Effects of Tertiary Expansion

This paper examines crowding-out effects and the labour market match for the tertiary educated in 26 OECD countries, using attainment data and data on labour market outcomes from Education at a Glance 2006. A first-difference approach is applied on a three-period, pooled country-panel to examine the effects of changes in tertiary attainment levels against changes in labour market outcomes over time. The policy questions in this paper focus on the potential negative short-term effects that mismatches between the supply of and demand for higher-educated individuals might bring about. There is no evidence in the current data suggesting any crowding-out effects of lower-educated from higher-educated individuals. On the contrary, there seems to be positive employment effects for individuals with less education in countries expanding their tertiary education. Labour market outcomes for the upper secondary educated appears to be less influenced by the expansion of tertiary education, but there is no indication that tertiary educated individuals, on average, are displacing (crowding out) upper secondary educated individuals from the labour market. Similarly, the job market for the tertiary educated appears to be little influenced by the expansion of tertiary education. There are some indications that relative unemployment (relative to upper secondary) for the tertiary educated has been diluted to some extent, but this appears to be more related to the upper secondary educated, relatively speaking, strengthening their labour market positions vis-à-vis tertiary educated individuals in general. The earnings advantage (premium) for tertiary educated individuals in comparison with upper secondary educated individuals is still on the rise, which suggests that, on the whole, demand outstrips supply in most countries.