Overqualification on the rise among recent graduates: Report

Can lead to lower levels of job satisfaction, higher turnover rates
By Liz Foster
|Canadian HR Reporter|Last Updated: 12/11/2015

Years of late-night study sessions, essays and exams go into each undergraduate degree.


But those efforts may not be paying off like they used to — a growing population of recent graduates are overqualified for their jobs, according to a report from Canada’s Office of the Parliamentary Budget Officer (PBO).


In 2014, about 140,000 or 56 per cent of recent university graduates aged 24 or younger were overqualified; roughly 65 per cent were either overqualified or unemployed. Among university graduates aged 25 to 34, about 600,000 or 40 per cent were overqualified in 2014.


“Our report did not explicitly look at the consequences of overqualification for employers but we would expect some costs,” said assistant parliamentary budget officer Mostafa Askari. “Overqualified workers may face lower levels of job satisfaction and attachment, which could increase turnover rates for employers. The overqualification means that resources may have not been allocated efficiently.” 


Additionally, the rate of recent graduates working in jobs that match their education level has dropped, found the report, which used educational attainment as the sole measure of qualification. It did not account for factors such as experience or labour demand. 


“We would expect work experience to have an impact on job qualification because it could add to a worker’s qualification,” he said. “For this reason, we focused on younger university graduates where education is relatively more important than for older workers. Regarding labour market demand, we would expect that to have an impact as well but we were not able to find satisfactory data to evaluate its impact.” 


College graduates, however, have fared better. Their overqualification rate dropped from 37 per cent in 2006 to 34 per cent in 2014. And the proportion of recent college graduates who were rightly qualified for their jobs rose from 45 per cent in 1998 to 50 per cent in 2014. 


“While we do not have data for demand for college degrees, this could be a factor in lower qualification rates as it reduces the likelihood of excess supply in the market for college graduates,” said Askari. “Moreover, college graduates mostly specialize in skilled trade or industries that require certification, therefore limited overqualification.” 


Demand was a key factor in the issue of overqualification, according to the report. Among the recent university graduates who reported having more education than was required for their current position, not being able to find the job they wanted and not being able to wait for the job they wanted were the two most popular explanations. 


Using data from Statistics Canada, the report showed the majority of overqualified employees were found in business management and public administration, social and behavioural sciences and law, and humanities. 


“We sought to provide additional information on labour utilization that may not be captured by typical indicators for younger workers,” said Askari. 


“It indicates that there is an issue of matching educational attainment with job requirements, which may have policy implications in terms of ensuring that university programs be congruent with job market requirements.”   


The PBO assessed qualification from the federal government’s Labour Force Survey. This methodology makes the report compatible with other commonly reported labour market data, such as the unemployment rate. The survey data has a significant history, said Askari, and could be tracked moving forward. 


Recruitment issues

Overqualification is often an issue raised during the recruitment process, said Rowan O’Grady, president of the Toronto-based recruitment agency Hays Canada.


“Employers are concerned about engaging with an overqualified candidate because their number one fear is that the individual will leave as soon as a more senior opportunity becomes available.” 


Other concerns about overqualified candidates include their expectations for higher levels of compensation and lower engagement levels. 


“Employers are often concerned that the individual would get bored in this job because it’s not challenging,” he said. “That can be a frustrating situation for the candidate, if they’ve been looking for a job for awhile and here’s a job they know they can do, and actually because of their experience it’s a job they could easily do, but they’re being rejected because of all these concerns. That’s a difficult thing to deal with.” 


An adjustment in perception would do wonders for the issues of unemployment and underemployment, said Berrin Erdogan, a fellow at the Society for Industrial and Organizational Psychology (SIOP) in Portland, Ore. 


“I truly believe that overqualification gets an overly negative perception in the minds of managers,” she said. “It’s very easy to dismiss these employees, to think they’re a flight risk, but I think organizations can benefit a lot from hiring the best person they can have for their current and future needs. I think there are a lot of advantages.” 


Overqualification for a position can lead to resentment, frustration and anger, said Erdogan, and it has been negatively linked to engagement, retention, job satisfaction and company attachment. However, it’s possible to mitigate these consequences, she said.


“There are ways to hire overqualified people but then immunize your organization against its harmful effects.” 


An honest conversation about expectations is crucial. Discussing the realities of the role and how it could expand — and allowing the employee to influence the scope of the position — create a sense of empowerment, said Erdogan. And a sense of autonomy can significantly mitigate against the negative consequences of overqualification.


“They can be a bargain to hire. The company is hiring somebody with greater skills while staying within their budget. You’re getting more for your money.”


That investment can pay off later, said Erdogan. 


“These employees are meeting the current needs of the organization but they also have the potential to meet the future needs of the organization as well. It is typically the most effective way to grow your own talent rather than acquire it from the outside. So, if your company is growing, if there’s going to be growth opportunity within the company, these employees can actually be great future employees as well as current employees. 


“You can feed into the talent pipeline and they can become the future leaders of the business.” 

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