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Unemployment or Overeducation: Which is a Worse Signal to Employers?

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Abstract

This study estimates the stigma effect of unemployment and overeducation within one framework. We conduct a randomised field experiment in which we send out trios of fictitious job applications, from male candidates with no relevant work experience, to real vacancies. One candidate graduated just a few months before the application, the two others graduated a year earlier and had been unemployed or underemployed since that time. By monitoring the subsequent callback, we find evidence of a larger stigma effect of unemployment than overeducation. The stigma effect of overeducation is found to occur for permanent contract jobs but not for temporary ones.

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Notes

  1. A worker is considered to be overeducated if her/his education level is higher than the level that is typically required to perform adequately (McGuinness 2006).

  2. Alongside these effects on future labour market outcomes, many studies also find overeducation to have an immediate effect on other labour market outcomes such as wages and job satisfaction (Green and Zhu 2010; Hartog 2000; McGuinness 2006; Pecoraro 2014; Verhaest and Omey 2012).

  3. This concept has been refined in later work such as Lockwood (1991), Blanchard and Diamond (1994) and Acemoglu (1995).

  4. The term ‘overeducation’ therefore does not refer to the job for which the worker applies but to his past job.

  5. We use the ISCED 1997 education levels. ISCED stands for the International Standard Classification of Education.

  6. The secondary schools mentioned for the moderately educated candidates were ‘Provenciaal Handels- en Taalinstituut’ (Type A applicants), ‘Vrije Handelsschool Sint-Joris’ (Type B applicants) and ‘Visitatie Mariakerke—Broeders van Liefde’ (Type C applicants). The candidates with a Bachelor in business administration had graduated from Artevelde University College Ghent (Type A and Type C applicants) or University College Ghent (Type B applicants), i.e., the two largest university colleges in Ghent (and among the three largest university colleges in Flanders). Finally, those with a Master in commercial sciences had all graduated from University College Ghent (as Artevelde University College Ghent did not offer this program).

  7. Ghent is the capital of East Flanders. However, this city is only 20 km away from the border between East Flanders and West Flanders. These provinces have a joint area of 6126 km² and a joint population of about 2.7 million.

  8. Besides East Flanders and West Flanders, Flanders also comprises the provinces of Antwerp, Flemish Brabant and Limburg. In total, Flanders has an area of 13,522 km² and a population of about 6.4 million.

  9. The job vacancy rate is the number of vacancies as a percentage of the sum of this number and the number of occupied jobs.

  10. The reader might note that, in contrast to former applications of the correspondence testing methodology in which unequal treatment on grounds based on which discrimination is forbidden by the law, we cannot claim that unequal treatment based on recent labour market history inflicts damage on the society that may justify these costs. We can only bring to bear scientific and policy advice advantages.

  11. (92 + 21 + 13 + 21)/540 = 0.27.

  12. Regression analyses with positive callback as a dependent variable and the experimental identities and these identities interacted with an indicator of temporary positions as independent variables indicate that these differences in overeducation stigma by contract characteristics are statistically significant.

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Authors and Affiliations

  1. Ghent University, University of Antwerp, Université catholique de Louvain, GLO, IMISCOE and IZA, Sint-Pietersplein 6, 9000, Ghent, Belgium

    Stijn Baert

  2. KU Leuven (Brussels Campus) and Ghent University, Warmoesberg 26, 1000, Brussels, Belgium

    Dieter Verhaest

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  1. Stijn Baert
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Correspondence to Stijn Baert.

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Table 4 Probability of positive callback by labour market history: regression analysis
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Baert, S., Verhaest, D. Unemployment or Overeducation: Which is a Worse Signal to Employers?. De Economist 167, 1–21 (2019). https://doi.org/10.1007/s10645-018-9330-2

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