RETURNS TO EDUCATION: WHAT DOES OVER-EDUCATION PLAY

  • Zainizam Zakariya Universiti Pendidikan Sultan Idris
Keywords: Over-education, Required education, Surplus education

Abstract

This paper attempts to study returns to education by taking into account of the quality of jobs match held by workers in the manufacturing sector of Malaysia. This type of study is quite rare not only in the country but also across developing nations. Using the second Malaysia Productivity Investment Climate Survey (PICS-2), nearly 20% and 30% of workers employed in jobs for which they are overeducated and undereducated, respectively. Further findings indicate that Over-education is more acute amongst highly-educated workers whilst under-education is more evident for lowly educated workers. By gender, women have a higher proportion of overeducated workers compared to men. Consequently, over-education leads to a lower productivity in terms of earnings. The augmented Mincer earnings equation, i.e. the ORU model clearly show that although returns to surplus education was positive (So), the return was lower than the returns to required education (Sr), approximately 6% against 10%. This means that overeducated workers earn significantly lower than their co-workers who are in similar jobs but who have less education, but well matched. Moreover, the ORU model signified that returns to required education was much greater than returns to actual educational attainment. All of these imply that the rate of return to education depends on the allocation of skills over jobs where earnings is not fully embodied but is (partly) determined by job characteristics and/or by the quality of the match between skills supplied by the worker and skills required by the job. Nevertheless, the situation of over-education among highly educated workers in the Malaysian labour market may impede the country’s intention to move towards the state of being a highincome country, as outlined in the “New Economic Model” blueprint since it reduces individuals’ productivity.

Downloads

Download data is not yet available.

References

Abbas, Q. (2008). Over-education and Under-education and their effects on Earnings: Evidence from Pakistan, 1998–2004. SAARC Journal on Human Resource Development, 109‒125.

Abdul Aziz, U., Buan, S.W., Hock, L.K., and Sanyal B.,K. (1988). University education and employment in Malaysia. IIEP Research Report No. 66. International Institute for Educational Planning.

Alba-Ramírez, A. (1993). Mismatch in the Spanish labor market: Overeducation? The Journal of Human Resources, 28(2), 259–278.

Allen, J., & van der Velden, R. (2001). Educational mismatches versus skill mismatches: Effects on wages, job satisfaction, and on-the-job search. Oxford Economic Papers, 53(3), 434‒452.

Annie, M. W., and Hamali, J. (2006). Higher education and employment in Malaysia. International Journal of Business and Society,7(1), 66–76.

Battu, H. (2007). Overeducation amongst the young in the OECD: A Review. OECD Commissioned Report.

Becker, G. (1964). Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education. New York: Columbia University Press.

Cheong, K.C., Selvaratnam, V., and Goh, K.M. (2011). ‘Education and Human Capital Formation’. In Rasiah, R. (eds), Malaysian Economy: Unfolding Growth and Social Change. Kuala Lumpur: Oxford University Press.

Gallup, J.L. (1997). Ethnicity and Earnings in Malaysia. HIID Development Discussion Paper No. 593, 1997.

Groot, W. (1996). The incidence of, and returns to overeducation in the UK. Applied Economics, 28(10), 1345‒1350.

Groot, W., and Maassen Van Den Brink, H. (2000). Overeducation in the labor market: A metaanalysis. Economics of Education Review, 19(2), 149–158

Groot, W. and Maassen van den Brink, H. (1997). Allocation and the Returns to Over-education in the UK. Education Economics, 5(2),169–183.

Hartog, J., and Oosterbeek, H. (1988). Education, allocation and earnings in the Netherlands: 0verschooling? Economics of Education Review, 7(2), 185‒194.

Hartog, J. (2000). Over-education and earnings: Where are we, where should we go? Economicsof Education Review, 19(2), 131–147.

Ishak, Y., Rahmah, I., and Robiah, S. (2008). Graduate and Employment: The case of UKM’s graduates. Akademika, 72(January), 3‒24.

Kiker, B. F., Santos, M. C., and De Oliveira, M. (1997). Overeducation and undereducation: Evidence for Portugal. Economics of Education Review, 16(2), 111–125.

Leuven, E., and Oosterbeek, H. (2011). Overeducation and mismatch in the labor market. Discussion Paper No. 5523. Bonn, Germany: IZA.

Lim, H. E., Rich, J., and Harris, M. N. (2008). Employment outcomes of graduates: The case of Universiti Utara, Malaysia. Asian Economic Journal, 22(3), 321‒341.

McGuinness, S. (2006). Overeducation in the labour market. Journal of Economic Surveys, 20(3), 387–418.

Mehta, A., Felipe, J., Quising, P., and Camingue, S. (2011). Overeducation in developing economies: How can we test for it, and what does it mean?Economics of Education Review, 30(6), 1334–1347.

Mincer, J. A. (1974). Schooling, experience, and earnings. National Bureau of Economic Research (NBER). New York: Columbia University Press.

Ministry of Higher Education. (2010). National Higher Education Action Plan, 2007-2010. Kuala Lumpur.

Morshidi, S., M., Buang, A. A., Mohd Isa, A. M., Padian, A., Abdullah, M.A., Ibrahim, M.D.,Piei, M.H., Lee, M.N.N., Shuib, M., Bakar, R., Mustafa, R., Abdul Rahman, S., A Hamid,S.Z., Ching Mey, S.S., and Mahmood, W.A.K. (2004). The problem of unemployed Among Graduate (Masalah Pengangguran di Kalangan Siswazah). Unpublished. Penang: National Higher Education Institute.

National Economic Advisory Council (NEAC). (2009). New economic model. Kuala Lumpur: Percetakan Nasional Berhad.

Quinn, M. A., and Rubb, S. (2006). Mexico’s labor market: The importance of educationoccupation matching on wages and productivity in developing countries. Economics of Education Review, 25(2), 147‒156.

Rahmah, I., and Ragayah, H. M. Z. (2003). Earnings differentials determinants between skills in the Malaysian manufacturing sector. Asian Economic Journal, 17(4), 325–340.

Rohana, Jani.,Zubiri, Y.Z., and Abu Bakarm M.Y. (2009). Employability Profiles of Graduate 2006-2008: The Malaysian Scenario. Paper presented at the Fifth QS Asia Pacific Professional Leaders in Education Conference and Exhibition. Kuala Lumpur, 24‒26 Nov 2009.

Sattinger, M. (1993). Assignment models of the distribution of earnings. Journal of Economic Literature, 31(2), 831–880.

Sicherman, N. and Galor, O. (1991). Overeducation in the labor market. Journal of Labor Economics. 9, 101‒22.

Sloane, P. J., Battu, H., and Seaman, P. T. (1999). Overeducation, undereducation and the British labour market. Applied Economics, 31(11), 1437–1453.

Thurow, L. C. (1975). Generating Inequality: Mechanism of distribution in the U.S. economy. New York: Basic Book Inc.

United Nation Development Programme (UNDP) (2009). Human Development Report. New York: UNDP.

World Bank. (2009). Malaysia productivity and investment climate assessment update. No.49137-MY. Washington, DC: The World Bank.
Published
2019-03-06
How to Cite
Zakariya, Z. (2019). RETURNS TO EDUCATION: WHAT DOES OVER-EDUCATION PLAY. Journal of Contemporary Issues and Thought, 3, 138-155. Retrieved from https://ejournal.upsi.edu.my/index.php/JCIT/article/view/993