This blog updates and expands the findings of the Spotlight on Work Statistics issue Education pays off, but you have to be patient and the related blog, focussing on labour underutilization.
Education is a crucial component of sustainable development. It is an enabler of economic growth, labour productivity, human capital gains and social mobility. We have accomplished great progress during the past few decades in our quest for universal access to quality education, although education loss and dropouts associated with school closures and the socioeconomic impact of the pandemic have reversed some of this progress.
During the past few decades, the educational level of the global labour force has steadily increased, with younger generations reaching higher educational levels than older generations. Still, tertiary education remains a privilege available only to a minority all over the world. According to ILO calculations based on data from the ILO Harmonized Microdata Repository, only 7 per cent of people aged 25 to 54 in low-income countries had a tertiary degree in 2023, compared to 16 per cent in lower-middle income countries, 21 per cent in upper-middle income countries, and 46 per cent in high-income countries. In other words, the prevalence of advanced education increases with the level of national income.
Higher education allows people to improve, increase, and diversify their skills, in the hope of getting better jobs and better living conditions in the future. But does education actually pay off? Are highly-educated workers better off in the labour market?
This blog tries to answer these questions, at least partially, by analysing the labour underutilization patterns of people with an advanced and a basic educational level around the world.
Education and labour underutilization: the global picture
In pursuing advanced education, workers may expect to be better prepared for the labour market. They may expect to find a quality job without much delay. However, this is not always the case: highly educated workers can find themselves unemployed or in other forms of labour underutilization, sometimes even for a long time.
At the global level, people with lower secondary education or less represent 52 per cent of the working-age population, but 47 per cent of those in employment, 37 per cent of the unemployed, 54 per cent of the potential labour force, and 57 per cent of those in time-related underemployment. In simpler terms, people with a basic or less than basic educational level are very under-represented amongst the unemployed and somewhat under-represented amongst the employed, but they are over-represented in the potential labour force and time-related underemployment. That is, although they seem to fare rather well in escaping unemployment, this is only masking the other forms of labour underutilization they are disproportionately exposed to: underemployment and quitting the labour force altogether (maybe due to job-search discouragement).
Conversely, at the global level, people with a tertiary degree represent 18 per cent of the working-age population, but 22 per cent of those in employment, 25 per cent of the unemployed, 12 per cent of the potential labour force, and 12 per cent of those in time-related underemployment. Thus, people with an advanced educational level are over-represented amongst the employed and to a greater extent amongst the unemployed, and under-represented in the potential labour force and time-related underemployment. That is, although people with tertiary education fare rather well in accessing employment given their employment figures, when this is not the case, the need or desire for a job is so pressing that they remain in unemployment, the most explicit form of labour underutilization, instead of quitting the labour force altogether by dropping the job search.
Where highly-skilled jobs are scarce it can take a while finding an adequate job matching the expectations, and where the financial and opportunity costs of tertiary education are high, expectations are even higher. If there is no integral strategy for education developed as part of a cohesive planning considering current and future skills needs and labour market opportunities, advanced education can turn into a double-edged sword leading to over-qualification and frustration.
Indeed, a survey conducted in the United States at the end of 2023 revealed that over three quarters of adults in the country thought that getting a college degree was not worth its cost (47 per cent said the cost was worth it only if no loan was required, and 29 per cent said the cost was simply not worth it regardless). About half of interviewed adults (49 per cent) thought it was less important to have a four-year college degree to get a well-paying job then than it was 20 years before. Also, only a quarter of US adults indicated it was extremely or very important to have a college degree to get a well-paying job.
The impact of income levels and labour market configuration on education returns
The level of national income and development greatly influence labour underutilization patterns by educational level, making it necessary to analyse the situation in each income group.
In fact, in high-income countries (and to a lesser extent in upper-middle income countries) people with an advanced educational level have an eased access to employment and they escape rather well all forms of labour underutilization (unemployment, time-related underemployment and the potential labour force).
In these countries, people with a basic or less than basic educational level have a rather difficult time securing a job, and they are greatly exposed to all forms of labour underutilization, but especially to the potential labour force. This suggests that finding an unskilled job is so hard that people with low educational levels cannot even find jobs with less working hours than they would ideally want, nor do they keep up the job-search (presumably because vacancies are so scarce that they got discouraged).
Nevertheless, in low-income and lower-middle income countries, it is exactly the opposite. Jobs which are relatively scarcer are skilled, high-quality ones, while unskilled jobs seem to abound. Therefore, people with a basic or less than basic educational level are proportionately represented in employment, suggesting they have an adequate access to jobs.
They also manage to escape in general terms all forms of labour underutilization, but especially unemployment. Actually, the most common form of labour underutilization for them is time-related underemployment, pointing to the availability of jobs, albeit with insufficient working time.
Contrariwise, people with tertiary education in low- and lower-middle income countries are vastly over-represented among the unemployed, and slightly over-represented within the potential labour force, but largely under-represented in time-related underemployment. This implies that skilled jobs are scarce, or at least not enough to satisfy the desire for work of all tertiary educated people. The desire (or need) for adequate jobs of tertiary-educated people is so strong that they keep at it: they do not quit the job search easily (meaning they remain unemployed rather than joining the potential labour force). This may also suggest that they do have the means to afford keeping at the job search rather than downgrading their expectations and taking up jobs of a lesser quality.
However, although for highly-educated people finding a skilled job of adequate quality meeting their expectations is hard and may take a long time, once they do, it is likely that the quality of that job will be much better than that of jobs held by workers with lower educational levels (including having sufficient working time).
In short, in low-income countries, workers who struggle the most to find suitable jobs are those with an advanced educational level, while in high-income countries, it is those with a basic educational level or less, which is related to differences in labour market structure and employment opportunities.
The heightened labour market hardships of youth
In 2023, according to ILO modelled estimates, over one fifth (around 20.4 per cent) of the world’s youth were not in employment, education or training (NEET). The share of NEET youth increases when the level of national income decreases: in 2023, it stood at 28.7 per cent in low-income countries, 23.2 per cent in lower-middle income countries, 16.6 per cent in upper-middle income countries, and 10.4 per cent in high-income countries.
There is a strong gender pattern in the youth NEET rate, arguably linked to ingrained gendered social norms and the persistent gendered distribution of unpaid care and domestic work. In 2023, while the global youth NEET rate was 13.1 per cent for men, it reached 28.1 per cent for women.
The study of youth NEET rates by educational level available for 163 countries in ILOSTAT show an interesting pattern. The share of youth NEET are higher among those with an advanced educational level than among those with only a basic educational level in 43 per cent of high-income countries with data, 58 per cent of upper-middle income ones, 52 per cent of lower-middle income ones, and 30 per cent of low-income ones.
Headline labour underutilization indicators also convey the labour market hardships of youth, especially highly-educated youth. At the global level, the unemployment rate and more-encompassing labour underutilization measures (covering time-related underemployment and the potential labour force) are higher for young people than the rest, and especially higher for highly-educated young people.
The situation of youth with tertiary degrees in low- and lower-middle income countries is particularly concerning: their unemployment rate is extraordinarily high (39.9 per cent in low-income countries and 36.7 per cent in lower-middle income countries). In fact, the unemployment rate of youth with tertiary education in low- and lower-middle income countries is much higher than that of their counterparts in high- and upper-middle income countries, but also much higher than that of youth with lower educational levels in the same country groups and that of other age groups with the same educational level. That is, highly-educated youth in poor countries are particularly being left behind in the quest for decent work for all.
It is also noteworthy that the (percentual) difference between the unemployment rate and the composite labour underutilization rate (covering unemployment, time-related underemployment, and the potential labour force) is smallest for youth with advanced education in low-income and lower-middle income countries than for all other population groups (other age groups, with other educational levels, in other income groups).
In simpler terms, the desire or need for (suitable) jobs is so pressing for highly educated youth in poor countries that they do not drop the job search, or they are so unwavering in their expectations of job quality that they prefer to keep looking rather than take up any job available. These higher unemployment rates may also suggest that these youth can afford to stay unemployed for longer than workers with basic or less than basic education due to improved access to unemployment benefits, financial support, savings, etc.
Concluding remarks
The relationship between educational levels and labour underutilization is complex and multifaceted. Higher education can (and does) lead to better job opportunities in many contexts, but the returns on education depend on the labour market configuration and the type of jobs available.
This blog focussed on the education returns in access to employment and labour underutilization, but of course, the impact of education should also be assessed in job quality aspects. Indeed, it may take some time for highly educated workers to find a proper job in poorer countries, but once they do, their working conditions are generally better than those of workers with lower educational levels.
Other important elements to factor in relate to the filed of study, the education quality, and the extent of skills mismatch in a given economy.
Maximizing the returns on education and ensuring smooth school-to-work transitions require targeted and effective labour market and education strategies based on evidence, including on skills demand and supply.
