Since 2000, the number of college graduates in Portugal has almost doubled. This has been accompanied by changes in the labour market, such as a decreasing wage premium for young graduates. The incidence of overeducation is also high.
In collaboration with Isabel Araújo (Universidade Lusíada and ISCAP) and José Verónico (MARKINO), Anabela Carneiro has investigated the effects of educational mismatches on early career performance of 1st and 2nd cycle graduates. The authors rely on the Quadros de Pessoal database to study over 15,000 individuals entering the Portuguese labour market in the crisis-stricken years of 2010 and 2011. The authors tracked their wages and job mobility over a period of 7 years.
The study’s sharpest results are on the consequences of vertical mismatches, which occur when the level of education of the employee is different than the modal level of education in the country-wide stock of employees with a similar occupation. According to Anabela, ‘about 40% of graduates entered the labour market overeducated, and around 44% of those remained overeducated’ for the period of analysis. The consequences are significant: the latter suffered a wage penalty ranging between 13.9% and 16.2% when compared to employees that were always vertically well-matched. Further, they ‘were less likely to switch jobs than similar workers.’
Still, there was an overall ‘low degree of job mobility in young graduates’ early career: 44% of the graduates did not perform any job change while employed in the private sector during the 2010-2018 period.’ Even if the phenomenon is well-known, its magnitude surprised Anabela, who notices that ‘there is far less job mobility in Portugal than in other countries.’
The authors also found that those continuously overeducated are overrepresented among females, foreigners, individuals employed in the Lisbon Metropolitan Area, or graduates in specific fields, such as the Humanities, Arts, or the Social Sciences, Business and Law. Yet, as Anabela highlights, ‘it makes more sense than ever to control for unobserved individual characteristics, given that the pool of graduates is increasingly heterogeneous.' This is a motivation for future research.