Professor François Rycx is a specialist in Labour Economics. Today he discloses and discusses the conclusions from his recent research into the magnitude and consequences of educational mismatch.
- Could you tell us some more about your background and how you became a professor?
Certainly! It all happened quite naturally. I have always been passionate about economic research and policy. After getting my Bachelor degree in Economics, I completed a Masters in Econometrics with the idea of ultimately joining an organisation like the International Labour Organisation (ILO), or the Organisation for Economic Co-operation and Development (OECD) or the research department of a mainstream bank. But then Professor Robert Plasman offered me the chance of studying for a PhD in the field of Labour Economics, and to join a very dynamic research team (also led by Danièle Meulders) and… here I am! Since graduating, I have published more than 80 articles in scientific journals and written books on a variety of issues, including minimum wage systems and unequal pay, performance-related pay, workforce absenteeism, workforce diversity and company performance, discrimination against women and migrants, the employment consequences of offshoring, and other topics. More recently I wrote about the impact on productivity and wages of a firm’s position in the value chain. In the meantime, I have acted as advisor to a number of organisations such as the European Central Bank, Eurofound, the European Commission, the European Trade Union Institute, IWEPS, the National Bank of Belgium, and the OECD. At the moment, I am particularly involved in two major ongoing research contracts with the Belgian Federal Scientific Policy Office (BELSPO). One is on “Improving the labour market position of people with a migration background in Belgium” (together with sociologists and geographers from the University of Antwerp) and the other is on “In-work poverty and shifts in work, income, and consumption of households” (together with economists and sociologists from the Universities of Antwerp, Leuven and Utrecht).
15% of workers in our country are either
over- or undereducated for their jobs
The choice of a measure
- One of your current research studies is specifically focused on educational mismatch. Could you elaborate on this?
Educational mismatch (put simply, being over- or under-educated) refers to the difference between the worker’s level of education and the education required in his/her job. Belgium, like most European countries, is facing a constant rise in the average education level of its population. The share of people (postsecondary) with higher level (tertiary) education aged between 25 and 34, increased from 36% to 44% between 2000 and 2014. At the same time, we have found that roughly 15% of workers in our country are either over- or under-educated for their jobs. This figure corresponds to the European average. There are many different ways of measuring the required level of education for a job and the incidence of educational mismatch. As often, none of them is perfect and each of them has advantages and disadvantages. In practice, the choice of what to measure is often dictated by what data is available. Still, I can see three valid approaches: objective measurement based on evaluation by professional analysts, subjective measurement (self-assessment) by the employee/employer, and empirical measurement.
- Can you correlate this educational mismatch with worker productivity?
Yes, and again there are different approaches, either direct (effect on productivity of over- or under- education) or indirect (through wage levels or job satisfaction). Using the indirect angle, human capital theory states that education enables the development of skills that make workers more productive, and that the gap in earnings should reflect these different levels of productivity. Consequently, the effect of educational mismatch on productivity could be estimated through its impact on wages. A second strand of the literature examines the impact of educational mismatch on job satisfaction and related indicators (such as absenteeism, shirking or turnover). The standard hypothesis here is that over-educated workers, frustrated by only being allowed to use a few of their skills, are less satisfied, more absent, and sicker than their adequately educated peers. These two approaches could thus lead to different conclusions.
First time study
- You also mentioned a “direct” angle…
Yes, and this one was studied for the first time by my co-author, Stephan Kampelmann, and myself. Our results show that, for the Belgian private sector, firm productivity depends significantly and positively on the share of overeducated workers. On the other side of the coin, the presence of under-education is found to be detrimental to firm productivity, but only among young workers. These results suggest that over-educated workers are more productive over their whole career due to the additional skills and capabilities acquired through schooling, while under-educated workers either manage to compensate for their lack of productivity by gaining additional work experience and training, or end up in less demanding jobs as they get older.
- What about the impact on the bottom line of firms?
Findings for Belgium, obtained with my colleagues from the University of Mons (Romina Giuliano, Benoît Mahy and Guillaume Vermeylen), suggest that educational mismatch exerts a stronger positive impact on firm productivity than on labour costs. Put differently, estimates show that under-education is associated with lower profits, whereas over-education leads to positive economic earnings. The size of these reactions is also found to be larger in firms that are experiencing economic uncertainty or are operating in high-tech sectors. These findings are consistent with theoretical expectations in light of Belgium’s relatively compressed wage structure. They suggest that wage compression will limit both any fall in wages for undereducated workers and any rise in wages for over-educated workers.
A sizeable phenomenon
- So what conclusions can be drawn?
Put briefly, although we cannot rule out that for any given job educational mismatch may lead to lower job satisfaction, our research suggests that over-education has a positive and longterm net effect on productivity. Over-educated workers are also found to be more profitable, especially in high-tech and more uncertain environments. This supports the idea that overeducated workers are more adaptable, more reactive, and thus more valuable in their surroundings that may be changing due to technology or just more unstable economically. In contrast, our research suggests that firms that employ under-educated workers are not only less productive but also less profitable. Given that under-education is a sizeable phenomenon in all advanced economies, this is an alarming result. It notably calls for more initiatives to tackle bottleneck vacancies (i.e. labour shortages) and to ensure that workers keep their skills and knowledge up-to-date. Finally, at the macro-economic level, poor educational matching means a loss in terms of global value creation and growth. It also raises questions about the capacity of the education system to provide young people with the skills they require at work, and the ability of labour markets to match large numbers of workers with suitable jobs.