Educational missmatch and its consequences for workers: the case of the Czech Republic
| Thesis title in Czech: | Educational missmatch and its consequences for workers: the case of the Czech Republic |
|---|---|
| Thesis title in English: | Educational missmatch and its consequences for workers: the case of the Czech Republic |
| Academic year of topic announcement: | 2023/2024 |
| Thesis type: | diploma thesis |
| Thesis language: | angličtina |
| Department: | Institute of Economic Studies (23-IES) |
| Supervisor: | Mgr. Barbara Pertold-Gebicka, M.A., Ph.D. |
| Author: | hidden - assigned by the advisor |
| Date of registration: | 08.02.2024 |
| Date of assignment: | 08.02.2024 |
| Guidelines |
| This thesis will be prepared in cooperation with Trexima, a company collecting detailed data about firms and their employees. We will compare the level and field of education on employees with their job type. Based on this comparison, we will determine whether the job is a good match or whether an employee is over- or underskilled. Using the information on wages, we will then determine the wage effects of being mismatched. |
| References |
| Bender, K. A., & Roche, K. (2013). Educational mismatch and self-employment. Economics of Education review, 34, 85-95.
Montt, G. (2017). Field-of-study mismatch and overqualification: labour market correlates and their wage penalty. IZA Journal of Labor Economics, 6, 1-20. McGuinness, S., Pouliakas, K., & Redmond, P. (2018). Skills mismatch: Concepts, measurement and policy approaches. Journal of Economic Surveys, 32(4), 985-1015. Nordin, M., Persson, I., & Rooth, D. O. (2010). Education–occupation mismatch: Is there an income penalty?. Economics of education review, 29(6), 1047-1059. Robst, J. (2007a). Education and job match: The relatedness of college major and work. Economics of Education Review, 26(4), 397-407. Robst, J. (2007b). Education, college major, and job match: Gender differences in reasons for mismatch. Education Economics, 15(2), 159-175. Robst, J. (2008). Overeducation and college major: Expanding the definition of mismatch between schooling and jobs. The Manchester School, 76(4), 349-368. Robst, J., & VanGilder, J. (2016). Salary and job satisfaction among economics and business graduates: The effect of match between degree field and job. International Review of Economics Education, 21, 30-40. Sellami, S., Verhaest, D., Nonneman, W., & Van Trier, W. (2017). The impact of educational mismatches on wages: The influence of measurement error and unobserved heterogeneity. The BE Journal of Economic Analysis & Policy, 17(1), 20160055. Sellami, S., Verhaest, D., & Van Trier, W. (2016). How to measure field-of-study mismatch? A comparative analysis of the different methods. Somers, M. A., Cabus, S. J., Groot, W., & van den Brink, H. M. (2019). Horizontal mismatch between employment and field of education: Evidence from a systematic literature review. Journal of Economic Surveys, 33(2), 567-603. Verhaest, D., Sellami, S., & Van der Velden, R. (2017). Differences in horizontal and vertical mismatches across countries and fields of study. International Labour Review, 156(1), 1-23. Zhu, R. (2014). The impact of major–job mismatch on college graduates' early career earnings: Evidence from China. Education Economics, 22(5), 511-528. |
| Preliminary scope of work in English |
| Motivation:
Examining the education-occupation mismatch is one of the essential components for understanding the efficiency and adaptability of the labour market. Previous research divides the mismatch between education and occupation into two phenomena: vertical mismatch, which mostly examines the overeducation (or undereducation) of some individuals for a certain job, and horizontal mismatch, which focuses on investigating whether the worker is employed in his or her field of study (McGuiness et al., 2018; Nordin et al., 2010, Verhaest et al., 2017). The studies on horizontal mismatch have shown that a significant part of young individuals encounters difficulties with finding a job that aligns with their field of study (Verhaest et al., 2017; Robst, 2007a). As a consequence, failing to utilize the skills and knowledge acquired in the studied discipline can affect an individual's effectiveness in the labour market and, perhaps, their salary as well. My thesis will solely focus on the horizontal education-occupation mismatch in the Czech labour market, with the aim to estimate the effect on wages. Wages can naturally be influenced by many aspects ranging from education, skills, experience, industry, location, economic conditions to the size and type of employer. A negative impact on wage was found by Nordin et al. 2010, who compared individuals with the same education. According to the results, mismatched men in Sweden tend to suffer on average a 20% wage penalty compared to well-matched men, for women the proportion was lower at 12%. When comparing individuals with the same occupation and years of schooling, the wage penalty was found to be 7% for both men and women. Other authors (Bender and Roche, 2013; Robst and VanGilder, 2016) also find a substantial negative effect on wage among the horizontally mismatched individuals. Moreover, Somers et al. (2019) show that individuals with more general education experience lower wage penalties compared to those with more occupation-specific education. On the contrary, Sellami et al. (2017) found that the effect of the horizontal education-occupation mismatch on wage may be of a lesser concern than the issue caused by the vertical mismatch. Another study by Montt (2017) adds to this issue and finds that the horizontal mismatch does not need to be regarded as negative in all cases, as vertically matched individuals working in a different field than originally studied do not suffer a significant wage punishment. Zhu (2014) even found that about a third of mismatched young individuals gain a wage premium. Research findings are multifaceted and may often vary based on the chosen mismatch measure, the inclusion of controls for unobserved heterogeneity, measurement error, or, for example, the reasons why the individual accepted the mismatch (potential career growth/promotion, high salary in the industry, job location, family-related motives). (Somers et al., 2019; Robst, 2007a) Understanding the incidence and consequences of this phenomenon is not only academically interesting, but also of great practical importance. Despite significant investment in training, mismatches persist, raising questions about the effectiveness of current workforce planning strategies. By clarifying the economic and social aspects of this mismatch, useful insights for policy makers or even employers and general public can be provided. Hypotheses: In my thesis, I aim to test the following three hypotheses. 1. In the Czech labour market, there is a substantial mismatch between the field of education and the work performed. 2. Mismatched individuals tend to suffer a wage penalty. 3. Individuals with more general education experience a lower wage penalty. Methodology: The main source of data for my analysis will be the data from the Information System on Average Earnings (ISPV). It is a repeated cross-section on all employees of a representative sample of firms operating in the Czech Republic. Firms with more than 250 employees are obliged to provide information on employees, firms with less than 250 employees are selected for the survey. Data from the business sector are collected quarterly, data from the non-business sector semi-annually. The dataset contains basic characteristics about an employee (age, sex, education, etc.) and detailed data on employment (occupation, tenure, hours worked, hourly wage, etc.), together with information on the specific firm (firm size, industry, etc.). Recently, the survey also includes information on the employee's field of education, which is a key element for this analysis. An essential part of the methodology will be to determine when the employee is working outside his or her field of education. The intention is to employ a custom mismatch identification technique that will pair the field of study with the most common occupations among individuals with a degree in that certain field. Individuals working in this paired occupation will be the matched ones; other employees, forming minorities of the occupation's representation among the group of individuals with the same educational background, will be the mismatched ones. For these purposes, a threshold will be required to determine whether an occupation is considered common among a group with the same educational background. I will then calculate how widespread the horizontal mismatch between education and occupation is in the Czech Republic. Subsequently, a regression analysis of the effect of horizontal mismatch on employee wages will be carried out. Since the literature argues that there is no universally accepted measure of mismatch, and simultaneously, the choice of mismatch measure can substantially bias the results (Sellami, 2017), conducting an instrumental variable regression is an adequate way to account for the measurement error. If feasible, an alternative meaningful measure of mismatch (based on some official classification of fields of education and occupations) will be constructed from the data. The results will be reported for that measure as well, providing the analysis with a robustness check. Expected Contribution: The proposed Master’s thesis seeks to make a significant contribution by utilizing new data that form a representative cross-section of the working population in the Czech Republic. This dataset offers a unique opportunity to investigate horizontal education-occupation mismatch comprehensively. By employing aforementioned quantitative methods, the study aims to measure the extent of this mismatch and its implications for workers. Specifically, the focus is on estimating the effect on workers' wages, providing valuable insights into the economic consequences of mismatched employment. Furthermore, this analysis has the potential to reveal broader implications for informed policy decision-making. By identifying fields of education that are more prone to mismatch and occupations with high demand but insufficiently skilled individuals, policymakers can better allocate resources and tailor educational programs to meet the labour market needs. This knowledge is also relevant for designing policies that address skill mismatches, enhance workforce productivity, and promote economic growth. Therefore, the expected contribution of this study extends beyond academic research and contributes to practical policy interventions aimed at improving labour market efficiency and responsiveness. Outline: 1. Introduction and motivation 2. Literature review – thorough review of the existing research addressing this issue and detailed description of the Czech education system 3. Data description 4. Methodology – horizontal mismatch identification technique, regression analysis, robustness checks 5. Results - evaluation of the results and their (non-)compliance with the stated hypotheses 6. Discussion and limitations 7. Conclusion |