-
Title
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Impact of Limited Education on Employment Prospects in Advanced Economies
-
Author
-
Solga, Heike
-
Research Area
-
Class, Status and Power
-
Topic
-
Social and Economic Inequality
-
Abstract
-
Employment and wage inequalities between educational groups in advanced economies have received much attention in economic and sociological research. Over the past 50 years, the labor market vulnerability of less‐educated workers has increased and will most probably continue to do so unless crucial interventions take place. Foundational research has identified multiple factors that contribute to rising educational disparities in employment prospects. It has focused in particular on demand‐side factors, such as skill supply–demand mismatches, changes in overall job structures, foreign trade, or institutional changes; however, most studies were based on supply‐side data. Cutting edge research has challenged some of these findings by studying recruitment processes, technological changes, and skill distributions, and by using a multidimensional concept of education. Nevertheless, the relative importance of the various factors has yet to be determined. Other key issues for future research involve including women in the analysis, explaining not only differences between educational groups but also differences within the group of less‐educated workers, and studying the impact of variation in competence‐qualification relationships on the employment prospects of less‐educated workers. Research of this nature will require more interdisciplinary cooperation between economists and sociologists and an increase in international comparative studies. Such research will enrich our understanding of how the barriers confronting less‐educated workers in the labor market can be overcome or removed.
-
Related Essays
-
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-
Economics of Early Education (Economics), W. Steven Barnett
-
Returns to Education in Different Labor Market Contexts (Sociology), Klaus Schöemann and Rolf Becker
-
Rent, Rent‐Seeking, and Social Inequality (Sociology), Beth Red Bird and David B. Grusky
-
Shadow Education (Sociology), Soo‐yong Byun and David P. Baker
-
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-
Globalization: Consequences for Work and Employment in Advanced Capitalist Societies (Sociology), Tony Elger
-
State of the Art in Competition Research (Psychology), Márta Fülöp and Gábor Orosz
-
Social Class and Parental Investment in Children (Sociology), Anne H. Gauthier
-
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-
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-
Technology Diffusion (Economics), Adam B. Jaffe
-
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Identifier
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etrds0176
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extracted text
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Impact of Limited Education
on Employment Prospects
in Advanced Economies
HEIKE SOLGA
Abstract
Employment and wage inequalities between educational groups in advanced
economies have received much attention in economic and sociological research.
Over the past 50 years, the labor market vulnerability of less-educated workers has
increased and will most probably continue to do so unless crucial interventions
take place. Foundational research has identified multiple factors that contribute
to rising educational disparities in employment prospects. It has focused in
particular on demand-side factors, such as skill supply–demand mismatches,
changes in overall job structures, foreign trade, or institutional changes; however,
most studies were based on supply-side data. Cutting edge research has challenged some of these findings by studying recruitment processes, technological
changes, and skill distributions, and by using a multidimensional concept of
education. Nevertheless, the relative importance of the various factors has yet to
be determined. Other key issues for future research involve including women in
the analysis, explaining not only differences between educational groups but also
differences within the group of less-educated workers, and studying the impact of
variation in competence-qualification relationships on the employment prospects of
less-educated workers. Research of this nature will require more interdisciplinary
cooperation between economists and sociologists and an increase in international
comparative studies. Such research will enrich our understanding of how the
barriers confronting less-educated workers in the labor market can be overcome or
removed.
INTRODUCTION
Research has repeatedly shown that in advanced societies, employment rates
and wages increase with education, whereas unemployment rates decrease.
Higher educated workers have better chances of finding a (well-paid) job
than less-educated ones. Since the 1970s, the economic prospects of the latter
have worsened, resulting in a significant widening of labor market inequalities between high- and low-skilled labor. Economic recessions, including the
Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
1
2
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
most recent one, have further exacerbated the already disadvantaged labor
market position of the less educated.
Since the 1950s and 1960s, the advanced economies have witnessed a rapid
increase in educational attainment and declining numbers of less-educated
young people. As a consequence, educational expansion has generated
compositional changes of the less-educated group. Since the 1990s, many
countries have experienced a slowing of educational expansion, especially
for young men. There are various causes behind this trend, including the
growing inflow of low-skilled immigrants, school systems insufficiently
engaged in discovering and developing the learning potentials of (the
“remaining”) low-achieving youth, and the vicious circle of experienced
or perceived disadvantage discouraging low-achieving youngsters from
investing in education.
This entry reviews well-established and new research findings in economics and sociology on the continuously growing labor market inequalities
between higher and less-educated workers. Existing work suggests that
multiple factors have contributed to educational disparities in labor market
outcomes in general and the increasing vulnerability of the less-educated in
particular. The final part of this entry identifies important avenues for future
research and their potential for innovative insights.
FOUNDATIONAL RESEARCH
LIMITED EDUCATION
At present, no established definition of “limited education” exists. For
advanced societies, researchers have often used the lowest educational
group, assuming that the skills of this group are too poor for adequate
participation in economic and social life. Recently, following poverty
research, a relative definition of less education has been added. Here, less
education—sometimes also called educational deprivation—is classified as
the education level that falls significantly below the population average.
This population average defines the societal level of education that, in a
given society, serves as the reference point for institutional and welfare state
regulations, labor market organizations, employer expectations, and youth’s
identity formation. According to this approach, the definition of limited
(or less) education crucially depends on social contexts and thus varies
historically and cross-nationally.
Earlier US studies classified individuals who dropped out of high school
as less educated. Today, everyone without a college education is considered less educated. As noted before, besides historical changes, important
cross-national differences exist. In the Netherlands, for instance, researchers
Impact of Limited Education on Employment Prospects in Advanced Economies
3
include all those in the less-educated group who have not completed any
kind of upper secondary program, general or vocational. In Germany,
by contrast, anyone who has not finished at least an upper secondary
vocational education program counts as less-educated. These different
definitions are because of country differences in upper secondary education
systems (providing firm-, industry-specific or general skills) and their
nexus to the institutional organization of labor markets as occupational
(industry-specific) or internal (on-the-job training) systems.
In international comparisons, “less education” is simply classified as having completed less than upper secondary education. Relevant comparative
research has therefore ignored the aforementioned differences in the meaning of being without upper secondary education.
EDUCATIONAL DISPARITIES IN EMPLOYMENT PROSPECTS
There are several theories explaining educational disparities in employment
prospects. Their basic idea is that labor market outcomes are the result of
matching job queues and labor queues. While the former consist of rankings of available jobs by workers, the latter involve employers’ rankings of
job applicants. Thus job placements and wages are produced by supply-side
factors, that is, by individuals’ job preferences (including their investment
in education) and job search behavior, and by demand-side factors, that is,
employers’ preferences, hiring practices, and decisions on production issues.
On the basis of this matching idea, the poor(er) employment prospects of
less-educated people are mainly explained by their lacking the skills required
by employers (human capital theory) or their lacking “educational credentials” as credible signals of learning capabilities and trainability (signaling
theory). On these grounds, less-educated jobseekers are placed at lower ranks
in labor queues or even excluded entirely if their education is deemed insufficient. Other explanations advanced by economists and sociologists include
the sorting hypothesis or the idea of credentials as social entitlements. Here,
educational attainment is seen as a “positional good” in labor markets, legitimizing the meritocratic idea that labor market rewards correspond to individual educational attainment.
All four theoretical approaches help elucidate the phenomenon that
less-educated workers have the poorest employment opportunities in all
advanced societies and that their employment concentrates in the same sectors (agriculture, lower-skilled blue-collar or service jobs). Nonetheless—as
empirical research has shown—their employment prospects do vary over
time and across countries, depending on the labor supply–demand ratio,
the occupational structure, and the meaning attributed to “less education”
by employers and society.
4
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
INCREASING VULNERABILITY OF LESS-EDUCATED PEOPLE
Multiple factors account for the increasing labor market vulnerability of
the less educated, primarily regarding supply-side changes in their group
composition and demand-side shifts in job availability and occupational
structure.
On the supply side, educational expansion has altered selection patterns
into the less-educated group, leading to a real or perceived lowering of
this group’s average level of cognitive and noncognitive skills. In addition,
an impoverishment of this group’s social network resources is observable
(social isolation hypothesis). As in advanced societies, educational attainment still depends on social origin, over time the “remaining” less educated
more often belong to lower social classes, wherever fewer adults with
strong labor market attachment are part of their network. This compositional change has contributed to their decreasing employment prospects
because—as many studies have shown—employers rely heavily on hiring
through informal referrals, especially for low-skilled jobs. Furthermore,
the lack of network resources means that less-educated youngsters receive
very little practical support in the process of application writing. Moreover,
research for the United States has shown that the rising incarceration rate of
young black men—who see crime as an attractive “alternative” to joblessness
and low-wage employment—partly explains the widening employment gap
between the high- and less-educated.
Demand-side factors have received more attention in empirical research
than (sociological) supply-side factors. A first line of research has culminated
in the crowding-out (or displacement) hypothesis. Here, the idea is that
in advanced societies, the pace of educational expansion was faster than
changes in job structures, resulting in a skill mismatch between job and
labor queues. Owing to this mismatch, less-educated workers are crowded
out by higher educated workers (in low-skilled jobs), raising the risk of
over-education in jobs with low skill requirements. Neither of these developments has, however, resulted in decreasing wage differentials between
high and low-skilled workers, as human capital theory would predict. On
the contrary, as mentioned above, we observe increasing wage inequality
between them. Thus, crowding out has predominantly contributed to
increasing educational disparities in getting a (proper) job.
With respect to the wage and employment losses of less-educated workers
over time, a second set of factors is important. Changes in occupational and
sectoral structures have led to declining numbers of low-skilled jobs, especially for men. Major developments generating these changes are increasing
mechanization in agriculture and shifts from (relatively high-paid) manufacturing to service jobs. Furthermore, foreign outsourcing and cheap
Impact of Limited Education on Employment Prospects in Advanced Economies
5
imports have lowered the demand for low-skilled labor in manufacturing
and agriculture—albeit only to a minor extent in many countries. Finally,
business cycles and economic recessions are especially detrimental for
less-educated workers.
A third set of explanatory factors is the movement of jobs out of inner cities,
combined with the well-documented lower geographic mobility among
less-educated workers, ethnic residential segregation, and insufficient public
transportation. Especially in the United States, this spatial mismatch of job
and labor queues has worsened the employment prospects of low-skilled
workers over time.
Fourth, a number of institutional changes have exacerbated educational
inequalities in job security and job quality. Both the growth of temporary staffing and the greater distinction between “core workers” and
“flex-workers” have aggravated the employment situation of low-skilled
workers. In addition, the weakening of collective bargaining and wage
regulations has increased the incidence of low pay. Finally, curtailments of
unemployment benefits, combined with the expansion of in-work benefits
and support for poor families (including increased availability of childcare facilities), have forced more less-educated women into employment,
although mostly in low-wage jobs.
CUTTING EDGE RESEARCH
Recent work has challenged some of these research findings. Foundational research has identified demand-side factors as especially relevant
for less-educated workers’ deteriorating employment prospects. Most
of the analyses are based, however, on individual-level data, in which
labor market placements represent the combined result of supply- and
demand-side factors. Only few studies have directly examined employers’ skills requirements and hiring procedures. These have shown that
less-educated applicants face specific barriers in hiring processes, including:
•
•
•
rising skills requirements, as a result of actually increasing skill needs,
but also used as means to practice discrimination in a politically correct
way,
hiring through (informal) referrals, with the objective to reduce hiring
costs, but also to reproduce the firm’s social composition,
hiring processes with multiple screening stages, which tend to exclude
less-educated applicants right away (based on their written application
documents), making employers less likely to discover differences in
learning potentials and soft-skills among less-educated applicants.
6
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
Moreover, studies by David Autor and colleagues on rising skills requirements and skill-based technological change have uncovered that most
skill upgrading has occurred within, rather than across industries (e.g.,
Acemoglu & Autor, 2010; Autor, 2011). Thus, it is not restricted to unionized
manufacturing industries. Therefore, the decline in manufacturing jobs and
deunionization may have had a smaller effect than previously thought.
Instead, these studies have shown that deskilling as a result of skill-replacing
technologies for routine job tasks, on the one hand, and rising wage premiums for high-skilled (non-routine) tasks, on the other, have intensified the
education-based polarization of employment and wages.
Comparative studies on the relationship between skill distributions,
wage differentials, and employment have challenged another prominent
research finding. In contrast to the conventional wisdom that high wages
push low-skilled workers out of employment, little evidence exists that
country differences in the level of wage compression actually translate into
differences in job creation and the unemployment rates of less-educated
workers. Moreover, research based not only on formal educational attainment but also on competence tests has shown that country differences
in educational wage disparities are related to variations in overall skill
(competence) distributions (Freeman & Schettkat, 2000). Accordingly,
for example, the higher skill compression in Germany compared to the
United States is responsible for Germany’s lower levels of wage inequality
(aside from differences in wage-setting institutions). This focus on skill
distributions also helps explain why employment problems for low-skilled
workers are common in all advanced societies, while the low-wage problem
is not.
In recent years, sociologists have contributed to the research on the labor
market vulnerability of less-educated people by emphasizing a multidimensional understanding of education (e.g., Solga, 2008). Besides education as
human capital (skills) and educational certificates as signals of trainability
or institutionalized job entitlements, they introduced the idea that education
also defines social group memberships (and thereby social networks) and
that educational biographies involve processes of identity formation (which
can lead to self-stigmatization among less-educated people and their withdrawal from labor and training markets). This broader concept of education
allows for integrating multiple explanatory factors for the declining employment prospects of less-educated workers. Furthermore, it draws attention to
previously overlooked factors, such as the causes and consequences of the
waning educational participation of disadvantaged youth and the changing
cultural meaning of “less education.”
Impact of Limited Education on Employment Prospects in Advanced Economies
7
KEY ISSUES FOR FUTURE RESEARCH
It is widely agreed that these multiple factors contribute to the increasing
vulnerability of less-educated people. Yet, for several reasons, their relative
importance remains unclear. First, researchers use different definitions of
“less education,” making comparisons across studies difficult. Second, many
studies investigate only one or two factors, thereby neglecting other decisive
factors. Finally, there is too little historical and internationally comparative
research. Therefore, more multifactor and cross-national studies are needed
in the future.
Moreover, most studies look at differences between educational groups
and pay only little attention to differences within the less-educated group in
terms of composition and outcomes. Yet despite educational expansion, this
group’s compositional heterogeneity may not have diminished over time
(due to, inter alia, the inflow of immigrants or the increasing differentiation
in less-educated youth’s school biographies). Regarding outcomes, the few
studies that do exist have revealed the extent of wage inequality within
the less-educated group to vary across time and countries. Most of these
studies remain rather descriptive. Substantive explanations for differences
in employment and wages between less-educated workers have therefore
yet to be identified by future research.
Furthermore, women are excluded from the analyses in most studies. Yet
by ignoring them, we overlook essential aspects of less-educated workers’
employment prospects, including women’s continuously rising educational
participation, the impact of family formation on the labor market situation
of low-skilled mothers, teenage motherhood as an “attractive alternative”
to employment in low-wage jobs for women, as well as the ways in
which safety-net changes or family policies (such as divorce legislations)
influence the employment participation of low-income and single-headed
families and thereby educational disparities in employment. Moreover,
less-educated immigrants are under-researched in many European countries, even though the problem of rising requirements in writing and math
in lower-skilled service jobs is particularly acute for them. In this context,
we also need more evaluation research in order to develop integrative
and effective education and labor market policies to address this skills
mismatch.
Another very promising area for innovative research is the relationship
between competencies and educational degrees and their distinct impact
on the labor market opportunities of low-skilled workers. This should be
investigated both between and within countries. Initial cross-nationally
comparative studies have revealed that the relationship between degrees
and competencies varies remarkably between advanced societies (e.g.,
8
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
Gesthuizen, Solga & Künster, 2011). Examining this variation can help
disentangle the (relative) effect of poor educational qualifications or skills on
educational disparities in wages and employment. In addition, research is
needed that explicitly focuses on the fact that the nature of educational deprivation varies significantly between countries (lack of firm-, industry-specific,
or general skills), and on how these variations and the corresponding types
of labor market organization (occupational vs internal markets) influence
the success and failure of the less-educated. Regarding the country studies,
investigating the qualification-competence-relationship would also enrich
research. It would draw our attention to recruitment processes and the meaning employers attach to skills requirements and “being less educated.” This
would help clarify why and how educational degrees, as well as cognitive
and noncognitive skills, influence the process of matching persons and job
positions.
CONCLUDING COMMENTS
In many European countries, dramatically contracting birth cohort sizes
have led to the expectation that the trend of rising labor market vulnerability of the less-educated would reverse itself. This is, however, an
unlikely scenario. First, neither the rise in real skills requirements nor
the rise in stigmatization will be affected by changes in supply–demand
ratios. Second, future economic growth will not alleviate the unemployment risk of low-skilled workers, because it will never be strong enough
to trigger sufficient job creation. Moreover, the recent recession and its
negative impact on youth employment, especially among less-educated
youth, will have long-lasting effects—both for the individual (due to scar
effects) and for society (because of the vicious circle of exclusion). Thus
more policy-oriented research is needed to identify “success conditions”
for less-educated individuals’ later entry into training and to effectively
mitigate the negative effects of being less educated on employment and
wages.
REFERENCES
Acemoglu, D. & Autor, D. (2010). Skills, Tasks and Technologies: Implications for Employment and Earnings. NBER Working Paper No. 16082. Retrieved from http://www.
nber.org/papers/w16082
Autor, D. (2011). The Polarization of Job Opportunities in the U.S. Labor Market:
Implications for Employment and Earnings. Community Investment, 23, 11–16.
Retrieved from http://www.frbsf.org/publications/community/investments/
1110/CI_IncomeInequality_Autor.pdf.
Impact of Limited Education on Employment Prospects in Advanced Economies
9
Freeman, R. B. & Schettkat, R. (2000). Skill Compression, Wage Differentials and
Employment: Germany vs. the US. NBER Working Paper No. 7610. Retrieved from
http://www.nber.org/papers/w7610
Gesthuizen, M., Solga, H., & Künster, R. (2011). Context matters: Economic marginalisation of low-educated workers in cross-national perspective. European Sociological Review, 27, 264–280. doi:10.1093/esr/jcq006
Solga, H. (2008). Lack of training. employment opportunities for low-skilled persons
from a sociological and microeconomic perspective. In K. U. Mayer & H. Solga
(Eds.), Skill formation. Interdisciplinary and cross-national perspectives (pp. 173–204).
Cambridge, NY: Cambridge University Press.
FURTHER READING
Borghans, L., & De Grip, A. (Eds.) (2000). The overeducated worker? The economics of
skill utilization. Cheltenham, England: Edgar Elgar.
Bound, J., & Holzer, H. J. (2000). Demand shifts, population adjustments, and labor
market outcomes during the 1980s. Journal of Labor Economics, 18, 20–54.
Card, D., Kramarz, F., & Lemieux, T. (1996). Changes in the Relative Structure of Wages
and Employment: A Comparison of the United States, Canada, and France. NBER Working Paper No. 5487. Retrieved from http://www.nber.org/papers/w5487
Freeman, R. B. (Ed.) (1994). Working under different rules. New York, NY: Russell Sage
Foundation.
Gregory, M., Salverda, W., & Bazen, S. (2000). Labour market inequalities: Problems and
policies of low-wage employment in international perspective. Oxford, England: Oxford
University Press.
Holzer, H. J. (1996). What employers want: Job prospects for less-educated workers. New
York, NY: Russell Sage Foundation.
Krugman, P. & Lawrence, R. (1993). Trade, Jobs, and Wages. NBER Working Paper No.
4478. Retrieved from http://www.nber.org/papers/w4478
Rosenbaum, J. R. (2005). Beyond college for all: Career paths for the forgotten half . New
York, NY: Russell Sage Foundation.
Solga, H. (2002). ‘Stigmatization by negative selection’: Explaining less-educated
people’s decreasing employment opportunities. European Sociological Review, 18,
159–178. doi:10.1093/esr/18.2.159
USEFUL HYPERLINKS
Education at a Glance indicator (OECD): Retrieved from http://www.oecd.org/
edu/educationataglanceindicatorsrawdata.htm
Employment policies and data (OECD): Retrieved from http://www.oecd.org/
els/employmentpoliciesanddata/
OECD (2013). OECD Skills Outlook 2013: First Results from the Survey of Adult Skills.
Paris, France: OECD http://skills.oecd.org/OECD_Skills_Outlook_2013.pdf.
10
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
HEIKE SOLGA SHORT BIOGRAPHY
Heike Solga is director of the research unit “Skill Formation and Labor
markets” at the WZB in Berlin and Professor of Sociology at Freie Universität Berlin. She is involved in the German National Education Panel
Study (NEPS). Solga has written and co-authored numerous books and
articles in the fields of sociology of education, labor market research, and
life course research. Her important (English-language) publications include
Skill formation: Interdisciplinary and cross-national perspectives (2008), “Getting
more unequal: Rising labor market inequalities among low-skilled men
in West Germany” (Research in Social Stratification and Mobility, 2014), Is
the Labor Market Vulnerability of Less-Educated Men Really About Job
Competition? Evidence from the United States. (ZAF – Journal for Labour
Market Research, 2013), and “Context matters: Economic marginalisation of
low-educated workers in cross-national perspective” (European Sociological
Review, 2011). Solga serves on numerous advisory boards (in Germany
and abroad) and has held many offices in German research organizations
(such as the German Science Foundation). She was co-editor of the most
important German sociological journal, Kölner Zeitschrift für Soziologie und
Sozialpsychologie.
Personal webpage: http://www.wzb.eu/en/persons/heike-solga
Curriculum vitae: http://www.wzb.eu/en/persons/heike-solga
Publications: http://www.wzb.eu/en/persons/heike-solga
WZB (Wissenschaftszentrum Berlin für Sozialforschung), Research Unit
“Skill Formation and Labor Markets”: http://www.wzb.eu/en/research/
education-work-and-life-chances/skill-formation-and-labor-markets
RELATED ESSAYS
Learning Across the Life Course (Sociology), Jutta Allmendinger and Marcel
Helbig
Economics of Early Education (Economics), W. Steven Barnett
Returns to Education in Different Labor Market Contexts (Sociology), Klaus
Schöemann and Rolf Becker
Rent, Rent-Seeking, and Social Inequality (Sociology), Beth Red Bird and
David B. Grusky
Shadow Education (Sociology), Soo-yong Byun and David P. Baker
Enduring Effects of Education (Sociology), Matthew Curry and Jennie E.
Brand
Globalization: Consequences for Work and Employment in Advanced
Capitalist Societies (Sociology), Tony Elger
State of the Art in Competition Research (Psychology), Márta Fülöp and
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Impact of Limited Education on Employment Prospects in Advanced Economies
11
Social Class and Parental Investment in Children (Sociology), Anne H.
Gauthier
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(Sociology), Michael Gebel
The Reorganization of Work (Sociology), Charles Heckscher
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Michaela Kreyenfeld
Education for Mobility or Status Reproduction? (Sociology), Karyn Lacy
Political Inequality (Sociology), Jeff Manza
Transformation of the Employment Relationship (Sociology), Arne L. Kalleberg and Peter V. Marsden
Gender Inequality in Educational Attainment (Sociology), Anne McDaniel
and Claudia Buchmann
How Do Labor Market Networks Work? (Sociology), Brian Rubineau and
Roberto M. Fernandez
Sociology of Entrepreneurship (Sociology), Martin Ruef
Education in an Open Informational World (Educ), Marlene Scardamalia
and Carl Bereiter
US Union and Workers’ Movements, Past and Future (Sociology), Daniel
Schneider and Judith Stepan-Norris
Institutional Contexts for Socioeconomic Effects on Schooling Outcomes
(Sociology), Herman G. van de Werfhorst
-
Impact of Limited Education
on Employment Prospects
in Advanced Economies
HEIKE SOLGA
Abstract
Employment and wage inequalities between educational groups in advanced
economies have received much attention in economic and sociological research.
Over the past 50 years, the labor market vulnerability of less-educated workers has
increased and will most probably continue to do so unless crucial interventions
take place. Foundational research has identified multiple factors that contribute
to rising educational disparities in employment prospects. It has focused in
particular on demand-side factors, such as skill supply–demand mismatches,
changes in overall job structures, foreign trade, or institutional changes; however,
most studies were based on supply-side data. Cutting edge research has challenged some of these findings by studying recruitment processes, technological
changes, and skill distributions, and by using a multidimensional concept of
education. Nevertheless, the relative importance of the various factors has yet to
be determined. Other key issues for future research involve including women in
the analysis, explaining not only differences between educational groups but also
differences within the group of less-educated workers, and studying the impact of
variation in competence-qualification relationships on the employment prospects of
less-educated workers. Research of this nature will require more interdisciplinary
cooperation between economists and sociologists and an increase in international
comparative studies. Such research will enrich our understanding of how the
barriers confronting less-educated workers in the labor market can be overcome or
removed.
INTRODUCTION
Research has repeatedly shown that in advanced societies, employment rates
and wages increase with education, whereas unemployment rates decrease.
Higher educated workers have better chances of finding a (well-paid) job
than less-educated ones. Since the 1970s, the economic prospects of the latter
have worsened, resulting in a significant widening of labor market inequalities between high- and low-skilled labor. Economic recessions, including the
Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
1
2
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
most recent one, have further exacerbated the already disadvantaged labor
market position of the less educated.
Since the 1950s and 1960s, the advanced economies have witnessed a rapid
increase in educational attainment and declining numbers of less-educated
young people. As a consequence, educational expansion has generated
compositional changes of the less-educated group. Since the 1990s, many
countries have experienced a slowing of educational expansion, especially
for young men. There are various causes behind this trend, including the
growing inflow of low-skilled immigrants, school systems insufficiently
engaged in discovering and developing the learning potentials of (the
“remaining”) low-achieving youth, and the vicious circle of experienced
or perceived disadvantage discouraging low-achieving youngsters from
investing in education.
This entry reviews well-established and new research findings in economics and sociology on the continuously growing labor market inequalities
between higher and less-educated workers. Existing work suggests that
multiple factors have contributed to educational disparities in labor market
outcomes in general and the increasing vulnerability of the less-educated in
particular. The final part of this entry identifies important avenues for future
research and their potential for innovative insights.
FOUNDATIONAL RESEARCH
LIMITED EDUCATION
At present, no established definition of “limited education” exists. For
advanced societies, researchers have often used the lowest educational
group, assuming that the skills of this group are too poor for adequate
participation in economic and social life. Recently, following poverty
research, a relative definition of less education has been added. Here, less
education—sometimes also called educational deprivation—is classified as
the education level that falls significantly below the population average.
This population average defines the societal level of education that, in a
given society, serves as the reference point for institutional and welfare state
regulations, labor market organizations, employer expectations, and youth’s
identity formation. According to this approach, the definition of limited
(or less) education crucially depends on social contexts and thus varies
historically and cross-nationally.
Earlier US studies classified individuals who dropped out of high school
as less educated. Today, everyone without a college education is considered less educated. As noted before, besides historical changes, important
cross-national differences exist. In the Netherlands, for instance, researchers
Impact of Limited Education on Employment Prospects in Advanced Economies
3
include all those in the less-educated group who have not completed any
kind of upper secondary program, general or vocational. In Germany,
by contrast, anyone who has not finished at least an upper secondary
vocational education program counts as less-educated. These different
definitions are because of country differences in upper secondary education
systems (providing firm-, industry-specific or general skills) and their
nexus to the institutional organization of labor markets as occupational
(industry-specific) or internal (on-the-job training) systems.
In international comparisons, “less education” is simply classified as having completed less than upper secondary education. Relevant comparative
research has therefore ignored the aforementioned differences in the meaning of being without upper secondary education.
EDUCATIONAL DISPARITIES IN EMPLOYMENT PROSPECTS
There are several theories explaining educational disparities in employment
prospects. Their basic idea is that labor market outcomes are the result of
matching job queues and labor queues. While the former consist of rankings of available jobs by workers, the latter involve employers’ rankings of
job applicants. Thus job placements and wages are produced by supply-side
factors, that is, by individuals’ job preferences (including their investment
in education) and job search behavior, and by demand-side factors, that is,
employers’ preferences, hiring practices, and decisions on production issues.
On the basis of this matching idea, the poor(er) employment prospects of
less-educated people are mainly explained by their lacking the skills required
by employers (human capital theory) or their lacking “educational credentials” as credible signals of learning capabilities and trainability (signaling
theory). On these grounds, less-educated jobseekers are placed at lower ranks
in labor queues or even excluded entirely if their education is deemed insufficient. Other explanations advanced by economists and sociologists include
the sorting hypothesis or the idea of credentials as social entitlements. Here,
educational attainment is seen as a “positional good” in labor markets, legitimizing the meritocratic idea that labor market rewards correspond to individual educational attainment.
All four theoretical approaches help elucidate the phenomenon that
less-educated workers have the poorest employment opportunities in all
advanced societies and that their employment concentrates in the same sectors (agriculture, lower-skilled blue-collar or service jobs). Nonetheless—as
empirical research has shown—their employment prospects do vary over
time and across countries, depending on the labor supply–demand ratio,
the occupational structure, and the meaning attributed to “less education”
by employers and society.
4
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
INCREASING VULNERABILITY OF LESS-EDUCATED PEOPLE
Multiple factors account for the increasing labor market vulnerability of
the less educated, primarily regarding supply-side changes in their group
composition and demand-side shifts in job availability and occupational
structure.
On the supply side, educational expansion has altered selection patterns
into the less-educated group, leading to a real or perceived lowering of
this group’s average level of cognitive and noncognitive skills. In addition,
an impoverishment of this group’s social network resources is observable
(social isolation hypothesis). As in advanced societies, educational attainment still depends on social origin, over time the “remaining” less educated
more often belong to lower social classes, wherever fewer adults with
strong labor market attachment are part of their network. This compositional change has contributed to their decreasing employment prospects
because—as many studies have shown—employers rely heavily on hiring
through informal referrals, especially for low-skilled jobs. Furthermore,
the lack of network resources means that less-educated youngsters receive
very little practical support in the process of application writing. Moreover,
research for the United States has shown that the rising incarceration rate of
young black men—who see crime as an attractive “alternative” to joblessness
and low-wage employment—partly explains the widening employment gap
between the high- and less-educated.
Demand-side factors have received more attention in empirical research
than (sociological) supply-side factors. A first line of research has culminated
in the crowding-out (or displacement) hypothesis. Here, the idea is that
in advanced societies, the pace of educational expansion was faster than
changes in job structures, resulting in a skill mismatch between job and
labor queues. Owing to this mismatch, less-educated workers are crowded
out by higher educated workers (in low-skilled jobs), raising the risk of
over-education in jobs with low skill requirements. Neither of these developments has, however, resulted in decreasing wage differentials between
high and low-skilled workers, as human capital theory would predict. On
the contrary, as mentioned above, we observe increasing wage inequality
between them. Thus, crowding out has predominantly contributed to
increasing educational disparities in getting a (proper) job.
With respect to the wage and employment losses of less-educated workers
over time, a second set of factors is important. Changes in occupational and
sectoral structures have led to declining numbers of low-skilled jobs, especially for men. Major developments generating these changes are increasing
mechanization in agriculture and shifts from (relatively high-paid) manufacturing to service jobs. Furthermore, foreign outsourcing and cheap
Impact of Limited Education on Employment Prospects in Advanced Economies
5
imports have lowered the demand for low-skilled labor in manufacturing
and agriculture—albeit only to a minor extent in many countries. Finally,
business cycles and economic recessions are especially detrimental for
less-educated workers.
A third set of explanatory factors is the movement of jobs out of inner cities,
combined with the well-documented lower geographic mobility among
less-educated workers, ethnic residential segregation, and insufficient public
transportation. Especially in the United States, this spatial mismatch of job
and labor queues has worsened the employment prospects of low-skilled
workers over time.
Fourth, a number of institutional changes have exacerbated educational
inequalities in job security and job quality. Both the growth of temporary staffing and the greater distinction between “core workers” and
“flex-workers” have aggravated the employment situation of low-skilled
workers. In addition, the weakening of collective bargaining and wage
regulations has increased the incidence of low pay. Finally, curtailments of
unemployment benefits, combined with the expansion of in-work benefits
and support for poor families (including increased availability of childcare facilities), have forced more less-educated women into employment,
although mostly in low-wage jobs.
CUTTING EDGE RESEARCH
Recent work has challenged some of these research findings. Foundational research has identified demand-side factors as especially relevant
for less-educated workers’ deteriorating employment prospects. Most
of the analyses are based, however, on individual-level data, in which
labor market placements represent the combined result of supply- and
demand-side factors. Only few studies have directly examined employers’ skills requirements and hiring procedures. These have shown that
less-educated applicants face specific barriers in hiring processes, including:
•
•
•
rising skills requirements, as a result of actually increasing skill needs,
but also used as means to practice discrimination in a politically correct
way,
hiring through (informal) referrals, with the objective to reduce hiring
costs, but also to reproduce the firm’s social composition,
hiring processes with multiple screening stages, which tend to exclude
less-educated applicants right away (based on their written application
documents), making employers less likely to discover differences in
learning potentials and soft-skills among less-educated applicants.
6
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
Moreover, studies by David Autor and colleagues on rising skills requirements and skill-based technological change have uncovered that most
skill upgrading has occurred within, rather than across industries (e.g.,
Acemoglu & Autor, 2010; Autor, 2011). Thus, it is not restricted to unionized
manufacturing industries. Therefore, the decline in manufacturing jobs and
deunionization may have had a smaller effect than previously thought.
Instead, these studies have shown that deskilling as a result of skill-replacing
technologies for routine job tasks, on the one hand, and rising wage premiums for high-skilled (non-routine) tasks, on the other, have intensified the
education-based polarization of employment and wages.
Comparative studies on the relationship between skill distributions,
wage differentials, and employment have challenged another prominent
research finding. In contrast to the conventional wisdom that high wages
push low-skilled workers out of employment, little evidence exists that
country differences in the level of wage compression actually translate into
differences in job creation and the unemployment rates of less-educated
workers. Moreover, research based not only on formal educational attainment but also on competence tests has shown that country differences
in educational wage disparities are related to variations in overall skill
(competence) distributions (Freeman & Schettkat, 2000). Accordingly,
for example, the higher skill compression in Germany compared to the
United States is responsible for Germany’s lower levels of wage inequality
(aside from differences in wage-setting institutions). This focus on skill
distributions also helps explain why employment problems for low-skilled
workers are common in all advanced societies, while the low-wage problem
is not.
In recent years, sociologists have contributed to the research on the labor
market vulnerability of less-educated people by emphasizing a multidimensional understanding of education (e.g., Solga, 2008). Besides education as
human capital (skills) and educational certificates as signals of trainability
or institutionalized job entitlements, they introduced the idea that education
also defines social group memberships (and thereby social networks) and
that educational biographies involve processes of identity formation (which
can lead to self-stigmatization among less-educated people and their withdrawal from labor and training markets). This broader concept of education
allows for integrating multiple explanatory factors for the declining employment prospects of less-educated workers. Furthermore, it draws attention to
previously overlooked factors, such as the causes and consequences of the
waning educational participation of disadvantaged youth and the changing
cultural meaning of “less education.”
Impact of Limited Education on Employment Prospects in Advanced Economies
7
KEY ISSUES FOR FUTURE RESEARCH
It is widely agreed that these multiple factors contribute to the increasing
vulnerability of less-educated people. Yet, for several reasons, their relative
importance remains unclear. First, researchers use different definitions of
“less education,” making comparisons across studies difficult. Second, many
studies investigate only one or two factors, thereby neglecting other decisive
factors. Finally, there is too little historical and internationally comparative
research. Therefore, more multifactor and cross-national studies are needed
in the future.
Moreover, most studies look at differences between educational groups
and pay only little attention to differences within the less-educated group in
terms of composition and outcomes. Yet despite educational expansion, this
group’s compositional heterogeneity may not have diminished over time
(due to, inter alia, the inflow of immigrants or the increasing differentiation
in less-educated youth’s school biographies). Regarding outcomes, the few
studies that do exist have revealed the extent of wage inequality within
the less-educated group to vary across time and countries. Most of these
studies remain rather descriptive. Substantive explanations for differences
in employment and wages between less-educated workers have therefore
yet to be identified by future research.
Furthermore, women are excluded from the analyses in most studies. Yet
by ignoring them, we overlook essential aspects of less-educated workers’
employment prospects, including women’s continuously rising educational
participation, the impact of family formation on the labor market situation
of low-skilled mothers, teenage motherhood as an “attractive alternative”
to employment in low-wage jobs for women, as well as the ways in
which safety-net changes or family policies (such as divorce legislations)
influence the employment participation of low-income and single-headed
families and thereby educational disparities in employment. Moreover,
less-educated immigrants are under-researched in many European countries, even though the problem of rising requirements in writing and math
in lower-skilled service jobs is particularly acute for them. In this context,
we also need more evaluation research in order to develop integrative
and effective education and labor market policies to address this skills
mismatch.
Another very promising area for innovative research is the relationship
between competencies and educational degrees and their distinct impact
on the labor market opportunities of low-skilled workers. This should be
investigated both between and within countries. Initial cross-nationally
comparative studies have revealed that the relationship between degrees
and competencies varies remarkably between advanced societies (e.g.,
8
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
Gesthuizen, Solga & Künster, 2011). Examining this variation can help
disentangle the (relative) effect of poor educational qualifications or skills on
educational disparities in wages and employment. In addition, research is
needed that explicitly focuses on the fact that the nature of educational deprivation varies significantly between countries (lack of firm-, industry-specific,
or general skills), and on how these variations and the corresponding types
of labor market organization (occupational vs internal markets) influence
the success and failure of the less-educated. Regarding the country studies,
investigating the qualification-competence-relationship would also enrich
research. It would draw our attention to recruitment processes and the meaning employers attach to skills requirements and “being less educated.” This
would help clarify why and how educational degrees, as well as cognitive
and noncognitive skills, influence the process of matching persons and job
positions.
CONCLUDING COMMENTS
In many European countries, dramatically contracting birth cohort sizes
have led to the expectation that the trend of rising labor market vulnerability of the less-educated would reverse itself. This is, however, an
unlikely scenario. First, neither the rise in real skills requirements nor
the rise in stigmatization will be affected by changes in supply–demand
ratios. Second, future economic growth will not alleviate the unemployment risk of low-skilled workers, because it will never be strong enough
to trigger sufficient job creation. Moreover, the recent recession and its
negative impact on youth employment, especially among less-educated
youth, will have long-lasting effects—both for the individual (due to scar
effects) and for society (because of the vicious circle of exclusion). Thus
more policy-oriented research is needed to identify “success conditions”
for less-educated individuals’ later entry into training and to effectively
mitigate the negative effects of being less educated on employment and
wages.
REFERENCES
Acemoglu, D. & Autor, D. (2010). Skills, Tasks and Technologies: Implications for Employment and Earnings. NBER Working Paper No. 16082. Retrieved from http://www.
nber.org/papers/w16082
Autor, D. (2011). The Polarization of Job Opportunities in the U.S. Labor Market:
Implications for Employment and Earnings. Community Investment, 23, 11–16.
Retrieved from http://www.frbsf.org/publications/community/investments/
1110/CI_IncomeInequality_Autor.pdf.
Impact of Limited Education on Employment Prospects in Advanced Economies
9
Freeman, R. B. & Schettkat, R. (2000). Skill Compression, Wage Differentials and
Employment: Germany vs. the US. NBER Working Paper No. 7610. Retrieved from
http://www.nber.org/papers/w7610
Gesthuizen, M., Solga, H., & Künster, R. (2011). Context matters: Economic marginalisation of low-educated workers in cross-national perspective. European Sociological Review, 27, 264–280. doi:10.1093/esr/jcq006
Solga, H. (2008). Lack of training. employment opportunities for low-skilled persons
from a sociological and microeconomic perspective. In K. U. Mayer & H. Solga
(Eds.), Skill formation. Interdisciplinary and cross-national perspectives (pp. 173–204).
Cambridge, NY: Cambridge University Press.
FURTHER READING
Borghans, L., & De Grip, A. (Eds.) (2000). The overeducated worker? The economics of
skill utilization. Cheltenham, England: Edgar Elgar.
Bound, J., & Holzer, H. J. (2000). Demand shifts, population adjustments, and labor
market outcomes during the 1980s. Journal of Labor Economics, 18, 20–54.
Card, D., Kramarz, F., & Lemieux, T. (1996). Changes in the Relative Structure of Wages
and Employment: A Comparison of the United States, Canada, and France. NBER Working Paper No. 5487. Retrieved from http://www.nber.org/papers/w5487
Freeman, R. B. (Ed.) (1994). Working under different rules. New York, NY: Russell Sage
Foundation.
Gregory, M., Salverda, W., & Bazen, S. (2000). Labour market inequalities: Problems and
policies of low-wage employment in international perspective. Oxford, England: Oxford
University Press.
Holzer, H. J. (1996). What employers want: Job prospects for less-educated workers. New
York, NY: Russell Sage Foundation.
Krugman, P. & Lawrence, R. (1993). Trade, Jobs, and Wages. NBER Working Paper No.
4478. Retrieved from http://www.nber.org/papers/w4478
Rosenbaum, J. R. (2005). Beyond college for all: Career paths for the forgotten half . New
York, NY: Russell Sage Foundation.
Solga, H. (2002). ‘Stigmatization by negative selection’: Explaining less-educated
people’s decreasing employment opportunities. European Sociological Review, 18,
159–178. doi:10.1093/esr/18.2.159
USEFUL HYPERLINKS
Education at a Glance indicator (OECD): Retrieved from http://www.oecd.org/
edu/educationataglanceindicatorsrawdata.htm
Employment policies and data (OECD): Retrieved from http://www.oecd.org/
els/employmentpoliciesanddata/
OECD (2013). OECD Skills Outlook 2013: First Results from the Survey of Adult Skills.
Paris, France: OECD http://skills.oecd.org/OECD_Skills_Outlook_2013.pdf.
10
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
HEIKE SOLGA SHORT BIOGRAPHY
Heike Solga is director of the research unit “Skill Formation and Labor
markets” at the WZB in Berlin and Professor of Sociology at Freie Universität Berlin. She is involved in the German National Education Panel
Study (NEPS). Solga has written and co-authored numerous books and
articles in the fields of sociology of education, labor market research, and
life course research. Her important (English-language) publications include
Skill formation: Interdisciplinary and cross-national perspectives (2008), “Getting
more unequal: Rising labor market inequalities among low-skilled men
in West Germany” (Research in Social Stratification and Mobility, 2014), Is
the Labor Market Vulnerability of Less-Educated Men Really About Job
Competition? Evidence from the United States. (ZAF – Journal for Labour
Market Research, 2013), and “Context matters: Economic marginalisation of
low-educated workers in cross-national perspective” (European Sociological
Review, 2011). Solga serves on numerous advisory boards (in Germany
and abroad) and has held many offices in German research organizations
(such as the German Science Foundation). She was co-editor of the most
important German sociological journal, Kölner Zeitschrift für Soziologie und
Sozialpsychologie.
Personal webpage: http://www.wzb.eu/en/persons/heike-solga
Curriculum vitae: http://www.wzb.eu/en/persons/heike-solga
Publications: http://www.wzb.eu/en/persons/heike-solga
WZB (Wissenschaftszentrum Berlin für Sozialforschung), Research Unit
“Skill Formation and Labor Markets”: http://www.wzb.eu/en/research/
education-work-and-life-chances/skill-formation-and-labor-markets
RELATED ESSAYS
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Impact of Limited Education on Employment Prospects in Advanced Economies
11
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and Carl Bereiter
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(Sociology), Herman G. van de Werfhorst
Impact of Limited Education
on Employment Prospects
in Advanced Economies
HEIKE SOLGA
Abstract
Employment and wage inequalities between educational groups in advanced
economies have received much attention in economic and sociological research.
Over the past 50 years, the labor market vulnerability of less-educated workers has
increased and will most probably continue to do so unless crucial interventions
take place. Foundational research has identified multiple factors that contribute
to rising educational disparities in employment prospects. It has focused in
particular on demand-side factors, such as skill supply–demand mismatches,
changes in overall job structures, foreign trade, or institutional changes; however,
most studies were based on supply-side data. Cutting edge research has challenged some of these findings by studying recruitment processes, technological
changes, and skill distributions, and by using a multidimensional concept of
education. Nevertheless, the relative importance of the various factors has yet to
be determined. Other key issues for future research involve including women in
the analysis, explaining not only differences between educational groups but also
differences within the group of less-educated workers, and studying the impact of
variation in competence-qualification relationships on the employment prospects of
less-educated workers. Research of this nature will require more interdisciplinary
cooperation between economists and sociologists and an increase in international
comparative studies. Such research will enrich our understanding of how the
barriers confronting less-educated workers in the labor market can be overcome or
removed.
INTRODUCTION
Research has repeatedly shown that in advanced societies, employment rates
and wages increase with education, whereas unemployment rates decrease.
Higher educated workers have better chances of finding a (well-paid) job
than less-educated ones. Since the 1970s, the economic prospects of the latter
have worsened, resulting in a significant widening of labor market inequalities between high- and low-skilled labor. Economic recessions, including the
Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
1
2
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
most recent one, have further exacerbated the already disadvantaged labor
market position of the less educated.
Since the 1950s and 1960s, the advanced economies have witnessed a rapid
increase in educational attainment and declining numbers of less-educated
young people. As a consequence, educational expansion has generated
compositional changes of the less-educated group. Since the 1990s, many
countries have experienced a slowing of educational expansion, especially
for young men. There are various causes behind this trend, including the
growing inflow of low-skilled immigrants, school systems insufficiently
engaged in discovering and developing the learning potentials of (the
“remaining”) low-achieving youth, and the vicious circle of experienced
or perceived disadvantage discouraging low-achieving youngsters from
investing in education.
This entry reviews well-established and new research findings in economics and sociology on the continuously growing labor market inequalities
between higher and less-educated workers. Existing work suggests that
multiple factors have contributed to educational disparities in labor market
outcomes in general and the increasing vulnerability of the less-educated in
particular. The final part of this entry identifies important avenues for future
research and their potential for innovative insights.
FOUNDATIONAL RESEARCH
LIMITED EDUCATION
At present, no established definition of “limited education” exists. For
advanced societies, researchers have often used the lowest educational
group, assuming that the skills of this group are too poor for adequate
participation in economic and social life. Recently, following poverty
research, a relative definition of less education has been added. Here, less
education—sometimes also called educational deprivation—is classified as
the education level that falls significantly below the population average.
This population average defines the societal level of education that, in a
given society, serves as the reference point for institutional and welfare state
regulations, labor market organizations, employer expectations, and youth’s
identity formation. According to this approach, the definition of limited
(or less) education crucially depends on social contexts and thus varies
historically and cross-nationally.
Earlier US studies classified individuals who dropped out of high school
as less educated. Today, everyone without a college education is considered less educated. As noted before, besides historical changes, important
cross-national differences exist. In the Netherlands, for instance, researchers
Impact of Limited Education on Employment Prospects in Advanced Economies
3
include all those in the less-educated group who have not completed any
kind of upper secondary program, general or vocational. In Germany,
by contrast, anyone who has not finished at least an upper secondary
vocational education program counts as less-educated. These different
definitions are because of country differences in upper secondary education
systems (providing firm-, industry-specific or general skills) and their
nexus to the institutional organization of labor markets as occupational
(industry-specific) or internal (on-the-job training) systems.
In international comparisons, “less education” is simply classified as having completed less than upper secondary education. Relevant comparative
research has therefore ignored the aforementioned differences in the meaning of being without upper secondary education.
EDUCATIONAL DISPARITIES IN EMPLOYMENT PROSPECTS
There are several theories explaining educational disparities in employment
prospects. Their basic idea is that labor market outcomes are the result of
matching job queues and labor queues. While the former consist of rankings of available jobs by workers, the latter involve employers’ rankings of
job applicants. Thus job placements and wages are produced by supply-side
factors, that is, by individuals’ job preferences (including their investment
in education) and job search behavior, and by demand-side factors, that is,
employers’ preferences, hiring practices, and decisions on production issues.
On the basis of this matching idea, the poor(er) employment prospects of
less-educated people are mainly explained by their lacking the skills required
by employers (human capital theory) or their lacking “educational credentials” as credible signals of learning capabilities and trainability (signaling
theory). On these grounds, less-educated jobseekers are placed at lower ranks
in labor queues or even excluded entirely if their education is deemed insufficient. Other explanations advanced by economists and sociologists include
the sorting hypothesis or the idea of credentials as social entitlements. Here,
educational attainment is seen as a “positional good” in labor markets, legitimizing the meritocratic idea that labor market rewards correspond to individual educational attainment.
All four theoretical approaches help elucidate the phenomenon that
less-educated workers have the poorest employment opportunities in all
advanced societies and that their employment concentrates in the same sectors (agriculture, lower-skilled blue-collar or service jobs). Nonetheless—as
empirical research has shown—their employment prospects do vary over
time and across countries, depending on the labor supply–demand ratio,
the occupational structure, and the meaning attributed to “less education”
by employers and society.
4
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
INCREASING VULNERABILITY OF LESS-EDUCATED PEOPLE
Multiple factors account for the increasing labor market vulnerability of
the less educated, primarily regarding supply-side changes in their group
composition and demand-side shifts in job availability and occupational
structure.
On the supply side, educational expansion has altered selection patterns
into the less-educated group, leading to a real or perceived lowering of
this group’s average level of cognitive and noncognitive skills. In addition,
an impoverishment of this group’s social network resources is observable
(social isolation hypothesis). As in advanced societies, educational attainment still depends on social origin, over time the “remaining” less educated
more often belong to lower social classes, wherever fewer adults with
strong labor market attachment are part of their network. This compositional change has contributed to their decreasing employment prospects
because—as many studies have shown—employers rely heavily on hiring
through informal referrals, especially for low-skilled jobs. Furthermore,
the lack of network resources means that less-educated youngsters receive
very little practical support in the process of application writing. Moreover,
research for the United States has shown that the rising incarceration rate of
young black men—who see crime as an attractive “alternative” to joblessness
and low-wage employment—partly explains the widening employment gap
between the high- and less-educated.
Demand-side factors have received more attention in empirical research
than (sociological) supply-side factors. A first line of research has culminated
in the crowding-out (or displacement) hypothesis. Here, the idea is that
in advanced societies, the pace of educational expansion was faster than
changes in job structures, resulting in a skill mismatch between job and
labor queues. Owing to this mismatch, less-educated workers are crowded
out by higher educated workers (in low-skilled jobs), raising the risk of
over-education in jobs with low skill requirements. Neither of these developments has, however, resulted in decreasing wage differentials between
high and low-skilled workers, as human capital theory would predict. On
the contrary, as mentioned above, we observe increasing wage inequality
between them. Thus, crowding out has predominantly contributed to
increasing educational disparities in getting a (proper) job.
With respect to the wage and employment losses of less-educated workers
over time, a second set of factors is important. Changes in occupational and
sectoral structures have led to declining numbers of low-skilled jobs, especially for men. Major developments generating these changes are increasing
mechanization in agriculture and shifts from (relatively high-paid) manufacturing to service jobs. Furthermore, foreign outsourcing and cheap
Impact of Limited Education on Employment Prospects in Advanced Economies
5
imports have lowered the demand for low-skilled labor in manufacturing
and agriculture—albeit only to a minor extent in many countries. Finally,
business cycles and economic recessions are especially detrimental for
less-educated workers.
A third set of explanatory factors is the movement of jobs out of inner cities,
combined with the well-documented lower geographic mobility among
less-educated workers, ethnic residential segregation, and insufficient public
transportation. Especially in the United States, this spatial mismatch of job
and labor queues has worsened the employment prospects of low-skilled
workers over time.
Fourth, a number of institutional changes have exacerbated educational
inequalities in job security and job quality. Both the growth of temporary staffing and the greater distinction between “core workers” and
“flex-workers” have aggravated the employment situation of low-skilled
workers. In addition, the weakening of collective bargaining and wage
regulations has increased the incidence of low pay. Finally, curtailments of
unemployment benefits, combined with the expansion of in-work benefits
and support for poor families (including increased availability of childcare facilities), have forced more less-educated women into employment,
although mostly in low-wage jobs.
CUTTING EDGE RESEARCH
Recent work has challenged some of these research findings. Foundational research has identified demand-side factors as especially relevant
for less-educated workers’ deteriorating employment prospects. Most
of the analyses are based, however, on individual-level data, in which
labor market placements represent the combined result of supply- and
demand-side factors. Only few studies have directly examined employers’ skills requirements and hiring procedures. These have shown that
less-educated applicants face specific barriers in hiring processes, including:
•
•
•
rising skills requirements, as a result of actually increasing skill needs,
but also used as means to practice discrimination in a politically correct
way,
hiring through (informal) referrals, with the objective to reduce hiring
costs, but also to reproduce the firm’s social composition,
hiring processes with multiple screening stages, which tend to exclude
less-educated applicants right away (based on their written application
documents), making employers less likely to discover differences in
learning potentials and soft-skills among less-educated applicants.
6
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
Moreover, studies by David Autor and colleagues on rising skills requirements and skill-based technological change have uncovered that most
skill upgrading has occurred within, rather than across industries (e.g.,
Acemoglu & Autor, 2010; Autor, 2011). Thus, it is not restricted to unionized
manufacturing industries. Therefore, the decline in manufacturing jobs and
deunionization may have had a smaller effect than previously thought.
Instead, these studies have shown that deskilling as a result of skill-replacing
technologies for routine job tasks, on the one hand, and rising wage premiums for high-skilled (non-routine) tasks, on the other, have intensified the
education-based polarization of employment and wages.
Comparative studies on the relationship between skill distributions,
wage differentials, and employment have challenged another prominent
research finding. In contrast to the conventional wisdom that high wages
push low-skilled workers out of employment, little evidence exists that
country differences in the level of wage compression actually translate into
differences in job creation and the unemployment rates of less-educated
workers. Moreover, research based not only on formal educational attainment but also on competence tests has shown that country differences
in educational wage disparities are related to variations in overall skill
(competence) distributions (Freeman & Schettkat, 2000). Accordingly,
for example, the higher skill compression in Germany compared to the
United States is responsible for Germany’s lower levels of wage inequality
(aside from differences in wage-setting institutions). This focus on skill
distributions also helps explain why employment problems for low-skilled
workers are common in all advanced societies, while the low-wage problem
is not.
In recent years, sociologists have contributed to the research on the labor
market vulnerability of less-educated people by emphasizing a multidimensional understanding of education (e.g., Solga, 2008). Besides education as
human capital (skills) and educational certificates as signals of trainability
or institutionalized job entitlements, they introduced the idea that education
also defines social group memberships (and thereby social networks) and
that educational biographies involve processes of identity formation (which
can lead to self-stigmatization among less-educated people and their withdrawal from labor and training markets). This broader concept of education
allows for integrating multiple explanatory factors for the declining employment prospects of less-educated workers. Furthermore, it draws attention to
previously overlooked factors, such as the causes and consequences of the
waning educational participation of disadvantaged youth and the changing
cultural meaning of “less education.”
Impact of Limited Education on Employment Prospects in Advanced Economies
7
KEY ISSUES FOR FUTURE RESEARCH
It is widely agreed that these multiple factors contribute to the increasing
vulnerability of less-educated people. Yet, for several reasons, their relative
importance remains unclear. First, researchers use different definitions of
“less education,” making comparisons across studies difficult. Second, many
studies investigate only one or two factors, thereby neglecting other decisive
factors. Finally, there is too little historical and internationally comparative
research. Therefore, more multifactor and cross-national studies are needed
in the future.
Moreover, most studies look at differences between educational groups
and pay only little attention to differences within the less-educated group in
terms of composition and outcomes. Yet despite educational expansion, this
group’s compositional heterogeneity may not have diminished over time
(due to, inter alia, the inflow of immigrants or the increasing differentiation
in less-educated youth’s school biographies). Regarding outcomes, the few
studies that do exist have revealed the extent of wage inequality within
the less-educated group to vary across time and countries. Most of these
studies remain rather descriptive. Substantive explanations for differences
in employment and wages between less-educated workers have therefore
yet to be identified by future research.
Furthermore, women are excluded from the analyses in most studies. Yet
by ignoring them, we overlook essential aspects of less-educated workers’
employment prospects, including women’s continuously rising educational
participation, the impact of family formation on the labor market situation
of low-skilled mothers, teenage motherhood as an “attractive alternative”
to employment in low-wage jobs for women, as well as the ways in
which safety-net changes or family policies (such as divorce legislations)
influence the employment participation of low-income and single-headed
families and thereby educational disparities in employment. Moreover,
less-educated immigrants are under-researched in many European countries, even though the problem of rising requirements in writing and math
in lower-skilled service jobs is particularly acute for them. In this context,
we also need more evaluation research in order to develop integrative
and effective education and labor market policies to address this skills
mismatch.
Another very promising area for innovative research is the relationship
between competencies and educational degrees and their distinct impact
on the labor market opportunities of low-skilled workers. This should be
investigated both between and within countries. Initial cross-nationally
comparative studies have revealed that the relationship between degrees
and competencies varies remarkably between advanced societies (e.g.,
8
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
Gesthuizen, Solga & Künster, 2011). Examining this variation can help
disentangle the (relative) effect of poor educational qualifications or skills on
educational disparities in wages and employment. In addition, research is
needed that explicitly focuses on the fact that the nature of educational deprivation varies significantly between countries (lack of firm-, industry-specific,
or general skills), and on how these variations and the corresponding types
of labor market organization (occupational vs internal markets) influence
the success and failure of the less-educated. Regarding the country studies,
investigating the qualification-competence-relationship would also enrich
research. It would draw our attention to recruitment processes and the meaning employers attach to skills requirements and “being less educated.” This
would help clarify why and how educational degrees, as well as cognitive
and noncognitive skills, influence the process of matching persons and job
positions.
CONCLUDING COMMENTS
In many European countries, dramatically contracting birth cohort sizes
have led to the expectation that the trend of rising labor market vulnerability of the less-educated would reverse itself. This is, however, an
unlikely scenario. First, neither the rise in real skills requirements nor
the rise in stigmatization will be affected by changes in supply–demand
ratios. Second, future economic growth will not alleviate the unemployment risk of low-skilled workers, because it will never be strong enough
to trigger sufficient job creation. Moreover, the recent recession and its
negative impact on youth employment, especially among less-educated
youth, will have long-lasting effects—both for the individual (due to scar
effects) and for society (because of the vicious circle of exclusion). Thus
more policy-oriented research is needed to identify “success conditions”
for less-educated individuals’ later entry into training and to effectively
mitigate the negative effects of being less educated on employment and
wages.
REFERENCES
Acemoglu, D. & Autor, D. (2010). Skills, Tasks and Technologies: Implications for Employment and Earnings. NBER Working Paper No. 16082. Retrieved from http://www.
nber.org/papers/w16082
Autor, D. (2011). The Polarization of Job Opportunities in the U.S. Labor Market:
Implications for Employment and Earnings. Community Investment, 23, 11–16.
Retrieved from http://www.frbsf.org/publications/community/investments/
1110/CI_IncomeInequality_Autor.pdf.
Impact of Limited Education on Employment Prospects in Advanced Economies
9
Freeman, R. B. & Schettkat, R. (2000). Skill Compression, Wage Differentials and
Employment: Germany vs. the US. NBER Working Paper No. 7610. Retrieved from
http://www.nber.org/papers/w7610
Gesthuizen, M., Solga, H., & Künster, R. (2011). Context matters: Economic marginalisation of low-educated workers in cross-national perspective. European Sociological Review, 27, 264–280. doi:10.1093/esr/jcq006
Solga, H. (2008). Lack of training. employment opportunities for low-skilled persons
from a sociological and microeconomic perspective. In K. U. Mayer & H. Solga
(Eds.), Skill formation. Interdisciplinary and cross-national perspectives (pp. 173–204).
Cambridge, NY: Cambridge University Press.
FURTHER READING
Borghans, L., & De Grip, A. (Eds.) (2000). The overeducated worker? The economics of
skill utilization. Cheltenham, England: Edgar Elgar.
Bound, J., & Holzer, H. J. (2000). Demand shifts, population adjustments, and labor
market outcomes during the 1980s. Journal of Labor Economics, 18, 20–54.
Card, D., Kramarz, F., & Lemieux, T. (1996). Changes in the Relative Structure of Wages
and Employment: A Comparison of the United States, Canada, and France. NBER Working Paper No. 5487. Retrieved from http://www.nber.org/papers/w5487
Freeman, R. B. (Ed.) (1994). Working under different rules. New York, NY: Russell Sage
Foundation.
Gregory, M., Salverda, W., & Bazen, S. (2000). Labour market inequalities: Problems and
policies of low-wage employment in international perspective. Oxford, England: Oxford
University Press.
Holzer, H. J. (1996). What employers want: Job prospects for less-educated workers. New
York, NY: Russell Sage Foundation.
Krugman, P. & Lawrence, R. (1993). Trade, Jobs, and Wages. NBER Working Paper No.
4478. Retrieved from http://www.nber.org/papers/w4478
Rosenbaum, J. R. (2005). Beyond college for all: Career paths for the forgotten half . New
York, NY: Russell Sage Foundation.
Solga, H. (2002). ‘Stigmatization by negative selection’: Explaining less-educated
people’s decreasing employment opportunities. European Sociological Review, 18,
159–178. doi:10.1093/esr/18.2.159
USEFUL HYPERLINKS
Education at a Glance indicator (OECD): Retrieved from http://www.oecd.org/
edu/educationataglanceindicatorsrawdata.htm
Employment policies and data (OECD): Retrieved from http://www.oecd.org/
els/employmentpoliciesanddata/
OECD (2013). OECD Skills Outlook 2013: First Results from the Survey of Adult Skills.
Paris, France: OECD http://skills.oecd.org/OECD_Skills_Outlook_2013.pdf.
10
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
HEIKE SOLGA SHORT BIOGRAPHY
Heike Solga is director of the research unit “Skill Formation and Labor
markets” at the WZB in Berlin and Professor of Sociology at Freie Universität Berlin. She is involved in the German National Education Panel
Study (NEPS). Solga has written and co-authored numerous books and
articles in the fields of sociology of education, labor market research, and
life course research. Her important (English-language) publications include
Skill formation: Interdisciplinary and cross-national perspectives (2008), “Getting
more unequal: Rising labor market inequalities among low-skilled men
in West Germany” (Research in Social Stratification and Mobility, 2014), Is
the Labor Market Vulnerability of Less-Educated Men Really About Job
Competition? Evidence from the United States. (ZAF – Journal for Labour
Market Research, 2013), and “Context matters: Economic marginalisation of
low-educated workers in cross-national perspective” (European Sociological
Review, 2011). Solga serves on numerous advisory boards (in Germany
and abroad) and has held many offices in German research organizations
(such as the German Science Foundation). She was co-editor of the most
important German sociological journal, Kölner Zeitschrift für Soziologie und
Sozialpsychologie.
Personal webpage: http://www.wzb.eu/en/persons/heike-solga
Curriculum vitae: http://www.wzb.eu/en/persons/heike-solga
Publications: http://www.wzb.eu/en/persons/heike-solga
WZB (Wissenschaftszentrum Berlin für Sozialforschung), Research Unit
“Skill Formation and Labor Markets”: http://www.wzb.eu/en/research/
education-work-and-life-chances/skill-formation-and-labor-markets
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