Technical Appendix 3: Skills-related underemployment

Researchers have defined skills-related underemployment (or skills underutilisation or overqualification) as a situation of mismatch between the skills needed for a job and the skills available in the labour market, in which the skills an individual possesses surpasses the requirements of a job (Rafferty 2020).Skills-related underemployment is measured by comparing the highest qualification held by an employee with their current occupation (Green and Henseke 2016). In national surveys such as the LFS, this can be measured through a so-called normative approach or a statistical approach (ILO 2014).

We use the normative approach because it allows us to standardise the categories of “overqualified”, “matched” and “underqualified” through time. The normative approach is operationalised as follows:

• Employees’ highest qualification is categorised according to the first digit of the International Standard Classification of Education (ISCED-97) and then classified into three categories. Later, ISCED levels 1 and 2 are assigned as “Low-skilled”, levels 3 and 4 are considered “Intermediate”, and levels 5 and 6 as “High-skilled”.

• Occupations are classified based on the first digit of the International Standard Classification of Occupations (ISCO-88) and categorised into three groups. In this case, occupations with 9 ISCO code are considered “low-skilled”, occupations related to ISCO codes 4, 5, 6, 7 and 8 are assigned to “intermediate” and occupations coded 1, 2 and 3 as “high-skilled”.

• Then, employees are considered as “overeducated” when their educational level is higher to the occupational group of their current job.

References

Green, Francis, and Golo Henseke. 2016. “Should Governments of OECD Countries Worry about Graduate Underemployment?” Oxford Review of Economic Policy 32: 514–37. https://doi.org/10.1093/oxrep/grw024.

———. 2014. “Skills Mismatch in Europe: Statistics Brief.” Geneva: International Labour Organisation. https://www.ilo.org/wcmsp5/groups/public/---dgreports/---stat/documents/publication/wcms_315623.pdf.

Rafferty, Anthony. 2020. “Skill Underutilization and Under-Skilling in Europe: The Role of Workplace Discrimination.” Work, Employment and Society 34 (April): 317–35. https://doi.org/10.1177/0950017019865692.