Summary

Key findings

New Zealand has one of the highest rates of qualification level mismatch in the OECD. This report explores the nature of that mismatch.

People gain qualifications for many reasons, not just to get a job. Employers also hire workers for different reasons, not just for their qualifications. So, there is always going to be some qualification level mismatch. However, high rates of mismatch raise concerns about possible negative effects on workers and employers, and the economy. People may not get the full value from their education, or employers may not get the best skilled people for jobs.

This report uses data from the Survey of Adult Skills. The Survey provides a measure of workers’ views of the usual qualification level currently needed to get their jobs, which can then be compared with their actual qualification level. Mismatch occurs when these are different.

Comparing the survey responses with occupational skill measures suggests that the workers’ views of the qualification levels needed to get their jobs may be lower, on average, than what employers think is needed for the job, particularly for jobs needing qualifications below bachelors level.

This report finds that mismatch was related to a number of characteristics of workers and their jobs. Younger people were more likely to be overqualified, and older people were more likely to be underqualified. Recent immigrants were less likely to be underqualified. Mismatch was also more prevalent in part-time jobs, in casual work and in smaller firms. People in jobs they were underqualified for generally had higher skills than people with the same qualification level working in matched jobs. No, or very little, relationship was found between qualification level mismatch and gender, ethnicity or where people lived.

Mismatched workers were found across all worker and job groups. Differences between workers and their jobs only explained some of the variation in who was over- or underqualified.

A major contributor to the overall rate of mismatch was the difference in the number of people with each qualification level, and the number of jobs needing those qualification levels to enter. In particular, there were more people with Level 4 to 7 non-degree qualifications than jobs that needed this qualification level to enter.

The data doesn’t support the proposal that mismatch was mostly driven by too many people with bachelors degrees and above. People with bachelors degrees and above were more likely to be in a job that matched their qualification level.

Workers got a wage benefit from working in jobs they were underqualified for, and a wage penalty from working in jobs they were overqualified for. However, for jobs that needed the same qualification level to enter, there was no differences in wages between over- and underqualified or matched workers. This suggests that pay is more related to the qualification level needed to get the job, than the qualifications of the people working in the job.

The high rate of overqualification, compared with underqualification, in New Zealand can be beneficial from an employer’s perspective, but a cost from a worker’s perspective. Employers are getting people with higher skills and potentially higher job performance for the same wages, while overqualified workers have less job satisfaction and are paid lower wages than others with the same qualification level.