the job rather than the individual’s characteristics.

The Job Competition Model emphasises the importance of a person’s relative position. Thurow postulates that were an individual to observe his/her neighbour participating in education, then under the human capital framework that individual would be less likely to participate in education, as the supply would be higher and the return less (Thurow, 1975). Slightly differently, under the Job Competition Model, the same individual would now be more likely to participate as education is a defensive need, necessary to protect their place in the queue. The larger the number of educated persons in the economy, the more imperative it becomes for individuals to invest in education.

The Job Competition Model provides a clear explanation for educational overinvestment as well as overeducation. The model is similar to the signalling framework in that preserving one’s position motivates individual investments. In Spence’s (1973) model, there is a limit to the amount of education in which an individual will invest (it is only based on the balance between wages and the cost of education). However, it is difficult to determine how a ceiling is reached within the Job Competition framework with respect to educational participation. This model provides a theoretical framework with which overeducation is entirely consistent. The implications of the Thurow’s model are that wages will be wholly dependent upon required education and that the returns to education that are over and above that is required by the job (education surplus) will be zero

In a similar respect, Muysken and Weel (1999) apply the job competition theory among skilled workers in European countries. They formalise the observation of increasing supply of skilled workers without rising wages. The study categorise the jobs based on skilled and unskilled jobs; and years of schooling is used as the proxy of education variable. They find that the results fit the facts for the Netherlands and other European countries quite well, since educational attainment had increased over the past decades whereas wages did not rise dramatically. The adjustment process went through on the one hand bumping down of skilled workers into unskilled jobs and on the other hand crowding out of unskilled workers into unemployment.

Moreover, Linsley (2005) studies overeducation in Australia labour market using the NLC survey. The study employs ISA and tests four of the key theories, i.e. the human capital, job competition, assignment and the career mobility theories. Various levels of education represent the education variable. The study concludes that job competition model is the best model to explain overeducation in Australia labour market. The model offers several implications: (1) overeducation persists and leads to less skilled workers being bumped down into low-skilled, low wage positions or crowded out of the labour market entirely; (2) a proportion of an individual’s investment in education has limited productive benefit. Thus, reallocation of investment in education towards vocational education and training institutions which provide intermediate skills for individuals is necessary.

Assignment Models

The assignment models originate from Tinbergen’s (1951) analysis of the determinants of income distribution. In this early model, there is a distribution of jobs (varying by some characteristics) and a different distribution of workers. Workers are affected by the mismatch between jobs and their own characteristics. Differences in wage rates arise which reconcile the distributions of jobs and workers by compensating workers for taking a job that does not match their characteristics (Sattinger, 2012).

Sattinger (1993) further asserts that there is an allocation problem in assigning heterogeneous workers to jobs, which differ in their complexity. The issue is that the frequency distributions on the demand and supply side are unlikely to match and education mismatches may be a persistent problem if the job structure is relatively

unresponsive to changes in relative supplies of educated labour. Moreover, assignment models differ significantly from the Job Competition interpretation in that the models stress that choice of job or sector creates an intermediate step between an individual’s characteristics and their wages, i.e. the job allocation process is not merely a lottery. Income maximisation guides workers to choose particular jobs over others. Subsequently, higher wages for workers with some characteristics play an important role in the economy rather than simply being rewards for the possession of particular characteristics. Workers find jobs in particular sector are not randomly distributed but are there based on the choices made to maximise their income or utility.

The central and crucial prediction arising from the literature is that in order to adequately explain changes in the distribution of wages, it must consider individuals and job characteristics. Therefore, overeducation is entirely consistent with the Assignment Interpretation suggesting that marginal products and wages will depend to some extent on both the individuals and the jobs; these models also imply that there is no reason to expect that wage rates will be wholly related to acquired schooling or other individual attributes (Human Capital theory), neither should it be expected that wage rates will be wholly related to the nature of the job (Job Competition Model). In short, match, overeducation and undereducation are determined by workers’ and jobs’ characteristics. In terms of empirical evidence, Rigg et al. (1990) suggest that in the 1980s approximately one-quarter of UK employers had substituted university graduates for non-graduates, but that approximately one-third of the jobs where this substitution had occurred had not been upgraded in line with the higher educational requirements. Similarly, Pietro and Urwin (2006) study education mismatch in the Italian graduate labour market (university level) in 1997 and 2003, and find little evidence to support the assignment theory; individuals’ pay is determined by both their human capital and the characteristics of their job. Instead, they identify a relatively weak wage effect arising from education mismatch associated with employers’, as opposed to employees’, perceptions of the job requirements. This is probably because employers have re-categorised jobs as requiring a degree, when they were previously filled by non-graduates, and many have not altered pay scales accordingly.

Career Mobility Theory

The theory of career mobility suggests several specific predictions especially related to the effect of schooling on wages and firm mobility. One of the predictions is the effect of schooling on the probability of being promoted from an occupation (within or across firms) will be higher if the returns to schooling are lower while one works in a specific occupation. Similarly, it will be rational for some individuals to spend a portion of their working careers in occupations that require a lower level of schooling than they have acquired. Thus, an individual may choose a job with a lower wage return to education but with a higher probability of promotion in the future than other available jobs with higher wage effects of schooling (Sicherman and Galor, 1990).

Furthermore, Sicherman (1991) applies this theory to explain overeducation, using the 1976 and 1978 waves of the Panel Study of Income Dynamics (PSID) with male heads of household, aged 18-60 years old as the sample. The education variable is presented by years of schooling, and occupation is in two digits occupational category. The study uses RM to analyse and ultimately concludes that overeducated people are willing to choose a job for which their educational levels are higher than needed in order to acquire skills or better opportunities to make a career upgrade in the future. However, Nielsen (2007) argues that this theory only takes effect if overeducated individuals indeed move to a higher level of job to fully utilise their educational qualifications. According to the literature, this theory could be unrealistic for two reasons. Firstly, there is a lack of empirical evidence. For instance, Sicherman (1991) finds that both overeducated people and undereducated people have a positive probability of promotion. Moreover, Büchel and Mertens (2004) point out that overeducated people remain in mismatched status within five years. Secondly, this theory fails to provide a rational explanation in terms of undereducation.

Signalling/Screening

Spence (1973) assumes that the labour market has an informational asymmetry. On the employers’ side, they are not completely certain about true productivity of their employees when they make the employment decisions and even after hiring. There is a signal transfer mechanism passing the information about employees to the employers in order to identify the most productive and motivated workers for the firms. Education acts

as an important signal in this mechanism, acting as a screening device representing some unobserved personal characteristics, such as problem-solving skills, communication skills and motivation. High educational levels signal high productivities. Individuals will keep on investing in education in order to distinguish themselves from others. Thus, investments in schooling are efficient from an individual’s point of view but do not necessarily affect a worker’s productivity.

This theory is not only able to help firms reduce the cost of hiring but is also beneficial for the final occupational distribution and placement in the labour market; by education signal, the most productive workers will be placed in the jobs that make them more productive. If high returns of investment in education remain, incentives for investment in education will last long (Tsang and Levin, 1985). Based on this theory, overeducation may be a persistent phenomenon, or in contrast to Freeman’s argument (Freeman, 1976). In addition, signalling and screening are similar; the difference is that workers move first to choose their education level in order to signal their productivity to the employers. While in the screening theory, employers move first to decide the education level required for a job.

Green et al. (1999) sum up previous studies on overeducation and the signalling model in the UK. They highlight the findings from Rigg et al. (1990) that about 25 per cent employers in late 1980s had substituted graduates for non-graduates, and only about a third of these jobs had been upgraded in terms of content. Meanwhile, the Institute of Personnel and Development (IPD, 1997) conducted a survey of employers, recruitment firms, outplacement agencies and graduate careers offices. One in ten employers felt that they had a problem attracting too many over-qualified people to their job advertisements. This problem was even greater among medium and large firms, with one in four reporting a problem with over-qualified applicants. However, employers may use the term 'over- qualified' to politely indicate that a candidate is, in their view, too old or experienced for the job.

In terms of empirical evidence, Ordine and Rose (2009) study overeducation in Italian graduate labour market, using the data from the Italian Ministry of Education and the Italian commission for academic research evaluation. For the method, the study uses the probit model, and overeducation is defined by DSA. The study focuses on educational choices in a signalling setting in the presence of heterogeneous working ability

equilibria may occur with forward induction reasoning, in which individuals with different abilities acquire the same educational level. Meanwhile, the assumed strategic interaction between firms and individuals’ choices considers explicitly the externality generated by low-ability individuals with low indirect costs who use education in order to signal the abilities that they do not have. As such, education mismatch derives from the emergence of pooling equilibria related to the dimension of the “ability effect” with respect to the “indirect costs effect” in human capital investment. When education quality is low, the latter effect may prevail, and it increases the probability of overeducation. The study further highlights that the larger the share of innovative firms is, the higher the