Dr. Raul Ramos is Associate Professor in Applied Economics and Researcher at the Grup d’Anàlisi Quantitativa Regional, University of Barcelona, Spain.

Fortunately, differences between countries with regard to the education levels of their population continues to decline very markedly. According to Barro-Lee’s database , in the last 30 years, while the average number of years of schooling of the adult population in many developed countries has grown moderately (for example, in the United States has gone from 12.4 years in 1980 to 13.5 in 2010), in many other countries the growth has been spectacular. Some examples: in Brazil it has grown from 3 to 8 years  of schooling between 1980 and 2010; in Colombia from 4 to 9; in Mexico from 4 to 8.

Much of this increase is due to the population’s greater access to basic education levels, but progressively the percentage of population that accesses and finishes college is higher. In fact, the percentage of adult population with university studies observed in several Latin American countries (Colombia, Costa Rica, Mexico, Panama and Peru)  is between 15% and 30%, the usual values in most developed countries.

This situation poses new challenges in the transition of university graduates from education to the labor market. Can society generate enough skilled jobs to absorb this increased supply of graduates? Or, on the contrary, will they be forced to accept jobs that do not require such levels of training? Since the 70s, Richard Freeman^[1] warned of the dangers of educational mismatch and negative consequences for overeducated workers in the US labor market, dangers that have been confirmed by subsequent research: they have lower wages and less job satisfaction than their former classmates who have suitable jobs.

In recent years we’ve begun to see studies that illustrate how this problem also affects Latin American labor markets. Leuven and Oosterbeck^[2] estimate that the percentage of overeducated workers in Latin America is already close to 25% and the wage penalty is important: while the wage returns per year of education for an individual properly educated for the job that he/she has is 7.5%, for overeducated workers the wage returns of the “surplus” years is 4.1%.

In this situation, policies should try, on the one hand, to improve university quality (as this could be a possible explanation of why companies do not adequately remunerate their university workers) and, on the other hand, to provide more transparent information to potential students about what studies may have greater demand in the future and what  greater job opportunities are expected in certain sectors or regions. Finally, reducing informality is also a key issue as the penalty for overeducated could still be higher in this labor segment.

Dr. Raul Ramos has written several articles of interest on the subjects of overeducation and wages.

^[1] Freeman, R.B. (1976), The Overeducated American. London: Academic Press.

^[2] Leuven, E. y Oosterbeek, H. (2011), “Overeducation and mismatch in the labor market” en Hanushek, E., Machin, S., Woessmann, L. (eds) Handbook of the Economics of Education Volume 4, Amsterdam: North Holland.