What the expansion of higher education means for graduates in the labour market

by Markus Schwabe
Statistician, Directorate for Education and Skills

A university degree has always been considered as key to a good job and higher wages. But as the share of tertiary-educated adults across OECD countries has almost doubled over the last two decades, can the labour market absorb this growing supply of skills? At first glance, the answer isn’t encouraging: the number of unemployed tertiary-educated adults has been increasing across OECD countries for many years. However, a closer look reveals that the unemployment rate for these adults is still much lower than for those without a university degree.

The latest Education Indicators in Focus policy brief analyses long-term trends in employment outcomes of adults based on their highest level of educational attainment. The figure above shows that, in all OECD countries, adults with tertiary education still enjoy higher employment rates than those without by 10 percentage points, on average, and this advantage has changed little over the past two decades.

While this might seem reassuring, in some countries the reality is more troubling. In Korea, for example, labour market demand has not kept pace with an ever-increasing supply of tertiary graduates. As a result, the employment advantage of tertiary-educated adults decreased slightly, by 0.6 point, between 1995 and 2006. In 1995, tertiary-educated adults in Korea were 13% more likely to be employed than those with an upper-secondary or post-secondary non-tertiary education; today they are only 6% more likely to have a job. With 70% of young adults in Korea holding a tertiary degree, some might wonder whether tertiary expansion has reached its limit. But with populations of school-aged children shrinking across OECD countries, the worry about too many university graduates competing for too few high-skilled jobs might prove to be misplaced.

The “knowledge economy” has increased the demand for better-educated and well-skilled workers. But in many countries, even as enrolments in higher education have grown, companies still report that they cannot find workers with the skills they are looking for. While technological progress and globalisation continue to challenge education systems, automation and digitalisation will be, in the words of two Harvard economists*, an ongoing “race between education and technology”. Countries should thus worry less about the share of tertiary-educated adults in the labour force and more about the skills that education provides. Ensuring that the skills students graduate with are relevant to the labour market will go a long way towards making the expansion of higher education sustainable – and beneficial for all.

*Claudia Goldin and Lawrence F. Katz in their book The Race between Education and Technology (2008), Cambridge, MA: Harvard Univ. Press, Belknap.

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