Overeducation, Job Mobility, and Earnings Mobility among Holders of First Degrees in Israel Aviad...
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Transcript of Overeducation, Job Mobility, and Earnings Mobility among Holders of First Degrees in Israel Aviad...
Overeducation, Job Mobility, and Earnings Mobility among Holders of First Degrees in Israel
Aviad Tur-Sinai (Israel Central Bureau of Statistics & Tel-Aviv University)
Dmitri Romanov (Israel Central Bureau of Statistics) Galit Eizman (Planning & Budgeting Committee - ICHE)
The Society of Labor Economists Annual Meeting, May 8-9, 2009
To begin with…To begin with…
Over-education is defined as a situation in which an individual
possesses a level of education in excess of what is required for
her/his particular job.
MotivationMotivation - - I I
A steep increase in the tertiary education enrollment and graduation
rates in the last decades in Israel
Students in Isreali Higher Education Institutions
50,821
101,286
163,525
68,236
135,886
213,835
0
80,000
160,000
240,000
1985/86 1988/89 1991/92 1994/95 1997/98 2000/01 2003/04 2006/07
Stu
dent
s
Bachelor's degree Total
Proportion of Israeli Students Entering Higher Education of the Average Age Cohort
44.242.141.8
43.742.240.5
37.636
31.9
28.826.7
23
0
10
20
30
40
50
%
1990/91 1994/95 1998/99 2001/02 2003/04 2005/06
MotivationMotivation - - I I
A steep increase in the tertiary education enrollment and graduation
rates in the last decade in Israel
This increase has slowed the rate of return on schooling, and even
caused a decline in the return on academic education in certain
fields/professions
Over-education provides a micro-level explanation for this trend
Motivation - Motivation - IIII
learning outcomes
Over-education indicates human capital under-utilization
Higher Education Institutions pay attention to employability (=the
probability of employment) of their graduates;
However, given relatively low rates of unemployment among
graduates, it seems that the major issue is the degree of
education applicability (=match between the acquired
knowledge and job requirements);
Motivation - Motivation - IIIIII
More than one third of Israeli graduates immediately proceed to
advanced academic studies.
Israeli Advanced Degree Students, 1989/90-2006/7
0
10,000
20,000
30,000
40,000
50,000
1989/90 1992/93 1995/96 1998/99 2001/02 2004/05
Mas
ter'
s S
tude
nts
0
2,000
4,000
6,000
8,000
10,000
12,000
Doc
tora
l Stu
dent
s
Master Degree Doctoral Degree
Israeli Advanced Degree Students, 1989/90-2006/7
0
10,000
20,000
30,000
40,000
50,000
1989/90 1992/93 1995/96 1998/99 2001/02 2004/05
Mas
ter'
s S
tude
nts
0
2,000
4,000
6,000
8,000
10,000
12,000
Doc
tora
l Stu
dent
s
Master Degree Doctoral Degree
Motivation - Motivation - IIIIII
More than one third of Israeli graduates immediately proceed to
advanced academic studies.
Is it a flight from over-education or a trap into over-education
with more years of schooling?
Prior research and open questionsPrior research and open questions
Sicherman & Galor (1990) and Sicherman (1991) claim that over-
education is a temporary phenomenon, while the empirical
studies by Battu et al. (1999) and Dolton & Vignoles (2000) show
this may be a persistent condition.
Question 1: Is over-education a temporary or a long-run
phenomenon ?
Prior research and open questionsPrior research and open questions
Does over-education imply a higher job mobility (occupational
mobility)? Scarce empirical evidence (Alba-Ramirez. 1993) says
‘yes’, but does it happen through intra-firm mobility or by
changing employers?
Question 2: Is over-education associated with a higher job
mobility?
Prior research and open questionsPrior research and open questions
To what degree over-education can be explained by
relatively low (unobserved) cognitive abilities? Dolton & Kidd
(1998) and Dolton & Vignoles (2000) use grades to control for the
abilities, having confused the “sheepskin effect” with abilities’
effect.
Question 3: How do individual’s cognitive abilities affect
the chances of being over- educated and the chances of
escaping from over-education ?
Further QuestionsFurther Questions
• How widespread is over-education among the Israeli graduates?
• What factors affect the chances of being over-educated?
• What wage loss entails over-education?
• Does learning to an advanced degree reduce the probability of
being over-educated ?
DataData
Survey “Recipients of Degrees from the Universities and Other Institutions of
Higher Education”, conducted by the ICBS (on the cohorts 2000/2001 and
2001/2002) :
– Field of study
– Continuing academic studies (mostly to the second degree)
– Information regarding current employment (occupation, employer, job duration)
– Subjective question regarding the relation between the individual’s current job and first-degree studies
– Satisfaction from quality of teaching, facilities and services
Total 8578 graduates of universities and public academic colleges
Data (cont.)Data (cont.)
Employment and wages:
ICBS’s matched employer-employee database for 2000-2005 provides,
for each employee job, with:
Cognitive abilities as measured by the NITE psychometric exams: total
score and its components—verbal thinking, quantitative thinking, and
English.
Annual gross wage Tenure on the job Number of months worked annually Firm’s size
time
t0t-1 t1 t2 t3
Graduation
year
Survey
year
Timetable of eventsTimetable of events
Cohort200020012002200320042005
2001/2002t-1t0 graduation
t1t2survey
t3
2002/2003t-1t0 graduation
t1t2survey
t3
Measuring Over-educationMeasuring Over-education
• Objective Measure: systematic job evaluation, which states the level
of qualifications required to perform a particular job, usually in terms
of occupation vis-à-vis years of schooling.
• Subjective Measure: worker’s self-assessment.
• Empirical Method: workers whose years of schooling lie outside of
the s.d. bound around the mean schooling, by occupation.
Measuring Over-educationMeasuring Over-education
Survey question used as a Subjective Measure:
To what degree is your current job related to your studies? (refer to all your first-degree studies)
[A] A very high degree [B] A high degree
[C] A low degree [D] Not related at all
Defined as Over-educated: if answer [C] or [D]
Estimates of Over-education among Employed First-Degree Graduates, by Occupation (%)
53%
47%
39%
35%
23%21% 21%
16%
0%
10%
20%
30%
40%
50%
60%
Humanities Social sciences Business andadministration
sciences
Physical,biological
sciences andagriculture
Mathematics,statistics, and
computersciences
Law Engineering andarchitecture
Medicine andParamedicalprofessions
%
Mean = 37%
Over-education, Job Mobility and Wage Gap
3,000
6,000
9,000
12,000Y
ear
1be
fore
degr
ee
Yea
r of
degr
eeaw
ard
Yea
r 1
afte
rde
gree
Yea
r 2
afte
rde
gree
Yea
r 3
afte
rde
gree
Wag
e, N
IS p
er m
onth
Avg. wage, overeducated graduates Avg. wage, non-overeducated graduates
Over-education, Job Mobility and Wage Gap
3,000
6,000
9,000
12,000Y
ear
1be
fore
degr
ee
Yea
r of
degr
eeaw
ard
Yea
r 1
afte
rde
gree
Yea
r 2
afte
rde
gree
Yea
r 3
afte
rde
gree
Wag
e, N
IS p
er m
onth
1.2
1.4
1.6
1.8
2.0
No.
of j
obs
per
year
Avg. wage, overeducated graduates Avg. wage, non-overeducated graduates
No. of jobs, overeducated graduates No. of jobs, non-overeducated graduates
Model I: Probability of Being Overeducated
iiikiijijk PastJobsTAbilityXOE 321)1Pr(
where:
OE – indicator of overeducation on the job
X – a an array of the graduate’s demographic traits, the institution that awarded
h/her degree, and the discipline studied
Ability – a proxy for cognitive abilities
T – tenure, number of months on the job
PastJobs – Number of employers in the last 3 years
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated: Results (1)
Explanatory variableAll disciplines
Male 0.0217
Age0.1469***
Age squared-0.0020***
Jewish0.5484***
Immigrated 1989 or later0.0467
Married-0.2180***
University graduate-0.0549
Continuing studies—parallel degree/certification0.3799***
Continuing studies—advanced degree-0.0886***
*, **, *** 10%, 5%, 1% significance, respectively.
Explanatory variableAll disciplines
Total psychometric score-0.0012***
Psychometric score—quantitative reasoning-0.0057***
Tenure with employer-0.0386***
Tenure with employer squared0.0027***
No. of employers in 3 years preceding survey-0.0446***
R2 max-rescaled0.3980
Probability of Being Overeducated:The Impact of Cognitive Abilities (2)
Model I
University graduate-0.0549
Cont. study – 1st degree/diploma
0.3799***
Cont. study – Advanced degree
-0.0886***
Psychometric exam – total
-0.0012***
Psychometric exam – math
-0.0057***
N5919
R2 0.3980
*, **, *** 10%, 5%, 1% significance, respectively.
Probability of Being Overeducated:The Impact of Cognitive Abilities (2)
Model IModel II
University graduate-0.0549-0.1508***
Cont. study – 1st degree/diploma
0.3799***0.3499***
Cont. study – Advanced degree
-0.0886***-0.1178***
Psychometric exam – total
-0.0012***
Psychometric exam – math
-0.0057***
N59196819
R2 0.39800.3689
*, **, *** 10%, 5%, 1% significance, respectively.
Probability of Being Overeducated:The Impact of Cognitive Abilities (2)
Model IModel IIModel III
University graduate-0.0549-0.1508***-0.1688***
Cont. study – 1st degree/diploma
0.3799***0.3499***
Cont. study – Advanced degree
-0.0886***-0.1178***
Psychometric exam – total
-0.0012***
Psychometric exam – math
-0.0057***
N591968196819
R2 0.39800.36890.3629
*, **, *** 10%, 5%, 1% significance, respectively.
Model II: Wage Equation
iitikikijkiktijijkt uJobChangesTTOEEmpXW 42
321)ln(
where:
W – monthly wage in the graduate’s principal job in year t
Emp – employer characteristics: positioning in the public sector and size of business
JobChanges – a measure of job mobility from year of degree award to year t
Note: slope estimate means % changes dY/dx [i.e., (dY/dx)/Y]
Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after
graduation
2 years after award of degree
3 years after award of degree
Over-education-0.1119***-0.1246***
Average annual No. of jobs (since graduation)
-0.1569***-0.1941***
Tenure0.0656***0.0465***
Tenure (square)-0.0014***-0.0009***
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after
graduation
2 years after award of degree
3 years after award of degree
Over-education-0.1119***-0.1246***
Average annual No. of jobs (since graduation)
-0.1569***-0.1941***
Tenure0.0656***0.0465***
Tenure (square)-0.0014***-0.0009***
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after
graduation
2 years after award of degree
3 years after award of degree
Over-education-0.1119***-0.1246***
Average annual No. of jobs (since graduation)
-0.1569***-0.1941***
Tenure0.0656***0.0465***
Tenure (square)-0.0014***-0.0009***
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after
graduation
2 years after award of degree
3 years after award of degree
Over-education-0.1119***-0.1246***
Average annual No. of jobs (since graduation)
-0.1569***-0.1941***
Tenure0.0656***0.0465***
Tenure (square)-0.0014***-0.0009***
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation: (Ln) Monthly wage in main job two years after graduation
Male0.1573***
Age***0.0627
Age (square)-0.0007**
Jewish0.1571***
Immigrant from 1989
-0.0300
Married0.0502***
University graduate0.1084***
Ln (Psychometric exam)
0.0599
Cont. study –
1st degree/diploma
-0.2545***
Cont. study –
Advanced degree
-0.1341***
Employment in public sector
-0.3986***
No. of employees in business:
0 – 9-0.2552***
10 - 49-0.0436*
50 - 99-0.0102
100 - 4990.0521**
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation: (Ln) Monthly wage in main job two years after graduation
Male0.1573***
Age***0.0627
Age (square)-0.0007**
Jewish0.1571***
Immigrant from 1989
-0.0300
Married0.0502***
University graduate0.1084***
Ln (Psychometric exam)
0.0599
Cont. study –
1st degree/diploma
-0.2545***
Cont. study –
Advanced degree
-0.1341***
Employment in public sector
-0.3986***
No. of employees in business:
0 – 9-0.2552***
10 - 49-0.0436*
50 - 99-0.0102
100 - 4990.0521**
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation: (Ln) Monthly wage in main job two years after graduation
Male0.1573***
Age***0.0627
Age (square)-0.0007**
Jewish0.1571***
Immigrant from 1989
-0.0300
Married0.0502***
University graduate0.1084***
Ln (Psychometric exam)
0.0599
Cont. study –
1st degree/diploma
-0.2545***
Cont. study –
Advanced degree
-0.1341***
Employment in public sector
-0.3986***
No. of employees in business:
0 – 9-0.2552***
10 - 49-0.0436*
50 - 99-0.0102
100 - 4990.0521**
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation: (Ln) Monthly wage in main job two years after graduation
Male0.1573***
Age***0.0627
Age (square)-0.0007**
Jewish0.1571***
Immigrant from 1989
-0.0300
Married0.0502***
University graduate0.1084***
Ln (Psychometric exam)
0.0599
Cont. study –
1st degree/diploma
-0.2545***
Cont. study –
Advanced degree
-0.1341***
Employment in public sector
-0.3986***
No. of employees in business:
0 – 9-0.2552***
10 - 49-0.0436*
50 - 99-0.0102
100 - 4990.0521**
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Equation: (Ln) Monthly wage in main job two years after graduation
Male0.1573***
Age***0.0627
Age (square)-0.0007**
Jewish0.1571***
Immigrant from 1989
-0.0300
Married0.0502***
University graduate0.1084***
Ln (Psychometric exam)
0.0599
Cont. study –
1st degree/diploma
-0.2545***
Cont. study –
Advanced degree
-0.1341***
Employment in public sector
-0.3986***
No. of employees in business:
0 – 9-0.2552***
10 - 49-0.0436*
50 - 99-0.0102
100 - 4990.0521**
*, **, *** 10%, 5%, 1% significance, respectively.
Model III: Wage Dynamics
iitijijijt
ijijt JobChangesOEWXWW 3201/1
0 ln1)(
where:
Wt – monthly wage in graduate’s principal job in year t (t=1,2,3)
W0 – monthly wage in graduate’s principal job in year of award of degree
Note: a positive estimator positive impact to wage growth over t years.
Wage Dynamics: Is Over-education Effect Temporary or Persistent?
Dependent Variable
One-year
growth rate of wage
Two-years average growth rate of
wage
Three-years average growth
rate of wage
University graduate-0.00190.01120.0153*
Cont. learning – 1st degree/diploma
-0.3805***-0.1354***-0.0905***
Cont. learning – Graduate degree
-0.2096***-0.0611***-0.0157**
Over-education-0.0299-0.0514***-0.0243***
Average annual No. of jobs (since graduation)
-0.1432***-0.0723***-0.0575***
N553153635086
R2 0.13550.34840.3883
*, **, *** 10%, 5%, 1% significance, respectively.
Wage Dynamics: Is Over-education Effect Temporary or Persistent?
Dependent Variable
One-year
growth rate of wage
Two-years average growth rate of
wage
Three-years average growth
rate of wage
University graduate-0.00190.01120.0153*
Cont. learning – 1st degree/diploma
-0.3805***-0.1354***-0.0905***
Cont. learning – Graduate degree
-0.2096***-0.0611***-0.0157**
Over-education-0.0299-0.0514***-0.0243***
Average annual No. of jobs (since graduation)
-0.1432***-0.0723***-0.0575***
N553153635086
R2 0.13550.34840.3883
*, **, *** 10%, 5%, 1% significance, respectively.
Model IV: Probability of Studying to an Advanced Degree
iijkikiijijk OEUniversityWorkAbilityXAdvanced 321 _)1Pr(
where:
Advanced – an indicator of taking advanced studies two years after receiving degree
Work_University – an indicator of working at the University during Year 3
Probability of Studying to an Advanced Degree: Demographic, Educational and Employment Factors
MaleAgeAge (square)
JewishImmigrant from 1989
Married
0.2214***0.3386***-0.0039**0.9363***-0.1735***-0.2694***
University graduate
Psychometric exam – total
Work in University during BA
studies
Over-education
0.5432***0.0029***0.5938**-0.1292***
*** ,** ,*represents 10%, 5%, 1% significance, respectively.
Probability of Studying to an Advanced Degree: Demographic, Educational and Employment Factors
MaleAgeAge (square)
JewishImmigrant from 1989
Married
0.2214***0.3386***-0.0039**0.9363***-0.1735***-0.2694***
University graduate
Psychometric exam – total
Work in University during BA
studies
Over-education
0.5432***0.0029***0.5938**-0.1292***
*** ,** ,*represents 10%, 5%, 1% significance, respectively.
Main FindingsMain Findings
• Two years after graduation, 37% of the first-degree holders are over-educated (53% in Humanities, 47% in Social Sciences).
• There is a 13% loss of wage for the over-educated graduates.
• In the first three years after graduation – the wage gap between matched and over-educated graduates is widening.
• Education and tenure are substitutes in the human capital model (one year of tenure decreases the chances of being over-education by 4%).
Main Findings (cont.)Main Findings (cont.)
• Changing one more job per year (in the first three years after graduation) decreases wage by 19%.
• University graduates seem to have lower chances of over-education – unless individual’s cognitive abilities are explicitly controlled for. That means that the graduating from university variable indicates positive (self)-selectivity into the
universities.
• Over-educated graduates have a lower propensity to study for an advanced degree.