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Previous work on over-education has assumed homogeneity of workers and jobs. Relaxing these assumptions, we find that over-educated workers have lower education credentials than matched graduates. Among the over-educated graduates we distinguish between the apparently over-educated workers, who have similar unobserved skills as matched graduates, and the genuinely over-educated workers, who have a much lower skill endowment. Overeducation is associated with a pay penalty of 5% -11% for apparently over-educated workers compared with matched graduates and of 22%-26% for the genuinely over-educated. Overeducation originates from the lack of skills of graduates. This should be taken into consideration in the current debate on the future of higher education in the UK.

Executive SummaryThe early Nineties have been characterised by a dramatic change in the British higher education landscape. Reforms allowed universities to expand and at the same time new institutions were granted university status. In a five year period, the number of students doubled (from 15% in 1988 to 30% by 1992). This large expansion in the number of students attending higher education was concomitant to a reduction in the unit cost of a graduate.Questions about the effect of such a rapid expansion have been raised concerning both the supply and the demand of graduates. On the supply side, the issue is about the quality of new graduates. It is feared that post-expansion graduates may have less human capital. This reduction in quality may be a consequence of i) over-crowding and funding reductions, ii) introduction of programs with little academic content, iii) dumbing down of existing programs to accommodate students with lower initial ability. Additionally, the demand for graduates may have failed to accommodate the rapidly increasing supply of graduates.So far, the literature has assessed the impact of the higher education expansion by measuring the changes in the returns to a degree over time. There had been no significant drop in the returns, which would suggest that the labour market absorbed the extra graduates and that the skills of graduates were appropriate. However, since new cohorts typically represent only a small fraction of the sample, these conclusions may be incorrect. Instead in this paper, we compare the early labour market attainment of two cohorts of graduates, one graduating just at the beginning of the expansion period (1990), whilst the second graduated towards the end of the expansion (1995). The two surveys allow us to measure the evolution in overeducation and the wage penalty associated with it between the two cohorts.Additionally, the second survey allows us to assess the skills of new graduates.Over-education can be defined as not being in a graduate job. The expansion of higher education resulted in a doubling of the over-educated population to 35% but we do not find evidence that over-educated individuals are lacking academic skills. Hence, the expansion did not result in a reduction in the quality of graduates.Over-educated graduates are a heterogenous group which can be divided between apparent over-education, where graduates feel that their job matches their skills and genuine over-education, where the graduate is over-skilled for the job. Apparently over-educated individuals are almost indistinguishable from matched graduates, but genuinely over-educated graduates failed to develop management and leadership skills while at university. This later group, representing 15% of graduates is also found to lack unobservable characteristics associated with higher wages (such as motivation, presentation, punctuality, etc). The wage penalty for being genuinely over-educated is similar in both cohorts and reaches 21%, almost eradicating the financial benefit of higher education for ...

Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract We investigate the relationship between early school-leaving and parental education and paternal income using UK Labour Force Survey data. OLS estimation reveals modest effects of income, stronger effects of maternal education relative to paternal, and stronger effects on sons than daughters. Using IV to simultaneously model the endogeneity of parental education and income, the maternal education effect disappears, while paternal education remains significant but only for daughters. In our favourite specification, which proxy for permanent income, paternal income becomes insignificant. Thus policies alleviating income constraints to alter schooling decisions may not be as effective as policies which increase permanent income. JEL codes: I20; J62

It is clear that education has an important effect on wages paid in the labour market However it not clear whether this is due to the role that education plays in raising the productivity of workers (the human capital explanation) or whether education simply reflects the ability of the worker (through a signalling role). In this paper we describe and implement, using a variety of UK datasets, a number of tests from the existing literature for discriminating between the two explanations. We find little support for signalling ideas in these tests. However, we have severe reservations about these results because our doubts about the power of these tests and the appropriateness of the data. We propose an alternative test, based on the response of some individuals to a change in education incentives offered to other individuals caused by the changes in the minimum school leaving age in the seventies. Using this idea we find that data in the UK appears to strongly support the human capital explanation.

Common wisdom states that teenage childbearing reduces schooling, labour market experience and adult wages. However, the decisions to be a teenage mother, to quit school, and be less attached to the labour market might all stem from some personal or family characteristics.Using the National Child Development Study (NCDS), we find that in Britain teenage childbearing decreases the probability of post-16 schooling by 12% to 24%. Employment experience is reduced by up to three years, and the adult pay differential ranges from 5% to 22%. The negative impact of teen motherhood on various adult outcomes is not due to some pre-motherhood characteristics; hence policies aiming to encourage return to school and participation in the labour market may be an efficient way to reduce the long-term consequences of teenage pregnancy.JEL Codes: I200, J130, J310

Executive SummaryThe gender wage gap has been a constant issue of research in the last four decades but no consensus has been reached regarding its origin. The main two theoretical hypotheses are that: 1)women are discriminated against 2) men and women select themselves into education/occupation with different wage profilesTraditionally, economists have decomposed the gender wage gap between a component that can be explained by differences in the characteristics of men and women and an unexplained component -which reflects discrimination but also model misspecification (omission of variables that do differ between gender but may not be observable to the researcher).This research aims to reduce the possible bias in the decomposition due to misspecification by including characteristics that are typically not available in most other research. More specifically, we focus on three domains and include information on i) the subject of degree as well as educational attainments Whilst previous literature has highlighted a motherhood gap, were the wage gap increases after childrearing decisions are made, here we show that women who have preferences for childrearing have lower wages even early on in their career. Additionally, we find that women with higher preferences for childrearing, act rationally and search the job market with less intensity, which could be the mechanism by which child rearing preferences affect wages.Men and women do make different choices through out their life which significantly affect their wages. However, one should be concerned that the "choices" made by women stem from fear of discrimination, social pressure and child rearing expectations and one could debate whether these choice variables should be included as explanations of the gender wage gap.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Using a survey of a cohort of UK graduates, linked to administrative data on higher education participation, this paper investigates the labour market attainment of recent graduates by subject of study. We document a large heterogeneity in the mean wages of graduates from different subjects and a considerably larger one within subject with individuals with the most favourable unobserved characteristics obtaining wages almost twice as large as those with the worst. Moreover, gender differences in wages within subjects are also large. We then simulate a graduate tax to calculate a willingness to pay -in form of tuition fees -to capture these subject wage premia.JEL Classification: I22, J31