Transition from School to Work in Transition Economies

Transcription

1 Transition from School to Work in Transition Economies Irena Kogan Marge Unt Mannheim Centre for European Social Research Institute for International and Social Studies University of Mannheim University of Tallinn P.O. Box, D Mannheim, Germany Estonia blvd 7, Tallinn 10143, Estonia Tel.: +49-(0) Tel.: Fax.: +49-(0) Fax: Paper prepared for the Transitions in Youth Conference 'Competencies and careers, 4-6 September 2003, Funchal, Madeira. First draft, please do not cite. Comments welcome.

2 Transition from School to Work in Transition Economies Abstract While a large body of research exists on the school-to-work transitions and the early careers of youth in EU and other western industrialised countries, little is known about the youth transitions in CEE countries. The experience of the post-communist countries seems however to be unique since transition economies are undergoing major structural changes of all sectors (education, economy, welfare state) at the same time, which is not comparable with downturns in the business cycle known in the western economies. The introduction of the market-based economy, among other things required radical changes in the production system and consequently in the skills of the labour force. Thus the major challenge for school-to-work transition in the transition countries has been to qualify new entrants into the labour market at a time when resources are limited and educational institutions and training providers are themselves being restructured. This paper attempts to contribute to the knowledge on school to work transitions among young school leavers in the transition countries focusing on the effect of the level of education, social background (and networks connected to it), and interplay between them on the timing of the first significant employment as well as the match between educational qualifications and occupation of the first significant job among school leavers in three countries Hungary, Slovenia and Estonia. So-called cohort effects are a focal point as well, since transition process and outcomes seem to be largely influenced by the dynamics of economic and social changes in the transition economies. To explore the early career developments of job entrants in the three transition countries during the 1990s, the study utilises the European Union Labour Force Survey (EULFS) ad hoc module on school-to-work transitions, which has been launched in Hungary, Slovenia in 2000 and in Estonia in Event history methods are applied to explore transition to first significant employment, while the match of educational qualification and occupational attainment is modelled using multinomial logistic regression techniques. 2

3 Transition from School to Work in Transition Economies Introduction Linkages between the education system and the labour market have received a great deal of attention in the sociological literature. The success of a person in the labour market is seen to be dependent on various resources s/he holds and on whether, if at all, s/he has a chance to convert those resources into a beneficial labour market position (Helemae and Saar, 2000, 85). In all western industrialised countries occupational attainment is shaped by education, which is especially true for new labour market entrants who do not have previous work experience. However, cross-national variation is observed with respect to how and to what extent educational attainment influences occupational outcomes (Shavit and Muller, 1998; Maurice et al., 1986; Allmendinger, 1989; Kerckhoff, 1995, 2000; Ryan, 2001). The human capital approach and the model of status attainment have focused mainly on the impact of individual resources, above all, education and work experience, as well as ascriptive characteristics like gender and social origin, also related to the status attainment. More recently the emphasis has shifted to the structural settings in which status attainment process occurs (Müller and Shavit, 1998, Gangl 2000a, Gangl 2000b, Gangl 2002). Findings show that the impact of individual resources, e.g. educational attainment, on the occupational outcome depends on the specific institutional settings, i.e. the institutional arrangements of educational systems, the system of labour market and the linkages between the two (Hannan et al., 1997). While a large body of research exists on the school-to-work transitions and the early careers of youth in EU and other western industrialised countries, little is known about youth transitions in Central and Eastern European (CEE) countries 1. The experience of the post-communist countries seems, however, to be unique since transition economies are undergoing major structural changes in all sectors (education, economy, welfare state) at the same time, which is not comparable with downturns in the business cycle known in western economies. The introduction of the market-based economy, among other things required radical changes in the production system and consequently in the skills of the labour force. Thus the major challenge for school-to-work transition in the transition countries has been to qualify new entrants (in addition to the re-qualifying a large part of the workforce) into the labour market at a time when resources are limited and educational institutions and training providers are themselves being restructured, often at a slower space than the labour market, which complicates the task. 1 This is not to disregard existing country studies, for example on Hungary (Robert and Bukodi, 2002; Bukodi, 2002; Bukodi and Robert, 2002) and Estonia (Saar and Helemäe, 2002; Katus et al., 2002) and comparative undertakings (e.g. Roberts, 1998). 3

4 This paper aims at describing school-to-work transitions in several CEE countries, candidates to join the European Union in 2004, namely Hungary, Slovenia and Estonia, during the 10-year period after the fall of socialism ( ). More specifically, the focus is on the effect of the level of education, social background (and networks connected to it), and interplay between them on the timing of first stable employment 2 and the quality of the match 3 of the first job with educational qualification among recent school leavers aged So-called cohort effects are a focal point as well, since transition process and outcomes seem to be largely influenced by the dynamics of economic and social changes in the transition economies. The match between the skills acquired in school and the occupational attainment is seen as particularly important for CEE countries as the highly qualified labour force is still regarded as their major strength (Employment and Labour Market Policies in Transition Economies, 1999). When the educational structure and the composition of available jobs do not correspond, there is a waste of resources in a society. For developing countries, it has been observed that when the development of the educational system and the labour market are not in harmony with each other, i.e. when the output of experts with higher education exceeds the availability of jobs requiring higher education, then the brain-drain from the country increases substantially, meaning also that these countries limited resources are being wasted (Bertrand, 1994). From the individual point of view, the evidence shows that the satisfaction with the job depends very much on whether a person is able to work in a job matching his/her educational qualifications (Tsang and Levin, 1985; Burris, 1985; Saar and Kazjulja, 2001; Rose, 1994). This paper, first, relates to the specificity of the situation in the transition economies after the collapse of socialism, further, discussing the background conditions in three CEE countries, Hungary, Slovenia and Estonia. Hypotheses as for the effect of education on the timing of first significant employment 4 and its match with acquired educational qualifications can be found in these sections. The data, variables, and methods are then described in detail. A further section presents results of the event history analysis of entry into the first significant job and of the multinomial regression analysis assessing the match of the first significant job with educational qualification. These results are discussed and summarized in the final section of the paper. 2 The transition from initial education to work is rarely a linear process but rather a sequence of transitions, which start at the point when educational pathways first diverge and end at the point (not clearly defined) when people s positions in the labour market become relatively stable (Wolbers, 2001). Moreover, such transitions often do not follow a normal sequence of school and then work, but represent a combination of learning and working as well as other dual statuses. In empirical research, often because of the lack of data, transition period from school to work is frequently defined as a time period between leaving the education and finding a first job. Similar approach is adopted in this paper. 3 Occupational mismatch is central topic of several empirical undertakings with most of the research addressing the issue of over-education (Borghans and De Grip, 2000; Clogg and Shockey, 1984; Freeman, 1976; Halaby, 1994; Smith, 1986). 4 First significant employment is defined in the study as non-marginal employment of at least 20 hours per week that has lasted at least six months (for more see section on data and variables). 4

5 School-to-work transitions in the CEE countries The transformation period in the CEE countries can be divided into two parts: the early transformation period and the stabilization period. The early transformation period in the CEE countries has been marked by extreme disorder and even chaos in youth school-to-work transitions, caused by general economic upheaval in the post-socialist countries (Roberts, 1998). It is a time when businessmen could emerge from nowhere and, without appropriate education, rapidly reach high status and amass fortunes or, in other words, entering employment as under-educated was a common reality. The breakdown of the normally observed stratification mechanisms was particularly salient as it occurred in sharp contrast to the situation in socialist times when full employment was guaranteed for all people and the link between education and social status of jobs was, due to central planning, even stronger than in Western countries (Solga and Konietzka, 1999). At that period the educational system was not able to respond immediately to its changed role in the market economy, while reforms of the educational system were certainly lagging behind the rapid changes in the labour market institutions. After a period of painful reforms labour market and educational institutions started to stabilize 5, the stabilisation, which should contribute to the re-emergence of the traditional stratification processes. In more organized economies the demand for professionals and qualified specialists has increased as western-based or western-linked businesses, privatized companies and the remaining public sector establishments have been recruiting young specialists and skilled labour, while opportunities for quick enrichment and higher status attainment among less educated persons have vanished. As the market began setting demands for school leavers qualification the system of post-secondary education has responded with decentralisation and expansion, with private institutions flourishing and paid programs in state educational establishments attracting more and more students 6. A tendency for youth to opt for the role of student has been greeted with enthusiasm as a sign of the increasing importance of education. Lately, however, this enthusiasm has been tempered with some sobering notes, as it has been recognised that this tendency also reflects withdrawal from the labour market in the face of poor labour market prospects (Helemae and Saar, 2000). Rapid expansion of the post-secondary and higher education might lead to the situation when there are more higher education graduates than corresponding jobs, so that some of the school leavers have to accept less attractive employment 7. This in turn might reduce chances of persons with lower 5 Stabilization means slowing of the growth in unemployment and an eventual trend to unemployment reduction. It should be remembered, however, that overall difficulties of school-to-work transitions might have increased in the market economies due to the end of State planning and sponsoring of youth transition processes (see below). 6 It should be noted that the number of state founded students hardly increased. 7 The argument stems from queuing theory (Thurow, 1975), which asserts the existence of two kinds of queues, a worker queue and a vacancy queue. Since the two might not necessarily match, persons with higher education, who are ranked higher in the worker hierarchy, will not necessarily get higher status jobs. This idea is also echoed in job matching theory (Sattinger, 1993), which explains the incidence of job mismatches by differences in the shares of vacant jobs of a given level and available workers with adequate educational qualifications. 5

6 education, because highly educated occupy lower-status employment, making the former drop further down the queue (Braverman, 1977; Borghans and De Grip, 2000). Therefore, educational expansion brings along proletarisation of higher education, i.e. the unemployment of young people with higher education increases and there are more young people with higher education who do not find jobs matching their educational level (Blossfeld, 1999). Starting from the second half of the 1990s this might become a reality in the CEE countries. All in all, we would expect to observe smaller differences between school leavers with different levels of education at entry to first significant employment in the early transformation period. As education was less a determinant of employment chances then, entering the first job as under-educated might be rather pronounced. During the stabilization period education should become a more valuable asset with stronger signalling power for employers, which should increase its importance for securing first significant employment. For less-educated school leavers the chances of obtaining secure employment might, however, decline due to the increased flexibility of labour markets. Labour market uncertainty might lead to the situation when school leavers choose to postpone labour market entry staying longer at school. Together with the educational expansion this might lead to higher probability of young people entering the labour market as over-educated in the later period in CEE countries. Can we expect differences between the three countries in school-to-work transitions? The answer is probably yes, and if so, Estonia is more likely to deviate from the rest of the countries analysed here. While more extensive discussion on cross-country differences can be found in the subsequent sections, in short it should be stressed that although the educational system and the labour market have undergone significant changes in all three countries during the 1990s, the situation in Hungary and Slovenia did differ from the one in Estonia. The former two countries had better starting positions as they had market elements in their central planning already before 1991, and generally their transition from one economic and political system to another could be characterised as more gradual compared to the Estonian case. The Estonian economic reform has been described as one of the most radical among the post-socialist countries, particularly with regard to its highly liberal economic principles and the modest role of the state (Saar and Helemäe, 2002). Institutional changes in the educational system in Hungary, Slovenia and Estonia During the socialist period the educational system was highly centralised and state controlled in all three countries. Young people were allocated to the educational system in accordance with the economic and social goals of central planning. The transition from school to work was smooth, as the first workplace was often assigned by state agencies, supported by employers and secured for all school leavers virtually irrespective of the level of education. Organization of the school structure and curricula was based on the dual system model, so the link between the level of education and the future job was clearly defined with status match being, however, more important than skill match. (Saar and Helemae, 2002; Robert and Bukodi, 2002) 6

7 After the launch of economic reforms employers have largely withdrawn from their administrative and financial involvement in education, including a reduced role in paying scholarships to students (OECD, 1997). In fact, many economic branches around which vocational education was organized became largely absolete after the collapse of the socialist system (Bukodi and Robert, 2002). Another trend in the 1990s is a marked expansion of tertiary education, which is clearly illustrated in Table 1. Actually, the attendance increased faster in the vocational type institutions or fashionable market-oriented colleges (both counting as short track tertiary education) than in universities. This trend is especially pronounced in Slovenia, where half of school leavers from tertiary education left not from universities but other forms of tertiary education. The expansion of tertiary education is probably less visible in Estonia according to Table 1. However, there only within 4 years between 1996 and 1999, enrolment into universities increased by 51% (Education 1999/2000, 2000). Annus (2000) suggests that an assessment of the results of the expansion in higher education on the labour market in Estonia will be available in two-three years i.e. in , when people begin to graduate. Since most students do not get any scholarship or other support from the state, universities or enterprises, they are forced to count entirely on their parents financial resources or start to work parallel to studying, which considerably extends the length of the schooling period. Hence, the results of the expansion in higher education might not be fully visible yet. - Table 1 about here - Unfortunately, simultaneously with the expansion of higher education in Estonia, there is also an increasing share of those with less than secondary education. Moreover, those programs which used to provide vocational training without basic education have been eliminated in vocational schools (Saar and Kazjulja 2001). Overall, while Hungary and Estonia appear to move slowly in the direction of organizational mobility space 8, in Slovenia educational reforms promoting apprenticeships are launched 9 (OECD, 1997; Robert and Bukodi, 2002, Saar and Kazjulja 2001). Labour market and loss of employment security in Hungary, Slovenia and Estonia Full employment and strong link between the level of education and social status were main features of the command system in socialist countries. The constitutional right to work as well as the principle of full employment shaped both occupational and employment opportunities available to employees and workers (Mach et al., 1994). Still, the republics of the former Yugoslavia deviated from this picture, as unemployment was a permanent job characteristic there in the post-wwii period. However, 8 This is characterized by a general curriculum in the educational institutions and weaker match between the type of qualification and the type of job. 9 Unfortunately the data do not allow differentiating between general and vocational education, so hypotheses as to the link between education and job in the light of ILM-OLM dichotomy are not discussed. 7

8 among all Yugoslav republics Slovenia had by far the lowest unemployment rate until 1990, so that this period can safely be labelled as a full employment period (Drobnic and Rus, 1995). Despite similarities, the Slovenian, Hungarian and particularly Estonian economies differed by the early 1990s when socialist rule collapsed. Slovenia, the richest republic in Yugoslavia and more economically advanced than other transition countries in the CEE region, was the country that had already introduced elements of the free market during socialist times. Hungary was another country to introduce market elements into the central planning process, so by the time of the political and economic transition in 1991 a significant part of the economic activity was already nominally private, albeit often in the form of subcontracts from the state-owned sector (OECD, 1995). Estonia, on the other hand, being a part of the economy of the Soviet Union, in the beginning of 1990s was closely bound up with the raw material and product markets of the Soviet Union. At the same time, Estonia had quite a special role in the Soviet Union as it was used as a laboratory for economic reforms from the 1950s onwards. This seems to have at least a somewhat positive effect on the economy and entrepreneurship, as this guinea pig role brought Soviet Estonia and its enterprise sector slightly closer to the market economy mechanism than other Soviet republics, although not to the same degree as in Slovenia and Hungary (Nove, 1992; Liuhto, 1996). In the years immediately after the fall of socialist rule in the transforming economies of Central and Eastern Europe have been overwhelmed by high and lasting unemployment. Koltay (1995) reports that in countries that started carrying out transformation and reforms even earlier, among them Hungary and Slovenia, by 1992 unemployment reached 12.3 and 13.2 per cent respectively. Developments in the early 1990s were, however, less disruptive in Slovenia than in other CEE countries, so that GDP growth already resumed in the second half of 1993 (OECD, 1997) 10. In Estonia the economic situation in 1992 was mostly dreadful: rapid economic decline, hyperinflation, food stamps, and a shortage of fuel. In this situation the Estonian government chose the path of maximum liberalisation: no tariffs, no subsidies, no regulated prices (with the exception of governmental constraints on the price of energy, water, health services, and postal services), no progressive taxes, no quotas and no extensive transfers of income (Lauristin et al., 1998). A very important step in the transformation processes in CEE countries was the restitution of ownership rights and privatisation. After instituting a small-scale privatisation program, in Estonia and in Hungary the government launched a large-scale one, based on international auctions. Thus the share of the private sector grew from 10% in 1990 to 70% in 1998 in Estonia, and from 25% in 1990 to 85% in 1998 in Hungary. The respective figures in Slovenia, a slower privatizer as compared to Hungary and Estonia, are 15% in 1990 and only 50% in 1998 (Hunya, 2001). The private sector dominates in manufacturing, construction and flourishes in a large part of services and trade, whereas typical public 10 In Estonia falling living standards bottomed in 1993; they began to rise again only in These were the first signs of growing GDP and of steadily decreasing inflation. 8

9 employers are found in administration, education and health. It is in the public sector, hit by serious budget constraints, where new job openings are scarce and fixed-term contracts are more frequent (Robert and Bukodi, 2002). In the early years of transition the decline in employment was mainly due to redundancies in the primary and secondary sectors in all three countries (Pettai, 2001; Bukodi and Robert, 2002). Differences are, nevertheless, noticeable between the countries with respect to the structure of employment. Table 2 shows that Hungary has the largest proportion of persons employed in services and the smallest in industry. Figures for Estonia are quite similar, whereas in Slovenia industry is still a significant part of the country s economy, as it is obvious from the proportion of people employed in industries. - Table 2 about here - At the same time, overall labour force participation rate is lower in Hungary and higher in Slovenia and Estonia. By 2002 unemployment rates fell in Hungary and Slovenia (see Table 2) and per capita GDP surpassed the 1990 levels 11 (Hunya, 2001). In Estonia the situation stabilised in , but since the end of 1998 unemployment has increased further as a result of the economic crisis in Russia. The growth of unemployment stopped only in the beginning of 2000 at the level of 13.2 % and encountered a light decrease tendency afterwards 12. The decline in the rate of employment in Estonia is especially dramatic in absolute values: as compared to 1991, the number of working people declined by the year 2000 by an astonishing 25% (or by 203,000 people in a country with 1.4 million of inhabitants) (Täht and Unt, 2001). It was a shock for people when guaranteed employment was replaced by competition for the rapidly reducing number of jobs. Different social groups adapted to the changes in the labour market with various degrees of success, with youth being particularly vulnerable. As is noticeable from Table 2 in all three countries the youth unemployment rate (unemployment rate among year-olds), being constantly higher that the average unemployment rate in each of the countries throughout the period between 1990 and 2000, in 2000 is still almost twice as high as the average unemployment rate (Kunz, 2002). An important characteristic of the transformation economies in the CEE countries relevant for schoolto-work transition processes is the increased flexibility of labour markets 13. In Slovenia as well as 11 In fact, per capita GDP as a percentage of the EU-15 average in Slovenia is similar to the indicator in Greece in The GDP per capita remains lower in Hungary and particular in Estonia. 12 In 2001 unemployment rate in Estonia was already 12.6%, about the same as in Spain, country with the highest unemployment rate in the European Union (Labour Force, 2001). 13 Flexibility has been defined as the high circulation of labour, including movements inside the labour market, out of employment and return to the labour market. 9

10 Hungary a significant proportion of newly created jobs are temporary in nature. In Hungary individuals in fixed-term jobs are overrepresented among young people: Indeed, 37 per cent of employees with fixed-term contract are aged 29 or below (Robert and Bukodi, 2002). As far as the socio-economic composition of fixed-term employees is concerned, this type of working arrangement is the most widespread among less educated unskilled workers 14. In Slovenia in order to promote transition from school to work the country s educational system places students in temporary jobs or particular forms of traineeships during their education. The Estonian economy is also characterised as a highly dynamic and flexible one (Cazes and Nesporova, 2001). Unfortunately, the negative side of the flexibility in Estonia is that the movement out of employment is much more frequent than the movement into employment, while most job shifts occur not due to the free choices of employees, but as employers initiative. Data and variables In order to explore the early career developments of school leavers in Hungary and Slovenia, a dataset made available by Eurostat is used, the European Union Labour Force Survey (EULFS) 2000 ad hoc module on transition from school to working life (see Eurostat, 1999). For Estonia, the similar ad hoc module was carried out in 2002 as an additional module of the general LFS. In addition to the data s linkage to the general EULFS (Eurostat, 1998), the ad hoc module on school-to-work transitions provides a core set of substantively important variables on labour market entry. A central concept within the EULFS ad hoc module is the so-called first significant job, defined by Eurostat as nonmarginal employment of at least 20 hours per week that has lasted at least six months and started after the employee s leaving continuous education. The LFS ad hoc module also contains information on the dates (month and year) of leaving continuous education and of entry into the job. For Hungary and Slovenia a missing month for leaving education was substituted by June if the year of the event was present. To minimize mistakes in calculation of the duration variables, similar imputations were made in those cases in which the month was missing for the start of the first significant job. In Hungary the actual sample size of the target population, i.e. young people aged who left education within the previous ten years (between 1990 and 2000), is 8614, in Slovenia 1750, and in Estonia The dependent variable in the analysis of transition to first significant employment is the conditional probability that a person enters first significant employment within a particular month (since the time is measured on the month scale in the present study), assuming that this person did not do so until that time. The dependent variable in the analysis of the quality of the match of education and occupational 14 Even in the well-educated service class more than 20 per cent of the employees have no permanent job contract. 10

11 status of first significant employment is the probability of finding matching employment, entering employment over-educated, or entering employment under-educated. If the prestige of the job (measured on ISEI scale) is at least one standard deviation below the medium prestige scores of the respective educational group in the total population aged 16-64, then the person holding it is considered over-educated. If the prestige of the job is at least one standard deviation above the medium prestige score of the respective educational group, then the person is considered undereducated. And finally if the prestige of the job falls in the range of the medium prestige score plusminus one standard deviation, the job is considered matching. Information on the medium prestige scores and standard deviations of the total population are taken from Luxembourg Employment Survey (LES) 15 and from the Estonian LFS 1995 and Independent variables used in the multivariate analyses are summarized in Table 3. - Table 3 about here - Method The empirical analysis focuses on the transition from education to first significant jobs, approached from an event history perspective. In such models one estimates the time-dependent hazard rate or risk r(t) of an event, defined by (e.g. Blossfeld and Rohwer, 1995:28): Pr( t T < t* T t) r( t) = lim, t* t t * t i.e. the limit (as t* approaches t) of the conditional probability (Pr) that the event occurs (at time T) between time points t and t*, given that it has not occurred until t, divided by the length of the interval between t* and t. The starting time of an episode (t=0) is defined as the time of leaving education. An event occurs when an individual takes a first significant job. In this case the point in time at which the job is begun defines the ending time of an episode. Hence, the duration of the search, measured in months, equals the period between leaving continuous education and starting the first significant employment. Those individuals (episodes) who did not enter a first significant job by the time of the interview are treated as right censored. In such cases, the duration of the job search is defined as the period of time between leaving continuous education and the date of the interview. Piecewise constant exponential models (see Blossfeld and Rohwer, 1995: ) are run to approximate the shape of the hazard functions and to estimate the impact of independent variables. This model postulates that the transition rate is given by: 15 LES database includes several LFSs, including 1993 and 1999 Hungarian LFS, and 1994 and 1999 Slovenian LFS. 11

12 r(t) = exp(a l + a 1 x a m x m ), for t [τ l, τ l+1 [ with 0 = τ 1 < τ 2 <... < τ L < τ L+1 =. i.e. the time axis is divided into L intervals, and an interval-specific constant a l is estimated for each interval [τ l, τ l+1 [ (l = 1,...,L). Furthermore, for all covariates x 1,...,x m, interval-independent parameters a 1,..., a m are estimated. As the piecewise-constant model is a proportional hazards model, the exponents of these parameters can be interpreted as hazard ratios. To assess the match of the first significant employment and educational qualification, multinomial logistic regression analysis is conducted. The probability that a person with characteristics x finds a specific type of employment (E j ) can be written: P( E bjx b1x b2 x b3x ) = e /( e + e e ), j + where 1, 2, and 3 represent three employment options: (1) matching employment, (2) over-education, (3) under-education. b j is a set of logic parameters corresponding to each of the options. Since the probabilities of ending up in each of the job options must sum to 1, only (j-1) independent sets of parameters can be estimated. Thus, option 1, finding matching employment, is set to 0 and serves as the base for comparison. Findings Descriptive characteristics To get an idea of the speed of entry to first significant employment it is advisable to look at the survivor functions 16 estimated using the Kaplan-Meier method (product-limit estimator). In our case the survivor function can be interpreted as the proportion of young people who still did not find a first significant job at time t after leaving education. The results of the analyses for three educational levels and two cohorts of school leavers are shown in Figure Figure 1 about here - An almost identical picture is apparent for Hungary and Slovenia. While for the earlier cohort disparities between school leavers with different levels of education in the speed of the entry to first significant employment are quite small, especially when it comes to individuals with secondary and tertiary education, these widen in the later cohort of school leavers. School leavers with low and even with secondary education have much slower entry to their first employment than people with higher education in the later cohort. Particular difficulties are noticeable for school leavers with lower, i.e. less than secondary education. Among them only 20% in were able to enter significant employment 2 years after leaving education. As for the year school leavers cohort the corresponding figure is about 60% in Hungary and 40% in Slovenia. Even among school leavers with secondary education the process of entry to first significant employment has slowed down significantly in No such trend is observed among tertiary educated school leavers in either 16 The survivor function is defined by G(t) = Pr(T > t). 17 Survival functions illustrate the first 5 years (60 months) after leaving education for the first time. 12

13 Hungary and Slovenia or Estonia. In Estonia, even though growing disparities between more educated and less educated school leavers at the entry to first significant employment are visible over time (cohort), these are of much lower magnitude. In fact, in the earlier cohort the survival curves for different educational levels hardly differ 18, or in other words, education plays no significant role in the speed of entry to first significant employment. In the later cohort, the differences between levels of education are increasing, but still not to the same degree as occurred in Hungary and Slovenia. All in all, educational stratification has increased in all three CEE countries when comparing earlier and later cohorts of school leavers, although the change is more modest in Estonia than in Hungary or Slovenia. To get an impression whether the link between occupational attainment and education has changed during the transition process, occupation by educational level and cohort is presented in Table 4. The educational level of persons starting their career as managers or professionals has been very high through the 1990s in Estonia and Hungary, especially the later, where over 80% of them had higher education. Slovenia deviates from the picture, as over the half of managers and professionals who started their job during the reform years in did not have higher education. This was probably due to the creation of small companies. However, later on the picture changed completely as already in about 81% and in % of school leavers entered managerial and professional jobs having higher education in Slovenia. The educational level of technicians has increased considerably during the last 10 years in all three countries. In Hungary, among school leavers who entered the labour market in and started to work as technicians, 7% had lower education and 14% higher education. For the later cohort, higher educational level was needed in order to have access to this occupational group: 33% of the cohort had higher education and people with lower education were pushed out. A similar trend is observable in Slovenia and Estonia. In Slovenia, only one tenth of people starting as technicians had higher education in the early 1990s while in the second half of 1990s, already over a half of them had higher education. The educational level of blue-collar workers has also increased in all three countries. Hungary and Slovenia are quite similar in this respect, as the share of low educated people among blue-collar workers has dropped from 30% to 9% in Hungary and from 22% to 4% in Slovenia, comparing the and cohorts. Additionally, the proportion of people working in blue-collar occupations while possessing 19 higher education has increased. Estonia differs from other countries partly as the share of school leavers with low education entering blue-collar employment has 18 In fact, according to the Wilcoxon test differences between the curves pertaining to tertiary educated and those with secondary education are not statistically different for either or cohorts. 19 It should be remembered, however, that not all school leavers have necessarily acquired educational certificates from the education they left. In the ad hoc module leaving education also includes dropping out. 13

14 increased, although similarly, the proportion of people with high education entering blue collar employment has increased, albeit slightly. -Table 4 about here- It is visible from the educational levels of various occupational groups that higher education does not automatically ensure the improvement of prospects in the labour market. The extent of the benefits that education may offer depends on the availability of jobs in the labour market. If the number of workers with a certain educational level exceeds the demand, then the process of downwards replacement of workers begins, whereby the value of education constantly decreases. The downwards replacement of workers occurs in two stages: workers with increasingly higher educational levels replace workers with lower educational levels in the lower positions on the hierarchy, which in turn results in the latter s exclusion from the labour market (Brauns et al., 1999). The data in Table 4 shows that this process has already started in the Hungarian and, especially, Slovenian and Estonian labour markets. Timing of the entry to first significant employment To answer the question how education and education-related variables affect the timing of entry to first significant employment after leaving school in three countries a piece-wise constant exponential model, which successively includes covariates pertaining to person s level of education and cohort (Model 1), parental education (Model 2) and interaction of education with the cohort (Model 3) was run. The results are reported in Table 5. - Table 5 about here - In Hungary having either medium or high education increases the change of obtaining first significant employment (to a similar degree for both levels of education), controlling both for age at leaving education and gender (see Model 1). In Slovenia the same is true, but highly educated school leavers have significantly higher change of finding employment than the lower educated and higher than those with secondary education. In Estonia, the educational level of job entrants does not seem to play any significant role in determining the speed of the entry to first significant employment. In all three countries there exists, however, a significant cohort effect, implying that the risk of entering first significant employment is higher for cohorts that left education prior to For Hungary and Slovenia, where differentiation between and cohorts is made, it is noticeable that the conditional probability of finding first significant employment is even higher in the earlier cohort, ceteris paribus. To examine the role social background and related networks possibly play in the first job search in Model 2 parental education is included in the model. Results show that in none of the countries does 14

15 parental education influence the speed of the job search process. Since no effect of parental education is observed, in Model 3, this variable is omitted, while the interaction of education and cohort is included to examine if the effect of education has changed during the decade after the fall of socialist rule. Results show that in Hungary and Slovenia the effect of education on the chances of first significant job entry has changed during the decade. It appears, and the findings are similar for both countries, that for earlier cohorts of school leavers education was less a determinant of first job entry, or in other words, the differences between school leavers with less than secondary education and those with secondary education or higher were much smaller, even though the earlier cohorts enjoyed an overall faster entry to first significant employment after leaving education. The disparities between lower educated school leavers and those with secondary education and higher grew substantially for those who left education between 1996 and 2000, in the so-called stabilization period, which confirms our expectations. Estonia is the only country in which this hypothesis has not been confirmed. In Estonia, on the other hand, unlike in other countries a significant gender effect is evident, suggesting that women have significantly lower changes of entering first secure employment than men do. Match of education and first significant employment As is mentioned earlier, not only speed but also match of education and first significant employment is an important indicator of the success of school-to-work transition and this is explored further using multinomial regression techniques for those persons who found their first significant employment. Results for entry to first significant employment as over-educated or under-educated versus entry to matching employment are reported in Table 6 for the three countries. Independent variables, as in the earlier analysis, are education of a school leaver, his/ her parental education (as a proxy for social networks), and cohort, while control variable include gender, age at leaving education and timing of entry to first significant employment. - Table 6 about here - Results for Hungary show that school leavers with at least secondary education have higher chances of entering employment as over-educated and lower chances of being under-educated in their first job. Interestingly enough, parental education plays a significant role in determining the match of education and job for recent school leavers in this country. Thus, individuals whose parents have secondary education, and even more so school leavers with tertiary educated parents, have a lower chance of entering a job as over-educated, but higher chance of entering a job as under-educated. This implies that highly educated school leavers with tertiary educated parents have the best chances of entering matching employment, other things being equal. At the same time, school leavers with at least secondary education and lower educated parents have higher chances to end up in the job for which they are over-educated. On the other hand, school leavers without secondary education, but highly educated parents (secondary education certificate or higher) manage to get first significant 15

16 employment although their educational qualifications seem to be one standard deviation lower than the median level of education normally necessary to enter this type of employment in Hungary. In Hungary a significant trend for the later cohorts of school leavers to enter first significant employment being over-educated is apparent. It seems, however, that the expectation that immediately after the break of socialist rule the probability of getting employment as under-educated should be higher was not substantiated by the data. The effects of control variables are worth mentioning too. Women seem to have lower chances of being over-educated for their jobs; the same holds true for younger people. Leaving education later in life (i.e. being older) increases the chances of entering the job under-educated, other things being equal. Landing employment prior to leaving education does not appear to influence the match; however, longer job search lessens the chances of ending in employment as over-educated. In Slovenia school leavers with secondary education have significantly lower chances of entering employment as under-educated compared to the lower educated persons, but at the same time are not in danger if being over-educated for their employment - at least the effect is not statistically significant. The same is true for tertiary educated school leavers, with the only exception that these have even an lower probability if being under-educated for their jobs, other things being equal. Highly educated parents of less educated offspring seem to help their children to get employment even if those are under-educated for their employment. A cohort effect in obtaining employment being undereducated as opposed to finding matching employment is also pronounced. Immediately after the fall of communist rule (in ) the chances of being under-educated for one s job were much higher than in the later period ( ) and further higher than in , which is the reference category in this comparison. At the same time, there is a weak evidence suggesting that over-education was less of a problem immediately after the collapse of the socialist regime. As for other variables the following is worth reporting: women appear to have higher probability of entering employment being under-educated, the same is true for people who left schooling later, other things being equal. Timing of job entry does not seem to play much of a role in determining job match, albeit only for those who are looking for their first significant employment longer than 5 years. Overall the fit of the model is poorer for Slovenia than it is for Hungary. Variables controlled in the model, for example, do not seem to play any significant role for predicting chances of a person to be over-educated versus finding matching employment. In Estonia, similarly to the other countries under discussion, tertiary educated school leavers have higher chances of being over-educated and lower chances of being under-educated in their first significant employment compared to the lower educated individuals. Persons with secondary education appear to have to be over-educated, although the effect is significant only at 10% level. Tertiary educated parents seem helping in reducing the chances of over-education if their children are also highly educated (again, the effect is significant only at the 10% level), and increase the 16

17 chances for their lower-educated offspring to land employment being under-educated. The effect of age at leaving education in Estonia is similar to other countries, while women have definitely lower chances of finding employment matching their educational credentials than men do. In contrast to Slovenia or Hungary, in Estonia no cohort effect is observed, that is there is no evidence that the match of education and job has changed during Summary and discussion In this paper we have examined school-to-work transition processes during the 10-year period after the fall of socialism ( (02)) in Hungary, Slovenia and Estonia, three former socialist countries which are due to enter the European Union in spring The main objective of this contribution is to assess if the role of education in the speed of the entry to first significant employment and the match of education and employment has changed during the transition period. Results show that educational stratification has grown in all three countries under discussion: modestly in Estonia, and more profoundly in Hungary and Slovenia. As was expected, there were smaller differences among school leavers with different levels of education at the entry to first significant employment in the early transformation period. Still, entering the job as under-educated was not common either in Estonia or in Hungary, being pronounced only in Slovenia during the reform years. Consequently, during the stabilization period, the importance of education in securing first significant employment has increased in Hungary and Slovenia. Estonia deviates from the picture, as there the importance of education has not remarkably changed across the whole period between 1992 and Results of the multivariate analyses show that over-education became more common in Hungary, and slightly less in Slovenia during the stabilization years. In Estonia, entering a job as over-educated did not appear to be as pronounced as expected since no significant cohort effect was found. It might be that there is a time lag between the expansion of higher education and its effects on the labour market, as only limited number of students have graduated from the expanded tertiary education system in Estonia. Even though parental education does not seem to play any role in the speed of entry to first significant employment, its influence in determining the match of education and job for recent labour market entrants is noteworthy. In all three countries, the probability of entering first significant employment as under-educated among lower educated school leavers is higher for those whose parents have tertiary education as compared to children of less educated parents. On the other hand, highly educated parents in Hungary and Estonia 20 avert the danger of over-education among their children particularly when the latter possess secondary education at least. These findings point to the importance of social background and networks in the CEE countries particularly when it comes to the occupational status or match of educational qualifications an occupation (Iannelli, 2002). 20 A weak significant effect is found in Estonia. 17