Skills, Inequalities, and Overeducation: The Perverse Effects of Educational Expansion in Poland

The last decades were a period of rapid educational expansion, giving raise to questions regarding the extent to which labor markets can accommodate the growing number of college graduates, and concerns that this change, rather than improving the labor market chances of individuals and reducing social inequality, may foster overeducation and skill mismatch. This paper seeks to assess three hypothetical explanations of the latter phenomena offered by the literature, each with differing implications for social inequality. The first assumes that the job structure is unresponsive to changes in the supply of workers with varying levels of schooling, and educated workers compete for a limited number of high skilled jobs. Thus, educational expansion fosters an increase in inequality, as some graduates, particularly those from unfavorable backgrounds, are pushed into jobs with lower skill requirements (Thurow, 1972; Spence, 1973). The second hypothesis assumes that people voluntarily accept jobs for which they are overqualified in order to gain the experience and training necessary for career development, and views overeducation and skills mismatch as short-term phenomena occurring at the beginning of a working life (Sicherman & Galor, 1990; Sicherman, 1991). The third hypothesis attributes overeducation to the fact that people with the same educational credentials differ with respect to their actual skills, which are also determined by experience, cognitive ability, or the quality of schooling offered by various institutions (Green & McIntosh, 2007). These issues are examined on the basis of data from the Polish Panel Survey POLPAN, 1988-2013. First, I analyze the extent to which overeducation / skills mismatch are associated with individual socio-demographic characteristics, local labor market opportunities, job mobility or cognitive capacity. Second, I assess whether overeducation can be regarded as a stepping stone or a dead-end for workers, using random-effects logistic regression models relating overeducation to its lagged value.