Are we only apparently mismatched? Reasons and consequences of apparent qualification mismatch

By Fabio Manca.

Measuring skills can be problematic as adequate proxies are, in many cases, not readily available. ‘Qualification levels’ are among the most commonly used proxies for skills as they can be found in large datasets produced by national statistical offices and updated regularly.

Qualifications, however, are only an imperfect approximation of workers’ competences, skills and abilities. In certain situations, for instance, workers may be categorised as being over or under-qualified (e.g. when their qualification levels are above/below those that are theoretically required by the job) while, nonetheless, being well matched by skills (as measured, for instance, by surveys like the Survey of Adults Skills, PIAAC). This situation is usually referred to as ‘apparent qualification mismatch’.

The reasons behind apparent qualification mismatch can be various. Apparent over-qualification (e.g. when a worker has a qualification level that is above the one theoretically required by the job but his/her skills are, nonetheless, well matched to the job requirements) may appear, for instance, due to the so-called credentialism (i.e. the belief that academic or other formal qualifications are the best way to signal a person’s ability to do a particular job). Bulmahn and Krakel (2002) argue, for instance, that employers may be tempted to inflate recruitment criteria with the idea that this will help them selecting the best candidates. Similarly, individuals may try to acquire higher qualification levels than really necessary (i.e. qualifications that bring only little marginal additions to their true skill set while, however, inflating their curriculum) if they believe these extra-qualifications to be essential to signal their skills in very tight and competitive labour markets.

Apparent under-qualification may appear, instead, when workers are able to acquire informal skills and competence at work (or through experience) but these skills are only partially reflected in their formal qualifications and titles.

But why should we care about apparent qualification mismatch in the first place?

There are various reasons. Employers rely on qualifications as a signal of a worker’s true skills, but the more these two measures diverge, the more it will be difficult for an employer to identify a candidate’s skills and the larger the potential mistakes in the hiring process. This is to say that, whenever qualifications are imprecise and weak indicators of a worker’s underlying skills (as in the case of workers that are apparently mismatched), employers’ hiring decisions become more difficult potentially leading to the emergence of (true) skills mismatch.

The weak signalling power provided by qualifications, and the resulting imperfect hiring decisions, can entail large costs, leading to lower productivity or to the need of providing additional training to workers who are lacking the skills required by their job once mistakenly hired.

A forthcoming study on the Swedish Skills Assessment and Anticipation system (OECD, forthcoming) discusses this issue linking it to the effective use of labour market information on skill needs. Interestingly, the extent of apparent qualification mismatch in Sweden varies substantially across fields of study (Table 1). It is the highest among those graduating from the engineering, manufacturing and construction field (55%) and the lowest in the Agriculture and veterinary field of study (4%).

Among the many potential explanations for this pattern, high shares of total apparent qualification mismatch in a specific field could be due to the fact that employers in that field are more able to discriminate and understand the true skills of job-seekers regardless of what nominally stated in the graduates’ official qualification levels (e.g. hiring workers that are apparently over or under-qualified but whose skills are, in fact, adequate for the advertised job).

The large heterogeneity in the extent of apparent qualification mismatch across fields of study unveils interesting patterns, especially when one looks at the shares of apparent over and under-qualification mismatch. Why?

Generally, if in doubt about a candidate’s true skills, employers should be more willing to hire over-qualified workers than under-qualified ones for the reasons mentioned above (e.g. credentialism etc). In certain fields, however, the extent of apparent under-qualification is higher than that of apparent over-qualification. Evidence from the Survey of Adults Skills shows that around 30% of the (nominally under-qualified) students graduating in the engineering, manufacturing and construction field of study were able to find a job in this area bringing, in fact, the adequate set of skills to carry out the job.

How is that so? Many reasons, yet not fully explored empirically, may lie behind this situation. One speaks to the fact that employers in certain fields may have been able to establish more robust links with potential job candidates than in others fields and that this may have given them ‘inside information’ about the candidates’ true skills.

The use of apprenticeships or internships in certain fields, for instance, may give employers inside information about a candidate true skill. In some cases, this can even lead to hire the candidate when she/he has lower qualifications than those theoretically needed to apply for the job but, yet, adequate skills for the job even before graduating. Other reasons can also be linked to field-specific hiring practices (i.e. firms in the economic consulting area may perform stricter and more systematic interviews than, say, those in the teaching and education field).

At the opposite side of the spectrum, total apparent qualification mismatch is relatively less common in fields such as teacher training and education science (8%) or services (9%). While this result can be due to the fact that those graduating from more general subject areas may be more prone to qualification mismatch (OECD, 2011), the ratio between apparent over and under-qualification still says something interesting. Across these fields, apparent qualification mismatch is mostly due to apparent over-qualification, being this almost three times as large as apparent under-qualification. In these fields, qualifications are likely to be poor proxies of the workers underlying skills suggesting that employers may find it more difficult to use these as an adequate indicator of graduates’ true skills and that workers tend to inflate their credentials for this reason. Better links between the world of work and that of education may be needed to foster exchange of information of skills that are delivered by qualifications acquired in these fields.

While more empirical work is needed to understand the reasons behind the heterogeneous patterns of apparent qualification mismatch across fields and the skills’ signalling power of qualifications to employers, much of the explanation has certainly have to do with the efficacy with which employers, education providers and students are able to share information about their skills and their needs in the labour market. Data and information collected by the OECD in the new Adapting to Changing Skill Needs project or those of the new round of the OECD Survey of Adults Skills (PIAAC) will help shed light on these issues.

References:

Bulmahn G. and  Kräkel M. (2002). “Overeducated Workers as an Insurance Device,” LABOUR, CEIS, vol. 16(2), pages 383-402, 06.

OECD (2011), OECD Employment Outlook 2011, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/empl_outlook-2011-en

OECD (forthcoming), ‘Getting Skills Right in Sweden’, OECD publishing, Paris.