Consider the following conditions :
a) College graduates are facing high unemployment.
b) Employers are able to hire college graduates for jobs that require a high school degree (low skill job) because many college graduates apply for these type of jobs.
c) High school graduates face high unemployment because the jobs that they can fill are taken by college graduates.
d) High school graduates feel compelled to go to college because they see that even low skill jobs are given to college graduates. With a college degree at least they will have a shot at low skill jobs. Without a college degree they are more likely to end up unemployed.
When the above four conditions are present in a society we say that it is trapped in an over-education equilibrium. The excess supply of college graduates will become a permanent phenomena and a large portion of high school graduates fall into this over-education trap.
The most obvious sign of an overeducation trap is the persistence of overeducation as a socioeconomic condition. Empirical research has shown that in the United States the early signs of overeducation emerged in 1960s and ever since overeducation has been a persistent condition with varying degrees.
Are there any solutions: The experience of many countries such as South Korea or the United States show that when a country is stuck in the over education trap it is very difficult to escape. Government intervention in the higher education industry might be needed. Any policy that affects any of the four conditions of over-education (listed above) can be helpful. Here are a few policies that might be helpful However these suggestions require careful and thorough scientific investigation.
A) Government should impose a penalty on employers that hire overqualified job applicants when adequately educated applicants are available. In other words, if adequate education for a position is a high school degree, an employer that offers this position to a college graduate must face a penalty. This policy will improve the labor market for less educated job seekers and reduce their incentive to fall into the over-education trap.
B) Impose aggregate limits on admissions for each degree based on projected needs for university graduates in each specific field in the long run. At present the American Medical Association regulates the admission to medical schools and the licensing of foreign applicants for medical jobs in the United States. Through these measures AMA is able to avoid oversupply of physicians and maintain high incomes for its members. (This practice is not always beneficial to society but it prevents the type of over education in medical professions that has surfaced in may countries. While AMA entry restrictions have reduced the supply below socially desirable level, lack of entry restrictions in many university fields of study has increased the supply above desired levels.