Economics of Education Review 19 2000 219–227 www.elsevier.comlocateeconedurev
The great Canadian training robbery: evidence on the returns to educational mismatch
Shaun P. Vahey
Faculty of Economics and Politics, University of Cambridge, Austin Robinson Building, Sidgwick Avenue, Cambridge CB3 9DD, UK
Received 30 October 1996; accepted 15 March 1998
Abstract
In this paper, I use data from the National Survey of Class Structure and Labour Process in Canada NSCS to estimate the returns to over and undereducation. I find that there are positive returns to overeducation for males in
jobs that require a university bachelor’s degree; but for other levels of required education, the returns are insignificant. I also find evidence of lower pay for undereducated males in jobs with low education requirements. For females, the
returns to over and undereducation are insignificant for all levels of required education. [I21, J31]
2000 Elsevier Science Ltd. All rights reserved.
1. Introduction
The mismatch between the skill requirements of jobs and the educational attainments of workers has long con-
cerned social scientists. In “The Great Training Rob- bery”, Ivar Berg 1970 argued that overeducated work-
ers are less productive than their counterparts because they find their jobs uninteresting and lack motivation.
A similar view was expressed by Freeman 1976, 1980 who coined the phrase “the overeducated Amer-
ican”. He argued that the entry of the “baby-boom” gen- eration into the labour force in the 1970s caused an
increased supply of highly educated workers. At the same time, the demand for these workers fell, forcing
many of them into jobs with lower educational require- ments. Dooley 1986 identified similar demographic and
demand-side changes in Canada.
Some researchers, including Kuttner 1983, Blue- stone and Harrison 1990 and Picot et al. 1990, have
argued that the incidence of North American skill or edu- cational
mismatch hereafter,
I use
the terms
E-mail: shaun.vaheyecon.cam.ac.uk
0272-775700 - see front matter
2000 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 2 - 7 7 5 7 9 8 0 0 0 2 9 - 6
interchangeably is increasing.
1
Industrial restructuring has caused a number of traditional, medium to high-skill
jobs to disappear—the so-called “declining middle”— forcing many skilled workers into low-skill, service sec-
tor jobs Gunderson and Riddell, 1993.
No previous studies have examined the relationship between educational mismatch and wages in Canada.
Using non-Canadian data, however, among others Dun- can and Hoffman 1981, Rumburger 1987, Hersch
1991, Sicherman 1991 and Kiker et al. 1997 esti- mated earnings or wage equations using the years of
required schooling and educational mismatch as explana- tory variables. These researchers found that the earnings
of under overeducated workers are less greater than their counterparts with exactly the required level of
schooling. Hereafter, I shall refer to workers who are not mismatched, but in jobs with the same educational
1
The term “skill mismatch” is sometimes used to refer to differences between the kind of skills required by firms and
those attained by unemployed workers. In this paper, I use the term to refer to differences between required and attained levels
of education.
220 S.P. Vahey Economics of Education Review 19 2000 219–227
requirements as “otherwise identical”. Assuming earn- ings reflect marginal productivity, their results do not
support Berg’s 1970 hypothesis: overeducated workers earn more—not less—than otherwise identical workers.
A number of studies have focused on whether the returns to skill mismatch are gender dependent. Frank
1978 argued that the limited geographic mobility of women causes a male–female differential in the returns
to education. If relocation is a family-based decision, then it will be based upon the needs of the primary
earner—usually the male. As a result, the secondary earner—the female—is geographically constrained in her
job search. Duncan and Hoffman 1981, Rumburger 1987, Hartog and Oosterbeek 1988, Groot 1996 and
Kiker et al. 1997 have examined male–female differ- ences in the returns to skill mismatch. These researchers
found that their results were similar for the two sexes: under overeducated workers earn less more than
otherwise identical workers. Using US data, however, Hersch 1991 found that for females, the returns to edu-
cational mismatch were insignificant.
In this study, I use data from the National Survey of Class Structure and Labour Process in Canada NSCS
to estimate the returns to educational mismatch. These are the only data available that contain self-report infor-
mation on educational mismatch in Canada for either sex. For males, I find evidence of negative positive
returns to under overeducation; but also find that the returns are sensitive to the level of required education.
The results for the female sub-sample differ from those obtained using the full sample: the returns are insignifi-
cant for all levels of required education. Hence, Berg’s 1970 hypothesis is rejected for both males and females:
overeducated workers do not receive lower earnings than otherwise identical workers.
The rest of the paper is organised as follows. In the following section, I discuss the incidence of educational
mismatch in Canada. I then set out the empirical model and present the results. I draw some conclusions in the
final section.
2. The incidence of educational mismatch in Canada
