The Plight of the Overeducated Worker

Overeducated Worker

At 27%, Canada has one of the highest rates of over-qualification in the world .

By Jock Finlayson : Statistics Canada’s latest Labour Force Survey points to a softening in the job market. Across many advanced economies, employment has been slow to recover from the punishing blow delivered by the 2008-09 recession, with young adults in particular shouldering much of the burden.

Canada has done better than most, but even its youth unemployment rate still hovers near 14 per cent, double the overall rate. Many young adults are finding the search for gainful employment tough sledding.

One sign of this trend is the swelling ranks of what is sometimes described as “over-qualified” or “over-educated” workers. Most economists and human resource managers would probably agree that it isn’t necessary to complete or even attend university or college to fill entry-level positions in retail sales, administrative support, food services, or basic production. Yet sizable numbers of workers in such occupations have spent time in or graduated from post-secondary education programs.

The problem of over-qualified workers isn’t new, nor is it unique to Canada – it’s widespread across the developed world. Some recent analysis from the Organization for Economic Cooperation and Development (OECD) sheds light on the problem. As part of a larger project entitled The OECD Skills Outlook, a survey was conducted covering 157,000 people across 24 OECD member countries.

The results indicate that slightly more than one-fifth of workers are overqualified for their current positions. That is, they believe they have education or other credentials that are higher/more extensive than what’s deemed necessary to perform their jobs. As it happens, Canada has one of the highest rates of over-qualification: 27 per cent. The phenomenon is most common in Japan and the UK (approximately 30 per cent); in the United States, 20 per cent of job-holders are over-qualified; while in the Netherlands, only 15 per cent say they are over-qualified for their current positions.

One factor that helps to explain the relatively high percentage of over-qualified workers in Canada is the dramatic increase in the proportion of the population with university degrees and other formal post-secondary credentials. Within the OECD, Canada ranks near the very top in both the level of overall post-secondary attainment and the rise in attainment over time. The presence of vastly more degree and diploma holders undoubtedly serves to inflate the number of workers who are “over-educated” for their present jobs.

Another reason why Canada might have proportionately more over-qualified workers is a high labour force participation rate. In most European countries as well as Japan, the share of the population in the workforce – whether employed or actively seeking employment – is lower than in Canada. Women in Japan are less likely to work than their counterparts in Canada or the U.S. Compared to Canadians, Europeans tend to retire at a younger age and often have a harder time securing employment after completing school. People who aren’t working or pursuing a job weren’t counted as over-qualified in the OECD survey.

Immigration also plays a role in driving up the number of over-qualified workers. Canada welcomes more newcomers relative to the size of its population than almost any other OECD nation, and most of them want to work. First generation immigrants are particularly apt to feel they are over-qualified for their jobs. This can reflect a combination of poor language skills, difficulties in assessing foreign credentials, a lack of Canadian work experience, and discrimination.

In pondering the challenges facing over-qualified workers, it’s important to keep the longer-term picture in mind. Canada’s labour market is flexible by developed country standards. There is evidence that, over a period of a few years, many workers who may be over-qualified in their current posts migrate to different jobs that are a closer fit with their credentials and career interests. In other words, being over-qualified is often a temporary situation.

An important question today is whether this will continue to be the case going forward. Some labour market analysts worry that Canada could be falling into a sub-optimal equilibrium, in which a growing share of the working age population has the wrong skills or inadequate educational preparation for the available jobs.

In any case, the frustrations felt by over-qualified workers are troubling. As the OECD observes, “making the most of human capital means ensuring that a worker’s qualifications and skills are well matched to those required by their job.” A rise over time in the number of over-qualified employees suggests that more must be done to improve the alignment between the supply of and the demand for skills and credentials in Canada.

Jock Finlayson is Executive Vice President of the Business Council of British Columbia.

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