Overeducation in the Irish Labour Market

Seamus McGuinness, Ruth O'Shaughnessy, and Konstantinos Pouliakas


Overeducation refers to the phenomenon whereby workers are employed in jobs for which they have more schooling than necessary, in terms of what is required to either ‘get’ or ‘do’ their current job. Overeducation is particularly relevant for higher education policy, since potential drivers include an imbalance between the supply of higher education graduates and the number of available jobs. While there has been a huge amount

S. McGuinness (*)

Economic Analysis Department, Economic and Social Research Institute, Dublin, Ireland

R. O’Shaughnessy

National Accounts Section, Central Statistics Office, Dublin, Ireland K. Pouliakas

European Centre for the Development of Vocational Training, Thessaloniki, Greece

© The Author(s) 2017

J. Cullinan, D. Flannery (eds.), Economic Insights on Higher Education Policy in Ireland, DOI 10.1007/978-3-319-48553-9_7

of research published on overeducation in recent decades—see Quintini (2011) and McGuinness (2006) for reviews—little is known about overeducation in Ireland. This chapter aims to address this gap and provides a detailed assessment of the extent of overeducation in Ireland. It also considers the impact of overeducation on earnings within the Irish labour market, as well as the extent to which overeducation in Ireland can be explained in terms of factors such as human capital effects, job condi- tions/requirements, preferences, or the information held at the time of recruitment. It also discusses the policy implications that flow from these findings.

Overeducation is an important issue as it has potentially damaging impacts for individuals, firms and the macroeconomy. International research has shown that overeducated workers earn substantially less than their counterparts with similar levels of schooling who are in matched employment,1 although they are also routinely observed to earn a wage premium relative to workers with lower levels of schooling doing the same job. This suggests that while overeducated workers tend to raise the productivity levels of jobs for which they are overqualified, earning them a premium relative to their less qualified colleagues, they cannot raise productivity levels to a degree that will enable them to earn their full potential wage. From the perspective of firms, there is ample evidence in the literature to show that overeducated workers have a much higher probability of job separation, suggesting that firms employing such workers will tend to incur higher recruitment and training costs. Furthermore, if overeducation restricts the ability of individual workers and firms to reach their full productivity potential then, arguably, it will also impose limits on the level of national income achieved within countries. Finally, overeducation is also potentially important across many key aspects of policy, including wage determination, firm-level performance and macroeconomic growth.

Therefore, within this context, this chapter takes the first in-depth look at the issue of overeducation within an Irish context. It is structured as follows: Sect. 7.2 presents an overview of the theory and evidence on overeducation, Sect. 7.3 discusses the data and methods employed in the chapter, Sect. 7.4 presents the results, while Sect. 7.5 concludes.

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