What the expansion of higher education means for graduates in the labour market

by Markus Schwabe
Statistician, Directorate for Education and Skills

A university degree has always been considered as key to a good job and higher wages. But as the share of tertiary-educated adults across OECD countries has almost doubled over the last two decades, can the labour market absorb this growing supply of skills? At first glance, the answer isn’t encouraging: the number of unemployed tertiary-educated adults has been increasing across OECD countries for many years. However, a closer look reveals that the unemployment rate for these adults is still much lower than for those without a university degree.

The latest Education Indicators in Focus policy brief analyses long-term trends in employment outcomes of adults based on their highest level of educational attainment. The figure above shows that, in all OECD countries, adults with tertiary education still enjoy higher employment rates than those without by 10 percentage points, on average, and this advantage has changed little over the past two decades.

While this might seem reassuring, in some countries the reality is more troubling. In Korea, for example, labour market demand has not kept pace with an ever-increasing supply of tertiary graduates. As a result, the employment advantage of tertiary-educated adults decreased slightly, by 0.6 point, between 1995 and 2006. In 1995, tertiary-educated adults in Korea were 13% more likely to be employed than those with an upper-secondary or post-secondary non-tertiary education; today they are only 6% more likely to have a job. With 70% of young adults in Korea holding a tertiary degree, some might wonder whether tertiary expansion has reached its limit. But with populations of school-aged children shrinking across OECD countries, the worry about too many university graduates competing for too few high-skilled jobs might prove to be misplaced.

The “knowledge economy” has increased the demand for better-educated and well-skilled workers. But in many countries, even as enrolments in higher education have grown, companies still report that they cannot find workers with the skills they are looking for. While technological progress and globalisation continue to challenge education systems, automation and digitalisation will be, in the words of two Harvard economists*, an ongoing “race between education and technology”. Countries should thus worry less about the share of tertiary-educated adults in the labour force and more about the skills that education provides. Ensuring that the skills students graduate with are relevant to the labour market will go a long way towards making the expansion of higher education sustainable – and beneficial for all.

*Claudia Goldin and Lawrence F. Katz in their book The Race between Education and Technology (2008), Cambridge, MA: Harvard Univ. Press, Belknap.

Links

Education Indicators in Focus No. 57 - Is labour market demand keeping pace with the rising educational attainment of the population?
Education at a Glance 2017 - OECD Indicators

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Do labour markets welcome shorter tertiary degrees?

by Dirk Van Damme
Head of the Innovation and Measuring Progress Division, Directorate for Education and Skills

At the turn of this century, two different models of higher education programmes prevailed in the world. The first mainly consisted of three- or four-year programmes leading to a first qualification – a bachelor’s degree – sometimes followed by a “postgraduate” programme at the master’s level. This model predominated in the United States, the United Kingdom and most other English-speaking countries. The second model, prevalent in Europe, entailed long, integrated programmes – in some fields of study, six, seven or even eight years long - leading to a plenitude of qualifications. Emerging economies in Asia mainly copied the American model, while Latin-American countries mainly followed the model of the European colonising powers.

Sixteen years later, the global landscape of higher education looks much different. What happened is that the continental European model transformed itself to the standard of the English-speaking world, which was considered to be more successful, both in scientific research and in education and labour market outcomes. This process of reform was instigated by the Bologna Declaration of 1999 and the so-called Bologna Process, through which the study programmes in all signatory countries were reformed.

The Bologna Process is mostly seen as a process of harmonisation – some would even say “standardisation” – of study programmes in the “European Higher Education Area” in order to promote European integration and mobility. Less well-known is that one of its objectives was to reduce the length of study at European universities and to ensure that people would enter the labour market at a younger age. Having young people first start their working life at the age of 27 or 28, which was often the case in Germany and Italy, was seen as unsustainable. Economic lobby groups, such as the European Round Table of Industrialists, argued explicitly in favour of a drastic reduction in the length of study programmes; national governments and the European Commission responded.

The Bologna reform process has largely been a success, although in some countries the transition is still not completed. Most programmes are now structured around the “bachelor’s/master’s” model. But are there more graduates with bachelor’s degrees or with qualifications from short-cycle tertiary programmes in the labour force? And are these graduates sought after by employers? The Bologna reforms implied changes to the supply side of education, but has the demand side – the labour market – adjusted itself to these new graduates?

The latest Education Indicators in Focus brief provides some interesting statistics on this. The data show that among adults with a tertiary degree, the share of 25-34 year-old graduates holding a bachelor’s or equivalent degree as their highest level of educational attainment is ten percentage points larger than the share of 55-64 year-olds holding similar degrees, on average across OECD countries. In some countries, such as Italy, which is famous for its long study programmes, the difference is as large as 20 percentage points. In 2015, almost one in two (49%) tertiary-educated 25-34 year-olds has, at most, a bachelor’s degree or equivalent.

As expected, among tertiary-educated adults, the share of graduates with a master’s degree has declined, but the rise of the prevalence of bachelor’s degrees is also the result of a decline in short-cycle tertiary qualifications. This is surprising, because the Bologna reforms also prompted new interest in the potential of short-cycle study programmes below the bachelor’s level. While some countries have expanded access to and availability of such short programmes, others have not, or have even phased them out.

The figure above gives a detailed profile of 25-34 year-old tertiary graduates across OECD and some partner countries. The general picture is that the higher the level of qualification, the better the employment rate, with holders of doctoral degrees and the equivalent benefitting from the highest employment rates. But the differences among the employment rates among the four qualification levels vary enormously across countries. The variation is actually larger for those with master’s degrees or short-cycle qualifications than for those with a bachelor’s degree. In two-thirds of the countries examined – those at the left side of the chart – at least 80% of graduates with a bachelor’s degree are employed. This means that in these countries, labour markets have adjusted well and have opened up opportunities for bachelor’s degree holders, even if, only a few decades ago, this level of qualification did not provide access to jobs. The one-third of countries at the right of the figure has not yet adjusted their labour markets to this new reality; they still value master’s degrees more than bachelor’s degrees. In some of these countries, such as Greece, Italy and Spain, the employment rates for all levels of qualifications are extremely low.

The situation for short-cycle programmes is even more confusing. Employers in some countries, including Austria, France and Luxembourg, seem to value these qualifications highly. In others, such as Norway and Sweden, there seem to be few employment opportunities for adults with short-cycle qualifications. And in many more countries, labour markets still have to adjust to be able to absorb graduates of these programmes.

Educational reforms are often grounded in a predominantly supply-side approach; and governments and higher education institutions often expect labour markets to adjust easily to these reforms. But in order to safeguard the future of young people it is much more important to look at the interaction between the supply and demand sides. In order to co-ordinate the acquisition of skills and qualifications with the exigencies of jobs and workplace needs, education and labour market stakeholders need to work together. In most countries, a well-balanced supply of bachelor’s and master’s degrees now seems to be in place, and that’s a major achievement. In these countries, the bachelor’s degree is now a well-established level of tertiary qualification, providing access to jobs and professions. But in a large group of countries, better policies are needed for both sides of the equation to match the supply with the demand for skills and qualifications.

Links:

Education Indicators in Focus No. 44: Attainment and labour market outcomes among young tertiary graduates, by Gabriele Marconi and Markus Schwabe.

OECD (2015), Education at a Glance 2015: OECD Indicators.

Chart source: OECD (2015), “Educational attainment and labour-force status”, Education at a Glance (database), http://stats.oecd.org/Index. aspx?datasetcode=EAG_NEAC. See Annex 3 for notes (www.oecd.org/education/education-at-a-glance-19991487.htm).

What does a country average actually mean?

by Dirk Van Damme
Head of the Innovation and Measuring Progress Division, Directorate for Education and Skills

The institutional framework of the international community was created in the period following the Second World War. The building blocks for international organisations, including the OECD, were and are the nation-states of the post-World War and post-colonial order. However, nation-states are not fixed entities, but historical constructions. Hence, they take many different forms and change as a consequence of socio-political transformations. Few states correspond to the ideal form of a nation – identified by a common history, language and religion – or state. In a complex and diverse world, national identities change and become less homogeneous. Today, many states are confronted with political pressures originating from regional aspirations for more autonomy. Sometimes such pressures lead to a separation of political entities and the creation of new states, as was the case in the former Yugoslavia, the former Czechoslovakia and the republics of the former Soviet Union. No one can predict the future, but it would be illusory to expect that the current global order will not continue to evolve during the 21st century.

The international statistical system, one of the great achievements of international organisations, has mirrored the evolution of the nation-state. International statistics – and those related to education are no exception – were tuned towards comparing and benchmarking countries against each other. National averages thus became the dominant data. Most of the data points in Education at a Glance, for example, are national averages. However, the expansion and increased sophistication of data collection and data processing have allowed for the development of many more measures than just national averages. Indeed, averages without more detailed measures of how indicators are distributed across various subpopulations offer little added value when it comes to understanding the real world.
Through its “New Approaches to Economic Challenges” initiative, the OECD is working to highlight distributional measures in its statistical apparatus. In Education at a Glance, for example, our analyses increasingly focus on the distribution of education indicators by gender, age, socio-economic status and immigrant background around the national average.

So far, little effort has gone into exploring regional variations within countries. Technical shortfalls, such as the lack of regional data in existing data collections, but also political sensitivities, have hindered the analysis of regional variations. After a few years of hard work, a pilot project under the auspices of the INES Working Party has gathered a range of interesting regional data on some key education indicators. The most recent edition of Education Indicators in Focus (EDIF) explores subnational variations in educational attainment and labour market outcomes.

The chart above shows clearly the relevance of subnational variations. For one of the key measures of a country’s human capital, the tertiary attainment rate in the adult population, the subnational variation in some countries is almost as wide as between-country variations. This is true, obviously, for large countries, such as Canada, the Russian Federation and the United States, but also for Germany, Spain and Sweden. Smaller countries, such as Belgium, Ireland and Slovenia, show less variation, but differences are still significant.

In all countries, the capital region, which attracts a large share of the nation’s human capital for the government and the industries and services concentrated around it, has a larger population of tertiary-educated adults than most other regions. This observation in itself is relevant for education policy: the civil servants and advisors designing those policies often live in environments that bear no resemblance to other parts of the country.

A better understanding of the magnitude of subnational variations in education indicators prompts a range of policy-relevant questions. Huge disparities in human capital between regions call into question the validity of uniform nation-wide education and skills strategies. Regional variation calls for policies that are adapted to the regions’ specific contexts and realities. But nation-states might also have an interest in promoting educational inclusion in the country by taking the steps necessary to help regions at the bottom of the distribution move closer to the average. Significant regional variation might also signal the need for continuing involvement of the central state to ensure that regions have similar capacity and resources to support skills development.

From a statistical point of view, exploring subnational variations raises doubts about the meaningfulness of national averages in international statistics. It is necessary to understand what the country average is and the magnitude of the regional variation around it. After all, an average is just an average, a statistical construct, not a reality.

Links: 

Education Indicators in Focus No. 43 Subnational variations in educational attainment and labour market outcomes, by Markus Schwabe, Rachel Dinkes, Tom Snyder.
Chart source: OECD/NCES (2015), Education at a Glance Subnational Supplement, http://nces.ed.gov/surveys/AnnualReports/oecd/.