Demand and Supply of Skilled Labour and Persistence of Young Workers’ Overeducation in Europe: Mediterranean Countries versus the Netherlands

Abstract

According to theoretical and empirical evidence, young workers are more likely to be overeducated than adult ones, especially in countries where the educational attainment of young people is increasing rapidly and the school-to-work transition is difficult and lengthy. Nonetheless, if overeducation were simply a transitory phenomenon (an «entry condition» on the labour market) and expected to disappear during working life, it would not be a crucial problem. The aim of this paper is to investigate the transitory versus persistent nature of young workers’ overeducation in different European countries. The analysis consists of two successive phases. Firstly, in order to take into account the role of work experience, I estimated individuals’ overeducation risks using the competences frontier method. Secondly, I studied the «destination» of different cohorts of workers by applying a pseudo-panel technique to ECHP-Eurostat microdata referring to European Mediterranean countries (Portugal, Italy, Greece and Spain, the so called «P.I.G.S.» countries) in comparison with a very different socio-economic system: the Netherlands. Results show that in countries where the growth in the average level of education of the population («supply» effect) has been driven by an effective requirement for a more highly educated workforce («demand» effect), young workers’ overeducation tends to be a transitory phenomenon. By contrast, work experience does not reduce young (and adult) workers overeducation in low-skill demanding local labour markets.