Do we have an over-supply of graduates in Ireland? (Part 1/2)

The debate on if there is an over-supply of graduates in Ireland has been ongoing for some time. I remember myself attending an event last year, in which a number of speakers addressed this issue, analysing from different perspectives and coming to different conclusions. If we consider the complexity of the issue, e.g. the number of factors at play and the limitations of research approaches used, the disagreement is not surprising.

On 7th June, 2015, the Irish Times published an article on the aforementioned disagreement (http://www.irishtimes.com/life-and-style/people/overqualified-workers-who-know-too-much-1.2237279).

On the one hand, the article referenced the results of studies by ESRI researchers which show that “Ireland emerged as having the highest rate of ‘overeducation’ in Europe”, with one of the authors suggesting part of the reason is that, “It could be there are too many graduates”.

On the other hand, the article cited Tom Boland, the chief executive of the HEA, who said: “Once you talk about overeducation then you are into how many are you going to educate, and then you are into a quota. And if you are going to come up with a ceiling on numbers then you might exclude someone who is going to come up with the cure for cancer; you just don’t know.”

Put simply, I think these two arguments are made from different points of view, both have some supportive evidence, but, it seems to me, one cannot be used to reject the other.

The concept of overeducation adopted by ESRI researchers is usually tested through questionnaires sent to either employees or employers, who then indicate if a specific job requires graduate knowledge or skills and if the person who is doing this job has a graduate education or not. When a graduate takes up a job which is considered, either by this graduate himself or her/his employer, not to require graduate knowledge or skills, it is concluded that this graduate is overeducated, as he ends up with a ‘non-graduate’ job. Nonetheless, the reason put forward by Tom Boland is not from this approach but based on the “who should or who should not attend higher education” debate. It is a hard question to answer, definitely if one wants to have a concrete numeric answer.

A recently published work by the Work Foundation in the UK – titled “Unemployed and overqualified? Graduates in the UK labour market” – provides some insightful evidence on this debate in the context of the UK.

In particular, the authors provided the following thinking: “If the overall supply of graduates was indeed outstripping aggregate demand, there would be several likely consequences. The first would be an increase in rates of graduate unemployment, especially amongst the more recent cohorts entering the labour market. The second would be some displacement of less skilled employees, as graduates struggling to enter the labour market were prepared to look for work outside of ‘graduate’ roles. This, in turn, would lead to a reduction in the additional ‘wage premium’ that graduates can expect to earn over the course of their working lives.”

The authors then continued to assess the evidence to assess the merits of the claim over the course of two decades between 1992 and 2011. In short, the response to the question that if there is an over-supply problem in the UK was no. The rise in graduate unemployment in most OECD economies, the UK included, is almost to do with cyclical factors and has very little if anything to do with an over-supply of highly qualified labour. Also, while supply has continued to expand at a rapid rate in the UK, it has not resulted in a significant change in relative wages: the graduate premium is significant in all OECD economies and has not declined over the last decade.

Although the authors cautiously pointed that this does not necessarily mean that the higher education sector functions fully effectively, there is no evidence to suggest the existence of an over-supply of graduates in the UK.

Then, for us, the question is, what is the evidence in Ireland? Whether or not the situation here is different from its UK counterpart on this issue? In the next blog, I will present more details of data analysis.

(To be continued.)

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