Author: Andrew Berger-Gross
Jobs are a lot like marriages. Just having a spouse is fine and well, but in an ideal world, we would hope that every individual finds a partner that is a “good match” for them.
Analogously, as economic conditions continue to improve, we would hope to see every worker adequately employed in a job that makes full use of their productive capacity. However, concern about “underemployment” continues to bedevil policymakers six years into the economic recovery. Underemployment is a phenomenon that is challenging to measure, making it difficult for researchers to demonstrate its extent or severity, but there are some proxy measures that can illustrate certain manifestations of the trend.
In a previous article, we explored one form of underemployment, the “involuntary part-time employed”—persons who work fewer than 35 hours per week but would prefer to work full-time. In this article, we focus on what we’ll informally call the “overeducated” employed—those who have educational credentials more advanced than the minimum entry-level requirements for the main job where they work.1
This group includes, for example, college graduates who are primarily employed as cashiers. However, it might also include individuals with advanced degrees that improve their chances of success or lead to advancement in their field but are not technically required for entry (such as registered nurses with bachelor’s degrees). Moreover, these data do not reveal whether these instances of underemployment are “involuntary” or merely demonstrate the preferences of individual workers. Despite these uncertainties, data on “overeducated” employment can be valuable in revealing areas of the labor market where worker’s skills are potentially underutilized.2
These data reveal that 56% of North Carolina’s workforce in 2014 had a more advanced credential than required for entry into their occupation. One reason this number is so high is merely a result of the definition we employ; it is not surprising that so many workers choose to obtain credentials beyond the bare minimum required for an entry-level job. However, other researchers looking at U.S. data found that overeducated rates increased from around 30% during the early 1970s to around 50% by the early 2000s, suggesting that longer-term trends in educational attainment are also playing a role.
Workers in North Carolina are most likely to be overeducated when they start their careers—a time when they have less work experience under their belt and weaker attachment to the labor market. As they progress into their 30s and 40s, workers are more likely to hold jobs befitting their educational credentials.
Even starker disparities can be seen when comparing where these individuals make their living. Notably, the occupations that are least likely to employ overeducated workers are those that are seeing the strongest labor demand relative to supply, such as Healthcare Practitioners and Technical Occupations. On the other hand, occupations experiencing a “labor surplus” – where the number of experienced jobseekers exceeds the number of job openings – are more likely to be filled by workers who have higher educational credentials than are required for the task at hand.3
We can also assess the extent of overeducated employment across North Carolina’s local areas. Workers in the state’s urban centers (including Greensboro, Asheville, Wilmington, Charlotte, and Raleigh) are more likely to hold educational credentials over and above what is required for entering their field, while workers in more sparsely-populated rural areas are less likely to be overeducated.
The information LEAD has reported about underemployment in North Carolina has several implications for labor market watchers, workforce developers, and economic developers.
First, for labor market watchers: by at least one measure, underemployment in North Carolina remains high but has declined from its post-recession peak, suggesting that conditions will continue to improve as the labor market normalizes. However, the damage to underemployed workers might be long-lasting; a recent paper demonstrated that highly-educated workers with low-level jobs at the top of their resumes may receive fewer call-backs from potential employers. Moreover, there is extensive research suggesting that such workers are prone to experience lower job satisfaction and persistently diminished employment prospects.
Next, for workforce developers: overeducated employment may be a warning sign that students and trainees are misjudging their need for educational credentials, leading them to expensive human capital investments yield relatively smaller rewards. The workforce development system can help steer education and training participants to the particular credentials that make the most sense in our 21st century economy. (In future research we will explore the relationship between the specific field-of-study pursued by college graduates and the field in which they find work.)
Finally, for economic developers: the underemployed are a crucial (but oft-ignored) component of a region’s labor pool. As we’ve shown previously, a large portion of those who enter new jobs in a given month were already employed in another job (rather than jobless). We can reasonably assume that the underemployed are more likely to be “poached” or seek work elsewhere than their more adequately-employed peers, and thus represent an ideal target for companies looking to hire. Developers can enhance their efforts to recruit or retain employers by incorporating data on the underemployed into their assessment of a region’s supply of qualified labor.
General disclaimers:
Data sources cited in this article are derived from surveys and administrative records, and are subject to sampling and non-sampling error. Any mistakes in data management, analysis, or presentation are the author’s.
1 We accomplish this by linking data on minimum entry-level educational requirements by occupation from the Bureau of Labor Statistics with data on the educational attainment – and occupation of employment – of individual North Carolina residents from the Current Population Survey (or American Community Survey, where noted.)
2 There is an active debate regarding whether the Bureau of Labor Statistics’ (BLS) measures of minimum entry-level educational requirements are appropriate for use in labor market analysis. For example, researchers at Georgetown University have asserted that the BLS measures are inadequate because they identify a single “cut-off” value, rather than a range of credentials appropriate for employment. Moreover, these researchers contend that the BLS measures are overly “subjective” because they are determined by individual analysts evaluating multiple sources of quantitative and qualitative data. For this analysis, we chose to use the BLS measures for several reasons: For one, the BLS measures are among the only comprehensive and high-quality designations of educational requirements available for detailed occupational categories. In addition, any assessment of “overeducation” requires a comparison of normative (needed) requirements against empirical (actual) educational attainment in the workforce. The measure of educational requirements proposed by Georgetown researchers, because it is drawn directly from observed data, requires us to accept that all workers have the “correct” amount of education; “overeducated” workers cannot possibly exist according to their approach.
3 In this article we apply a somewhat different methodology for estimating the number job openings by occupation than in our previous work on the subject. We developed a methodology that adjusts occupation-level data on job advertisements from the Help Wanted OnLine™ program by benchmarking it to shifts in job openings from the Job Openings and Labor Turnover program. This methodology is intended to improve our estimates of labor demand in various occupations; however, the ranking of occupations by their relative degree of labor “shortage” or “surplus” remains largely unchanged regardless of the method we use.