1. Overeducation, Job Mobility, and Earnings Mobility among Holders of First Degrees in Israel Aviad Tur-Sinai (Israel Central Bureau of Statistics & Tel-Aviv University) Dmitri Romanov (Israel Central Bureau of Statistics) Galit Eizman (Planning & Budgeting Committee - ICHE) The Society of Labor Economists Annual Meeting, May 8-9, 2009

2. To begin with… Over-education is defined as a situation in which an individual possesses a level of education in excess of what is required for her/his particular job.

3. Motivation - I A steep increase in the tertiary education enrollment and graduation rates in the last decades in Israel

4. Students in Isreali Higher Education Institutions

5. Proportion of Israeli Students Entering Higher Education of the Average Age Cohort

6. Motivation - I A steep increase in the tertiary education enrollment and graduation rates in the last decade in Israel This increase has slowed the rate of return on schooling, and even caused a decline in the return on academic education in certain fields/professions Over-education provides a micro-level explanation for this trend

7. Motivation - II learning outcomes Over-education indicates human capital under-utilization Higher Education Institutions pay attention to employability (=the probability of employment) of their graduates; However, given relatively low rates of unemployment among graduates, it seems that the major issue is the degree of education applicability (=match between the acquired knowledge and job requirements);

8. Motivation - III

9. More than one third of Israeli graduates immediately proceed to advanced academic studies.

10. Israeli Advanced Degree Students, 1989/90-2006/7

12. Israeli Masters Degree Students, 1989/90-2006/7

13. Israeli Doctoral Students, 1989/90-2006/7

14. Motivation - III More than one third of Israeli graduates immediately proceed to advanced academic studies. Is it a flight from over-education or a trap into over-education with more years of schooling?

15. Prior research and open questions

16. Sicherman & Galor (1990) and Sicherman (1991) claim that over- education is a temporary phenomenon, while the empirical studies by Battu et al. (1999) and Dolton & Vignoles (2000) show this may be a persistent condition. Question 1: Is over-education a temporary or a long-run phenomenon ?

17. Prior research and open questions Does over-education imply a higher job mobility (occupational mobility)? Scarce empirical evidence (Alba-Ramirez. 1993) says yes, but does it happen through intra-firm mobility or by changing employers? Question 2: Is over-education associated with a higher job mobility?

18. Prior research and open questions To what degree over-education can be explained by relatively low (unobserved) cognitive abilities? Dolton & Kidd (1998) and Dolton & Vignoles (2000) use grades to control for the abilities, having confused the sheepskin effect with abilities effect. Question 3: How do individuals cognitive abilities affect the chances of being over- educated and the chances of escaping from over-education ?

19. Further Questions How widespread is over-education among the Israeli graduates? What factors affect the chances of being over-educated? What wage loss entails over-education? Does learning to an advanced degree reduce the probability of being over-educated ?

20. Data Survey Recipients of Degrees from the Universities and Other Institutions of Higher Education, conducted by the ICBS (on the cohorts 2000/2001 and 2001/2002) : –Field of study –Continuing academic studies (mostly to the second degree) –Information regarding current employment (occupation, employer, job duration) –Subjective question regarding the relation between the individuals current job and first-degree studies –Satisfaction from quality of teaching, facilities and services Total 8578 graduates of universities and public academic colleges

21. Data (cont.) Employment and wages: ICBSs matched employer-employee database for 2000-2005 provides, for each employee job, with: Cognitive abilities as measured by the NITE psychometric exams: total score and its componentsverbal thinking, quantitative thinking, and English. Annual gross wage Tenure on the job Number of months worked annually Firms size

22. time t0t0 t -1 t1t1 t2t2 t3t3 Graduation year Survey year Timetable of events 200520042003200220012000Cohort t3t2 survey t1t0 graduation t-12001/2002 t3t2 survey t1t0 graduation t-12002/2003

23. Measuring Over-education Objective Measure: systematic job evaluation, which states the level of qualifications required to perform a particular job, usually in terms of occupation vis-à-vis years of schooling. Subjective Measure: workers self-assessment. Empirical Method: workers whose years of schooling lie outside of the s.d. bound around the mean schooling, by occupation.

24. Measuring Over-education Survey question used as a Subjective Measure: To what degree is your current job related to your studies? (refer to all your first-degree studies) [A] A very high degree [B] A high degree [C] A low degree[D] Not related at all Defined as Over-educated: if answer [C] or [D]

25. Occupation, Field of Study and Close Relation Between Work and Studies (out of Graduates)

26. Estimates of Over-education among Employed First-Degree Graduates, by Occupation (%) Mean = 37%

27. Over-education, Job Mobility and Wage Gap

29. Model I: Probability of Being Overeducated where: OE – indicator of overeducation on the job X – a an array of the graduates demographic traits, the institution that awarded h/her degree, and the discipline studied Ability – a proxy for cognitive abilities T – tenure, number of months on the job PastJobs – Number of employers in the last 3 years

30. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

31. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

32. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

33. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

34. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

35. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

36. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

37. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

38. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

39. Probability of Being Overeducated: Results (1) All disciplinesExplanatory variable 0.0217 Male 0.1469*** Age -0.0020*** Age squared 0.5484*** Jewish 0.0467 Immigrated 1989 or later -0.2180*** Married -0.0549 University graduate 0.3799*** Continuing studies parallel degree/certification -0.0886*** Continuing studies advanced degree *, **, *** 10%, 5%, 1% significance, respectively. All disciplinesExplanatory variable -0.0012*** Total psychometric score -0.0057*** Psychometric score quantitative reasoning -0.0386***Tenure with employer 0.0027*** Tenure with employer squared -0.0446*** No. of employers in 3 years preceding survey 0.3980R 2 max-rescaled

40. Probability of Being Overeducated: The Impact of Cognitive Abilities (2) Model I -0.0549 University graduate 0.3799*** Cont. study – 1st degree/diploma -0.0886*** Cont. study – Advanced degree -0.0012*** Psychometric exam – total -0.0057*** Psychometric exam – math 5919 N 0.3980 R2R2 *, **, *** 10%, 5%, 1% significance, respectively.

41. Probability of Being Overeducated: The Impact of Cognitive Abilities (2) Model IIModel I -0.1508***-0.0549 University graduate 0.3499***0.3799*** Cont. study – 1st degree/diploma -0.1178***-0.0886*** Cont. study – Advanced degree -0.0012*** Psychometric exam – total -0.0057*** Psychometric exam – math 68195919 N 0.36890.3980 R2R2 *, **, *** 10%, 5%, 1% significance, respectively.

42. Probability of Being Overeducated: The Impact of Cognitive Abilities (2) Model IIIModel IIModel I -0.1688***-0.1508***-0.0549 University graduate 0.3499***0.3799*** Cont. study – 1st degree/diploma -0.1178***-0.0886*** Cont. study – Advanced degree -0.0012*** Psychometric exam – total -0.0057*** Psychometric exam – math 6819 5919 N 0.36290.36890.3980 R2R2 *, **, *** 10%, 5%, 1% significance, respectively.

43. Model II: Wage Equation where: W – monthly wage in the graduates principal job in year t Emp – employer characteristics: positioning in the public sector and size of business JobChanges – a measure of job mobility from year of degree award to year t Note: slope estimate means % changes dY/dx [i.e., (dY/dx)/Y]

44. Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after graduation 3 years after award of degree 2 years after award of degree -0.1246***-0.1119***Over-education -0.1941***-0.1569***Average annual No. of jobs (since graduation) 0.0465***0.0656***Tenure -0.0009***-0.0014***Tenure (square) *, **, *** 10%, 5%, 1% significance, respectively.

45. Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after graduation 3 years after award of degree 2 years after award of degree -0.1246***-0.1119***Over-education -0.1941***-0.1569***Average annual No. of jobs (since graduation) 0.0465***0.0656***Tenure -0.0009***-0.0014***Tenure (square) *, **, *** 10%, 5%, 1% significance, respectively.

46. Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after graduation 3 years after award of degree 2 years after award of degree -0.1246***-0.1119***Over-education -0.1941***-0.1569***Average annual No. of jobs (since graduation) 0.0465***0.0656***Tenure -0.0009***-0.0014***Tenure (square) *, **, *** 10%, 5%, 1% significance, respectively.

47. Wage Equation Sensitivity analysis: (Ln) Monthly wage in main job two/three years after graduation 3 years after award of degree 2 years after award of degree -0.1246***-0.1119***Over-education -0.1941***-0.1569***Average annual No. of jobs (since graduation) 0.0465***0.0656***Tenure -0.0009***-0.0014***Tenure (square) *, **, *** 10%, 5%, 1% significance, respectively.

48. Wage Equation: (Ln) Monthly wage in main job two years after graduation 0.1573***Male ***0.0627Age -0.0007**Age (square) 0.1571***Jewish -0.0300Immigrant from 1989 0.0502***Married 0.1084***University graduate 0.0599Ln (Psychometric exam) -0.2545***Cont. study – 1st degree/diploma -0.1341***Cont. study – Advanced degree -0.3986***Employment in public sector No. of employees in business: -0.2552***0 – 9 -0.0436*10 - 49 -0.010250 - 99 0.0521**100 - 499 *, **, *** 10%, 5%, 1% significance, respectively.

49. Wage Equation: (Ln) Monthly wage in main job two years after graduation 0.1573***Male ***0.0627Age -0.0007**Age (square) 0.1571***Jewish -0.0300Immigrant from 1989 0.0502***Married 0.1084***University graduate 0.0599Ln (Psychometric exam) -0.2545***Cont. study – 1st degree/diploma -0.1341***Cont. study – Advanced degree -0.3986***Employment in public sector No. of employees in business: -0.2552***0 – 9 -0.0436*10 - 49 -0.010250 - 99 0.0521**100 - 499 *, **, *** 10%, 5%, 1% significance, respectively.

50. Wage Equation: (Ln) Monthly wage in main job two years after graduation 0.1573***Male ***0.0627Age -0.0007**Age (square) 0.1571***Jewish -0.0300Immigrant from 1989 0.0502***Married 0.1084***University graduate 0.0599Ln (Psychometric exam) -0.2545***Cont. study – 1st degree/diploma -0.1341***Cont. study – Advanced degree -0.3986***Employment in public sector No. of employees in business: -0.2552***0 – 9 -0.0436*10 - 49 -0.010250 - 99 0.0521**100 - 499 *, **, *** 10%, 5%, 1% significance, respectively.

51. Wage Equation: (Ln) Monthly wage in main job two years after graduation 0.1573***Male ***0.0627Age -0.0007**Age (square) 0.1571***Jewish -0.0300Immigrant from 1989 0.0502***Married 0.1084***University graduate 0.0599Ln (Psychometric exam) -0.2545***Cont. study – 1st degree/diploma -0.1341***Cont. study – Advanced degree -0.3986***Employment in public sector No. of employees in business: -0.2552***0 – 9 -0.0436*10 - 49 -0.010250 - 99 0.0521**100 - 499 *, **, *** 10%, 5%, 1% significance, respectively.

52. Wage Equation: (Ln) Monthly wage in main job two years after graduation 0.1573***Male ***0.0627Age -0.0007**Age (square) 0.1571***Jewish -0.0300Immigrant from 1989 0.0502***Married 0.1084***University graduate 0.0599Ln (Psychometric exam) -0.2545***Cont. study – 1st degree/diploma -0.1341***Cont. study – Advanced degree -0.3986***Employment in public sector No. of employees in business: -0.2552***0 – 9 -0.0436*10 - 49 -0.010250 - 99 0.0521**100 - 499 *, **, *** 10%, 5%, 1% significance, respectively.

53. Model III: Wage Dynamics where: W t – monthly wage in graduates principal job in year t (t=1,2,3) W 0 – monthly wage in graduates principal job in year of award of degree Note: a positive estimator positive impact to wage growth over t years.

54. Wage Dynamics: Is Over-education Effect Temporary or Persistent? Three-years average growth rate of wage Two-years average growth rate of wage One-year growth rate of wage Dependent Variable 0.0153*0.0112-0.0019University graduate -0.0905***-0.1354***-0.3805***Cont. learning – 1st degree/diploma -0.0157**-0.0611***-0.2096***Cont. learning – Graduate degree -0.0243***-0.0514***-0.0299Over-education -0.0575***-0.0723***-0.1432***Average annual No. of jobs (since graduation) 508653635531N 0.38830.34840.1355R2R2 *, **, *** 10%, 5%, 1% significance, respectively.

55. Wage Dynamics: Is Over-education Effect Temporary or Persistent? Three-years average growth rate of wage Two-years average growth rate of wage One-year growth rate of wage Dependent Variable 0.0153*0.0112-0.0019University graduate -0.0905***-0.1354***-0.3805***Cont. learning – 1st degree/diploma -0.0157**-0.0611***-0.2096***Cont. learning – Graduate degree -0.0243***-0.0514***-0.0299Over-education -0.0575***-0.0723***-0.1432***Average annual No. of jobs (since graduation) 508653635531N 0.38830.34840.1355R2R2 *, **, *** 10%, 5%, 1% significance, respectively.

56. Model IV: Probability of Studying to an Advanced Degree where: Advanced – an indicator of taking advanced studies two years after receiving degree Work_University – an indicator of working at the University during Year 3

57. Probability of Studying to an Advanced Degree: Demographic, Educational and Employment Factors MarriedImmigrant from 1989 JewishAge (square) AgeMale -0.2694***-0.1735***0.9363***0.0039**0.3386***-0.2214*** Over- education Work in University during BA studies Psychometric exam – total University graduate -0.1292***0.5938**0.0029***0.5432*** *, **, *** represents 10%, 5%, 1% significance, respectively.

58. Probability of Studying to an Advanced Degree: Demographic, Educational and Employment Factors MarriedImmigrant from 1989 JewishAge (square) AgeMale -0.2694***-0.1735***0.9363***0.0039**0.3386***-0.2214*** Over- education Work in University during BA studies Psychometric exam – total University graduate -0.1292***0.5938**0.0029***0.5432*** *, **, *** represents 10%, 5%, 1% significance, respectively.

59. Main Findings Two years after graduation, 37% of the first-degree holders are over- educated (53% in Humanities, 47% in Social Sciences). There is a 13% loss of wage for the over-educated graduates. In the first three years after graduation – the wage gap between matched and over-educated graduates is widening. Education and tenure are substitutes in the human capital model (one year of tenure decreases the chances of being over-education by 4%).

60. Main Findings (cont.) Changing one more job per year (in the first three years after graduation) decreases wage by 19%. University graduates seem to have lower chances of over-education – unless individuals cognitive abilities are explicitly controlled for. That means that the graduating from university variable indicates positive (self)-selectivity into the universities. Over-educated graduates have a lower propensity to study for an advanced degree.

61. Thank You