The utilisation of education and skills: evidence from Britain

This paper assesses how far the products of education are utilized in the British labour market, and how utilization has recently changed. We distinguish the concepts of ‘under–education’, ‘over–education’ and ‘qualification inflation’. Using data from four surveys we find that over–education, while substantial, has been stable since the mid–1980s. Although observed over–education is partly associated with low ability compared with one’s educational peers, both over–education and skill under–utilization are also associated with mismatch in the labour market, and both involve a loss of wages. We conclude that, in order to inform policy, education and skill utilization should be closely monitored.