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Overqualification, skills and job satisfaction Insights on Canadian Society
Overqualification, skills and job satisfaction

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by Sébastien LaRochelle-Côté and Darcy Hango

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Introduction

Canada has one of the most educated workforces in the developed world. In 2014, about 28% of the Canadian population aged 25 to 64 had earned a bachelor’s degree or higher—identical to the Organisation for Economic Co-operation and Development (OECD) average of 28%.^{Note 1} From 1990 to 2015, the proportion of those aged 25 to 64 holding a university degree increased (from 14% to 30%), with a particularly large increase among women (from 12% to 32%).^{Note 2} Canada’s immigration system is also skewed in favour of those who have a university degree, and the children of immigrants are far more likely to get a university education than the Canadian-born.^{Note 3} All of these factors suggest that Canada benefits from a strong supply of university graduates.

The increase in the supply of university graduates, including those with a foreign education, has led to concerns that the Canadian economy is not creating enough jobs for those who are university-educated,^{Note 4} and that too many graduates would be forced to work in lower-level occupations. These “overqualified” university graduates would face a higher risk of unemployment, lower earnings, skill loss, and lower levels of job satisfaction.^{Note 5} In addition, the resource-based growth of the late 2000s might also have changed labour demand for lower-skilled jobs, especially among younger workers. Recent research indicates that, even though workers with a university degree continue to earn more than less-educated workers, the relative gains of university graduates have declined since the early 2000s—especially in resource-rich provinces.^{Note 6}

In spite of the above, a recent study showed that overqualification rates did not change considerably over two decades. According to the study, approximately 15% of workers with a university degree were in a job requiring no more than a high school diploma in 2011—almost as many as in 2001 and 1991.^{Note 7} Some categories of university graduates, however, were more at risk of overqualification than others, including immigrants who have a foreign degree, and graduates who have a degree in the humanities, languages and arts.^{Note 8}

Overqualification, however, is a form of educational mismatch, and is not a measure of skills mismatch. Because some university graduates have lower levels of literacy and numeracy skills,^{Note 9} could it be that individuals are “overqualified” because they do not have the skills required for jobs that match their level of education?

In this paper, the relationship between overqualification (or credential mismatch) and information-processing skills—as measured by tests administered by the Programme for the International Assessment of Adult Competencies (PIAAC)—is examined. This study also examines the range of skills used on the job by overqualified workers, and concludes by examining whether overqualification leads to higher levels of job dissatisfaction among Canadian workers aged 25 to 64.

Measurement of overqualification and skills in PIAAC

Overqualification, which refers to educational mismatch between worker’s educational attainment and the level of education required for their job, can be measured in numerous ways.

One method consists of examining whether the skill level of jobs held by survey respondents matches their highest level of educational attainment, based on a predetermined classification of occupations across skill levels—the National Occupation Classification (NOC).^{Note 10} With this method, also called job analysis (JA), overqualification can be calculated by taking the proportion of university-educated workers who are in a job requiring no more than a college diploma, or the proportion of those who are in a position requiring no more than a high school diploma. According to PIAAC, less than 15% of university-educated workers were employed in occupations that did not require more than a high school education in 2012.

The measure described above, however, is not without caveats. First, workers within detailed categories of occupations may or may not use the skills deemed “normally required” for the occupation, depending on their employer, their experience, or position within a firm. Second, it ignores other contributors of human capital, such as training, past work experience, or informal learning, and does not account for field of study mismatch.^{Note 11}

Another method, called worker self-assessment (WA), consists of asking survey respondents if they believe that their level of education is appropriate for their job.^{Note 12} In PIAAC, it takes the form of the following question: “If applying today, what would be the usual educational qualification required for your position?”Overqualified individuals can be identified by calculating the number of university graduates who self-reported that their position required a lower level of education.

In 2012, for example, 12% of university graduates aged 25 to 64 indicated that their position required no more than a high school diploma—a percentage relatively close to the one obtained using the NOC. There is also a strong degree of overlap between both measures.^{Note 13}

Because this paper is concerned with the link between qualification mismatch and the information-processing skills of respondents (including literacy and numeracy), the WA method was preferred over the JA method. The WA method may be better aligned with skill and job satisfaction indicators since they are based on what respondents experience in their jobs.^{Note 14} Readers should note, however, that similar results were found with the other method (JA).^{Note 15}

In PIAAC, information on numeracy and literacy skills comes from tests administered to survey respondents. Literacy refers to respondents’ ability to understand and use written text both in print and electronic format, while numeracy refers to adults’ ability to evaluate, use, and communicate numerical and mathematical concepts.^{Note 16} Respondents can be classified by skill level, ranging from 0 to 5 (see Data sources, methods and definitions).

In this paper, and in line with earlier work on this topic, individuals with a lower skill level are those with a level 2 or lower in literacy (numeracy skill levels yield similar results, given the close correlation between the two measures). Conversely, individuals whose score is level 3 or higher are deemed to have a higher skill level. Adults with a level 3 or higher have been shown to have a better mastery of skills related to literacy and numeracy, and generally have more positive social and educational outcomes.^{Note 17}

Overqualification is associated with lower literacy and numeracy among university graduates

As indicated above, 12% of working adults aged 25 to 64 with a university education stated that their job only required a high school education. Another 19% thought that their job required a college-level education, and more than two-thirds (69%) of those with a university education reported that their job required a university education. In the sections that follow, the “overqualified” population refers to the 12% who reported that their job required no more than a high school education.

The proportion of those who reported that their jobs required no more than a high school diploma did not vary across age groups or gender, but varied across other socioeconomic characteristics (Table 1). For example, 27% of foreign-born workers with a foreign university degree reported that they were in a job requiring a high school education, compared with 8% of the Canadian-born and 5% of foreign-born workers who obtained their university degree from a Canadian institution. Furthermore, 20% of university graduates whose mother tongue was neither English nor French said they were working in a job that required no more than a high school diploma.

In addition, 21% of those who had a degree in humanities, languages or arts said that they were working in a high school-level position. This compared with 14% for those who had a degree in social science, business or law; 10% for those who had a degree in science, technology, engineering and mathematics (STEM); and percentages below 10% for those who had a degree in health and education disciplines. These two findings concur with the existing literature, which also identified the location of study and field of study as factors significantly correlated with overqualification.^{Note 18}

As expected, literacy and numeracy skill levels were also correlated with overqualification. Among university graduates whose literacy skills were in the lowest range (levels 0 and 1), more than one-third (34%) reported that their current job required no more than a high school education, while 21% of those with a level 2 in literacy reported as much. In comparison, 10% of university graduates with a level 3 and 7% of those with a level 4 or level 5 reported that their job required no more than a high school diploma.^{Note 19} The numeracy results were similar.

It is important to keep in mind that university graduates with a lower skill level do not constitute the majority of university graduates (Chart 1.1). In 2012, out of a total of approximately 4 million adult workers aged 25 to 64 with a university education, about 3 million had a higher literacy level (level 3 or higher), and they were therefore less likely to be overqualified. The risk of overqualification was higher among university graduates with lower literacy skills (level 2 or lower)—about 235,000 (out of 1 million) reported that they were working in an occupation requiring no more than a high school education. Similarly, out of 1.2 million university graduates with lower numeracy skills, about 268,000 said that they were working in an occupation requiring a high school diploma or less education (Chart 1.2).

Another useful way to examine the close association between skills and overqualification is to look at the proportion of overqualified university graduates who have a lower level of literacy (or numeracy).

In 2012, nearly one-half (47%) of university graduates who were working in a high school-level position had a level 2 or lower in literacy (Chart 2.1). Similar results were found with numeracy scores: about 54% of university graduates working in a high school-level position scored a level 2 or lower in numeracy, while 46% had at least a level 3 (Chart 2.2).

In comparison, among those who reported that they were in a job requiring a university education, 18% had lower levels of literacy skills and 23% had lower levels of numeracy skills.

The factors associated with overqualification vary by skill level

In this section, the factors associated with overqualification (i.e., working in a job requiring a high school education or less) are examined separately for those with higher and lower skill levels.

The overqualified with lower skills may be in that situation because of skills attrition over time, or because employers naturally select individuals with higher skills to occupy jobs that require a university education.^{Note 20}

Overqualified workers with higher skills, by contrast, represent a different population. They may represent a productivity loss to the Canadian economy, given that they presumably would have the capacity to occupy jobs that require more skills, yet they are in jobs that require no more than a high school education. Having a higher skill level may suggest inefficiencies in the labour market or simply imply differences in preferences of individuals (such as the desire to work in a less stressful or less demanding workplace). Understanding the factors associated with overqualification for each of these populations is therefore important.

Results are derived from logistic regression models and expressed as predicted probabilities. A probability of 1 indicates a 100% probability of being overqualified, and a probability close to 0 indicates a low probability of being overqualified.

Results indicate that, all else being equal, there appears to be a significant association between location of study, field of study, mother tongue and the probability of being overqualified (Table 2). The magnitude and significance of these associations, however, varied between the populations with high and low skill levels.

For example, among those who had higher literacy skills, foreign-born workers who received their highest university degree outside Canada were significantly more likely (14%) to be overqualified than Canadian-born workers (6%).^{Note 21} At the same time, foreign-born workers who were trained in Canada had the lowest probability of being overqualified (3%). Similar findings were noted for workers with higher numeracy skills (although the difference between foreign-born workers with a foreign degree and Canadian-born workers was no longer significant).

Within the lower skilled population, the numeracy model results indicate a significant difference between foreign-born workers who earned their degree in Canada (with a 4% probability to be overqualified) and those who were born in Canada (14%). In both models, the foreign-born and foreign-educated had a predicted probability above the 25% range.

Graduates of humanities, languages and arts programs had a significantly greater probability of being overqualified than graduates of STEM programs, regardless of skill level. However, among workers with higher literacy skills, the gap between graduates of these programs was 10 percentage points (15% versus 5%), while for those with lower literacy skills, the gap was 19 percentage points (30% versus 11%). At the same time, graduates of social science, business and law programs with lower literacy skills had a significantly greater probability of being overqualified (24%) than their lower-skilled counterparts in STEM programs (11%); that difference was much smaller among higher-skilled graduates (7% versus 5%).

In addition, university graduates with higher skill levels whose mother tongue is French were significantly less likely to be overqualified (3%) than either English speakers (6%) or those with a mother tongue other than English or French (10%).

Among those with lower skill levels, graduates with lower literacy skills whose mother tongue was a language other than English or French had a significantly higher probability of being overqualified (25%).

Lastly, the results also indicate that conjugal status is related to the probability of being overqualified. All else being equal, workers who live with a spouse or partner, regardless of skill level, have a significantly lower probability of being overqualified than those who do not live with a spouse or partner. Given that the results have a 10% level of significance, they must be interpreted with caution; such results, however, might be related to the selectivity of individuals who are married or in a common-law relationship.^{Note 22}

Fewer complex activities are performed by overqualified university graduates in the workplace

The relationship between overqualification and skills is not unidirectional. While university graduates’ lack of skills might lead them to occupy a lower-skilled job, it could also be that some university graduates are less skilled because they occupy a lower-skilled job and thus have fewer opportunities to use, maintain or gain skills than their counterparts in jobs that require more skills.^{Note 23}

Given the cross-sectional nature of the data, it is difficult to formally identify a cause-and-effect relationship between overqualification and lower skill levels. In PIAAC, however, survey respondents are asked a number of questions on weekly activities at work—including literacy activities, numeracy activities, and information and communications technology (ICT) (or “technology”) activities. Questions were also asked about generic (or “soft skill”) activities such as instructing people, giving presentations, persuading or influencing people, and thinking about complex problems. A total of 12 question items were used to identify the use of generic activities in the workplace. Another 7 were about ICT activities, 12 were about literacy activities and 6 were about the use of numeracy activities.^{Note 24}

To get a sense of the extent to which workers use complex skills, a statistical indicator of the workplace activities can be calculated. We do so by calculating the number of activities used in the workplace on a weekly basis for each employed individual, and by averaging the results obtained across all labour market participants. For example, university-educated workers who were in a university-level occupation performed, on average, 7.7 of the 12 generic activities listed in PIAAC on a weekly basis (7.7/12*100=64%). These university graduates also performed 53% of literacy activities, 44% of numeracy activities and 55% of ICT activities listed in PIAAC on a weekly basis (Chart 3).

The results indicate that overqualified workers (i.e., working in a high school position or lower) performed fewer activities in the workplace than those who occupied a university-level position. For example, overqualified workers performed 25% of ICT activities on a weekly basis; this compared with 55% among those who were in a position requiring a university education.^{Note 25} In all other categories (use of literacy, numeracy and generic skills), there was nearly a 20 percentage point difference between those who were in a high school-level position and those who were in a university-level position. Such results increase the possibility that the lack of skill use may contribute to a deterioration of the skill level of workers with a university education, especially if they are working in a job that requires a high school diploma or less education.

Overqualification and job satisfaction

It is generally assumed that overqualified workers are less satisfied with their jobs than those who are not overqualified for their jobs.^{Note 26} Generally speaking, overqualified workers who are less satisfied may be more willing to leave their current job in order to find one that better matches their credentials or skill level. Moreover, higher levels of dissatisfaction may also be related to lower productivity.

The issue of overqualification and job satisfaction, however, has been studied little in Canada. Studies either examine overqualification^{Note 27} or job satisfaction,^{Note 28} but the connection between the two is lacking in the Canadian literature.^{Note 29} With that in mind, what can be said about the relationship between job satisfaction and overqualification in Canada?

According to PIAAC data, most university graduates are satisfied with their jobs. In 2012, 84% of university graduates aged 25 to 64 said they were satisfied or extremely satisfied with their jobs, compared with 10% who were neither satisfied nor dissatisfied, and 6% who were dissatisfied or extremely dissatisfied. In fact, at all levels of completed education, a similar level of satisfaction was observed.^{Note 30}

To study the relationship between job satisfaction and overqualification, an ordered probit model was conducted on the sample of university graduates.^{Note 31} Three possible ordered outcomes were considered in the model: (1) dissatisfied or extremely dissatisfied; (2) neither satisfied nor dissatisfied; and (3) satisfied or extremely satisfied. In addition to overqualification, variables that may be related to job satisfaction were included as controls (including gender, age, region of residence, health status, immigrant status and location of study of highest level of education, and earnings).^{Note 32} Literacy skill levels were also included as a control variable in this model. The results discussed below are expressed as marginal probabilities, and indicate the probability that workers will either be dissatisfied, neutral or satisfied with their job when all other control variables are taken into account and held at average values.

Results indicate that 13% of university graduates who considered themselves to be in a job requiring a high school diploma or less education were dissatisfied with their job, compared with 3% of those who were in a job requiring a university education—indicating that there is a statistical difference in the level of job dissatisfaction between those who are overqualified and those who are not overqualified (Chart 4).

Conversely, the predicted probabilities indicate that 68%, or two-thirds, of university graduates who were in a job requiring no more than a high school diploma were satisfied with their job, while 19% were neither satisfied nor dissatisfied. This compared with 88% and 8%, respectively, for those who were in a university-level job.

Hence, overqualified university-educated workers have a significantly higher probability of being dissatisfied with their current job than their university-educated counterparts whose qualifications are a better match. Although this was the expected result, it is important to note that this result remains even when other factors are taken into account. Future research is needed to gain more insight into the relationship between overqualification and job satisfaction.

Conclusion

Canada’s university graduates generally perform well in the labour market in both the short and long term.^{Note 33} Their rates of employment exceed those of their counterparts with a high school diploma and even those with other postsecondary diplomas. However, for various reasons, including lower literacy and numeracy skills,^{Note 34} not all university graduates are well placed in the labour market. When a worker occupies a position that requires much less education than they possess, it is considered a qualification mismatch, which may affect job satisfaction, job retention and earnings. This is qualitatively different from situations where there is a skills mismatch. The latter occurs when a university graduate works in a position where they lack the skills (such as literacy) to carry out the duties and tasks of the job.

A vast amount of past work used a measure of qualification mismatch based on the National Occupational Classification (NOC). However, it is not without its limitations, and, in this study, a self-assessed qualification mismatch measure was used to supplement the comprehension of issues that are related to highly educated individuals working in jobs that require much lower levels of education. According to the results, approximately 12% of university workers aged 25 to 64 say they are working in a job that only requires a high school diploma. The percentage of overqualification using the NOC is similar at less than 15%.

This study shows that overqualification is typically associated with lower levels of literacy and numeracy. Some of the characteristics associated with overqualification were similar regardless of skill level, especially with respect to field of study. Other factors, such as mother tongue, had a larger impact within the lower-skilled population.

The overqualified university-educated population was also less likely to perform literacy, numeracy or ICT activities in the workplace. They were also less likely to perform so-called ‘generic’ skills such as thinking about complex problems or influencing people. The less-frequent use of those activities over time may effectively impact their ability to maintain and strengthen their skills and possibly obtain a job that is more matched to their level of education. Lastly, university-educated workers with jobs that required no more than a high school diploma had lower levels of job satisfaction, even after controlling for many factors including earnings.

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