Graduate jobs and graduate wages across Europe in the 21st century Francis Green and Golo Henseke 15/2/2018 www.researchcghe.org 1
Is this the typical European graduate labour market? Source: Patrick: https://flic.kr/p/cpv74 2
Today's outline: focus on heterogeneity 1. Context: graduate labour supply trends, "graduate jobs" & graduate underemployment. 2. A picture of heterogeneity within Europe's graduate labour markets 3
Graduate labour supply, in brief Tertiary-educated graduates have become more prevalent everywhere, but at a widely varying pace They will go on growing everywhere for some time to come (No strong evidence of convergence) 4
Level of tertiary educational attainment 2005 & 2015 (30-34 years) 70% 60% 50% 40% 30% 20% 10% 0% IT SK CZ DEHU AT EL ES SI EE BE PL FR FI NL DKUK SE NO LU IE CY LT 2015 2005 5
Gap in tertiary education between 30-34 and 55-59 years olds, 2015 35 30 25 20 15 10 5 0 EE FI DE BE IT SK CZ AT HU ES UK NO NL SI LU EL DK SE FR IE LT CY PL 6
Graduate jobs, in brief Prevalence of graduate jobs varies a lot Considerable variation, which correlates with the quality of graduates relative to nongraduates They have grown more prevalent almost everywhere, though at a varying pace Some occupations can switch between graduate and non-graduate But future growth is very uncertain 7
Indonesia Chile Turkey Austria Greece Czech Republic Japan Slovenia Germany France Ireland Korea Estonia Italy Canada Denmark New Zealand Spain Lithuania United States Slovak Republic United Kingdom Poland Cyprus Belgium Sweden Singapore Israel Netherlands Finland Norway 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% Proportion of labour in graduate jobs across countries 0.0% 8
High-skill job growth (2005/2015) 9
Graduate underemployment, in brief: Graduate underemployment varies considerably across countries Graduate underemployment is increasing in the majority of countries, but not all Rising excess supply of graduates is strongly associated with a growing prevalence of underemployment 10
Finland Poland Norway Germany Cyprus Italy Sweden Netherlands Slovakia Belgium Spain France Austria Denmark Estonia United States United Kingdom Korea Ireland Canada Czech Japan Underemployed graduates, observed and skills adjusted 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Observed Skills Adjusted 11
Change in the proportion of employed graduates in mediumskilled or low-skilled jobs (2005/2015, ages 30-34) 20.0 15.0 10.0 5.0 0.0-5.0-10.0-15.0 LT FI BE EE DE ES LU FR DK NL CY IT SE NOHU UK CZ AT IE PL SK EL SI 12
Graduate earning trends, in brief Great cross-national differences in the evolution of graduate earnings Growth of average graduate earnings is closely associated with labour productivity trends, increasing excess supply of graduate labour, Earnings gap between graduates and lower educated groups is broadly stable in most countries 13
Growth rate of average graduate earning, 2005-2015 14
Labour productivity and graduate earnings 15
Rising graduate wage heterogeneity? Changing wage inequality = wages grow at different paces across the graduate wage distribution. Relevance to: risk and student debt? limits to the power of education to deliver on its promise of social mobility? 16
Graduate wage heterogeneity Excess supply and occupational downward shifting of graduates? Technological change (and/or globalisation): differential effects on skills demand within graduate jobs? Changing management practices (e.g. digital Taylorism): differential effects on skill use and development? Increasing skills heterogeneity among new graduates? Wage setting institutions: union power, minimum wages, occupational licensing? Great recession: low capital investments, lack of openings in high-skill jobs, sluggish productivity growth Composition: migration, population ageing, growing female lfp 17
Some manifestations of changing heterogeneity Grade (Naylor et al (2016) for Britain) by underemployment (e.g. Green & Zhu (2010), Green and Henseke (2017) for Britain) (cf: the theory of "effectively maintained inequality") by qualification level (cf "maximally maintained inequality") e.g. Lindley & Machin (2016) for US & Britain; Lee (2016) for Hong Kong; (cf: the theory of maximally maintained inequality") subject studied?; university rank/type; achieved grade. e.g. Sullivan et al (2017); Walker and Zhu, 2011; 2017 18
Data European Statistics on Income and Living Conditions (EU-SILC), 2004-2015 Sample: Male graduates aged 30 to 59 years who worked for at least one fte-month in the year before the interview. 19
Underemployment pay penalty - Pay penalty associated with underemployment has risen significantly in ES, NL, FI, CY, CZ, AT and potentially in IT, IE, BE - It dropped significantly in EL and SI - Overall, a 1 percentage point rise of the underemployment pay penalty is associated with a 0.6 rise of the P90/P10 ratio 20
Underemployment pay penalty rose in many but not all countries, 2005-2015 21
Trends in income dispersion and underemployment penalty 22
How has wage inequality within graduates evolved? 2005-2015 23
Composition effects were overall minute Decomposition changing graduate earnings (averages and dispersion) into a composition (e.g., age, experience, work status) and price component Significant but limited contribution of composition in 5 out of 23 countries 24
Potential drivers of changing dispersion Excess supply of graduates: Associated with reduced lower tail wage inequality, but only if Greece is in the country selection Technological change (and/or globalisation) ICT capital stocks associated with widening underemployment pay penalty There is no association of offshoring or investment into intangible assets with changing wage dispersion across countries Rising proportion of foreign-born graduates correlates with widening upper tail inequality conditional on highskills demand 25
Summary 1 Universal rise in the supply of graduates and graduate jobs Latter grew slower than former in many but not all countries. The result is growing underemployment Average returns to tertiary education were relatively stable in most countries 26
Summary 2: trends in graduate wage dispersion Underemployment pay penalty rose in many but not all countries. Changing underemployment pay penalty and rising wage dispersion correlate But no general trend towards greater heterogeneity Contribution of composition (age, gender, work status) is minute Mixed evidence for labour market antecedents 27
What now: Graduate Employment Clouds? Ongoing rise in supply of graduates young-old achievement gap ubiquitous Demand uncertainty: maturity of existing ICT? new-wave automation or skills-intensive innovation? politically-induced uncertainties (the B word) Will we see: rising underemployment? Probably increasing dispersion of graduate wages??? 28
Green, F. and G. Henseke (2016a) "Should governments of OECD countries worry about graduate underemployment?" Oxford Review of Economic Policy. (Open access at: http://discovery.ucl.ac.uk/1522165/ ). Green, F. and G. Henseke (2016b). "The Changing Graduate Labour Market: Analysis Using a New Indicator of Graduate Jobs". IZA Journal of Labor Policy, 5:14. ( Open access at http://discovery.ucl.ac.uk/1505789/ ) Henseke, G. and F. Green (2017) Cross-national Deployment of Graduate Jobs : Analysis Using a New Indicator Based on High Skills Use". Research In Labor Economics. (Open access at: http://discovery.ucl.ac.uk/1542476/ ) Green, F. (2013). Skills and Skilled Work. An Economic and Social Analysis. Oxford, Oxford University Press. http://discovery.ucl.ac.uk/1490672/ Henseke, G. (2018). Against the Grain? Assessing Graduate Labour Market Trends in Germany Through a Task-Based Indicator of Graduate Jobs. Social Indicators Research http://rdcu.be/gjds www.researchcghe.org 29
Additional slides in reserve 30
Proportion Underemployed Relative demand and underemployment 0.6 JPN 0.5 CA-EN 0.4 IRL CZE KOR UK-EN EST 0.3 USA FRA ESP AUT UK-NIR CA-FR 0.2 DEU POL 0.1 DEN BE-FL SVK NLD SWE CYP ITA NOR R² = 0.622 FIN 0-0.1-0.05 0 0.05 0.1 0.15 0.2 0.25 Relative Demand for Graduates 31
Wage differential between tertiary and (upper-) secondary education, 2003 and 2013 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% South Central Anglo Nordic 2013* 2003* 32
Wage gap between matched and underemployed graduates, 2013 10.0% South Central Anglo Nordic 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% -35.0% -40.0% -45.0% 33
Growing heterogeneity? Annual % change in the graduate underemployment wage penalty 2003-2013 6 South Central Nordic Anglo 4 2 0-2 -4
Appendix: Three steps to classifying occupations as graduate jobs Ingredients: data with job tasks and educational requirements of job (e.g. SAS); an Occupation coding system: ISCO08 Step 1: Calculate the effect of each high-skilled task on the propensity for a job to require a level 4 qualification. Step 2: For each person, compute a score, which is the estimate of the probability that he/she will be in a graduate job, given the observed high-skilled tasks of the job, then compute the mean score for each occupation Step 3: Split occupations into two clusters using statistical methods. 35
Step 1 We calculate the effect of each of several highskilled tasks on the propensity for a job to require a tertiary qualification. For each person, we then compute the GSR score, which is the estimate of the probability that he/she will be in a graduate job, given the observed high-skilled tasks of the job. e.g. high-level numeracy, complex problem solving, presenting, influencing, job autonomy + more 36
Step 2 We compute the average GSR (predicted score) in each "minor group" (3-digit) of occupations Step 3 Use a statistical "cluster analysis" to determine two clusters of graduate and non-graduate jobs. 37
Average annual growth rate Annual change in real gross earnings of graduates in high-skills employment, 2003-2013 6.0 South Central Anglo Nordic 4.0 3.0 2.0 0.0-2.0-0.2-1.5 0.0 1.7 0.1 0.1 0.5 0.8 0.9-0.9 0.9 1.7 1.5-4.0-6.0-4.6-8.0-7.3 38
A great reversal? Earnings premium for college-only stopped growing in 2010 Generalised reduced demand for advanced cognitive skills (even within high-skilled occupations), since ~2000 (Beaudry et al. 2016) robot world and chronic macro-uncertainty 39
Concept of Graduate Jobs "where a substantial portion of the skills used are normally acquired in the course of higher education, including many of the activities surrounding it, and of its aftermath the years after higher education when skills are acquired in work through graduates acquired faculty for learning them" www.researchcghe.org 40
Wage differential between tertiary and (upper-) secondary education, 2003 and 2013 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% South Central Anglo Nordic 2013* 2003* 41