Overeducation in the Swiss Labour Market: Does Anything Go Wrong?

An empirical study conducted by the KOF Swiss Economic Institute (ETH Zurich) shows that the overeducation is not hinting at inefficiencies of the functioning of the labour market in Switzerland. The review shows no evidence for labour market rigidities which limit the allocative efficiency of the human capital supplied for persons who work in a job related to their educational qualifications. In particular, looking at the overall Swiss labour market for the supply of and demand for educational qualifications, women (married or single), foreigners, and part-time workers are shown to have as equal access to jobs that are in line with their education level as full-time working males with Swiss citizenship. This finding stands in clear contradiction to the results found for Germany, where the educational systems and industrial structure is most comparable with Switzerland.
Nevertheless, one must keep in mind that most studies of overeducation do not restrict the sample only to those workers who have jobs relating to their educational qualifications. Despite the fact that there is still some room for improving the situation of women with higher education and women with small children, the overall phenomenon of overeducation in Switzerland seems to reflect mostly unmeasured heterogeneity of individuals: such as, ability, motivation, or possibly unmeasured differences in education quality. Furthermore, the study finds that married men have a higher likelihood of an optimal jobeducation match, which suggests that unmeasured heterogeneity might as well be linked to time-varying factors as motivation and effort supplied as innate ability differences. However, this finding does not stand in opposition to the theory that excess supply of qualified labor might have an impact on the level of overeducation overall, explaining higher levels of overeducation in other countries than in Switzerland.
From a policy point of view the results are interesting as they show that overeducation does not in general reflect a inefficient use of public funds invested in education. Nevertheless, job-educational qualities match of women with higher education and women with small children might still be improved. For Swiss economic policy, in particular, it is worthwhile noting that utilisation of supplied human capital is not limited by part-time work per se. Economic growth in Switzerland is potentially constrained by the growth rate of labor supply. This can be eased by recruiting un- or under-skilled human capital and women with higher education by motivating them to continue working in occupations relating to their educational qualifications, even if it is part-time work.

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