Underemployment and employment among young workers and the business cycle in Spain: the importance of education level and specialisation

Abstract

The objective of this paper is to identify the effect of education on young workers’ time-related underemployment as well as analysing whether education has been a defence mechanism against the recent crisis. Especially relevant is the analysis regarding field of study, which has not been addressed in the underemployment literature. Using data from the Spanish Labour Force Survey 2006–2014, bivariate probit selection models are estimated for three different periods. This methodology enables to analyse the evolution of underemployment among young people, simultaneously considering their probability of employment. The results indicate that underemployment is negatively related to education level for each period and tertiary education has smoothed the negative effect of the recession. Moreover, those specialisations that provide students with specific and work-oriented skills (sciences, technology and health) help workers avoid underemployment and enable them to handle the recession better. Conversely, more generally oriented fields (education, and arts and humanities) are associated with a higher probability of underemployment. Similar patterns have been found regarding unemployment, indicating education plays a similar role in both working time shortages.

Keywords:

• Education level
• field of study
• underemployment and employment
• business cycle

Acknowledgment

We would like to thank the reviewer of Journal of Education and Work for her/his helpful comments on the previous draft of this article.

Notes

1. A revision of the literature on unemployment is not provided because it is not the main focus of the article. Moreover, studies on young workers’ unemployment are relatively common (see, for example, Bell and Blanchflower 2011 and Eichhorst, Hinte, and Rinne 2013), while underemployment has received less attention.

2. Exceptionally, Doiron (2003) found that Australian firms experiencing negative demand shocks are less prone to underemploy workers than expanding firms.

3. The data provided by the Ministerio de Empleo y Seguridad Social indicate that the number of workers involved in working time reduction measures started to increase in 2008 (2675 workers), but the dramatic change took place in 2012, when 99,724 workers were affected.

4. García-Pérez and Mestres-Domènech (2016) suggest that 20% of the unemployment reduction observed from March 2012 to December 2015 was due to the Labour Reform.

5. The upper threshold established by the LFS varies across industries to smooth differences in the length of the working day. Thus, a higher threshold in those industries characterised by long working days means underemployment can occur.

6. We establish the lower threshold at 16 years old, since it is the minimum working age in Spain. The upper threshold is set at 34 because if we consider a lower one (29 or 24), the potential experience of university graduates would be very short compared to less qualified workers. Moreover, increasing the sample size enables a more detailed analysis of the impact of specialisation.

7. Before the Bologna Process, the Spanish education system distinguished short-cycle (three years) and long-cycle university degrees (more than three years, usually five). The new degrees under the European Higher Education Area are included as long-cycle programmes.

8. Estimates are available upon request.

9. The marginal effects of the interacted variables are not included in Table 2 for the sake of space, but they are available upon request.

10. Age and area of residence are not included in the underemployment equation; however these variables have an indirect marginal effect on the conditional probability of underemployment due to the bivariate nature of the model.

11. Tenure generates different effects on underemployment by age. Thus, tenure of one year or less has a smaller adverse effect for individuals aged 16 to 19 than for the rest of workers. However, the probability of underemployment tends to decrease with age for workers with tenure longer than one year.

12. Technology includes agriculture and health refers to health and welfare services.

13. Serrano and Soler (2015) find that the positive effect of young workers’ education on unemployment has grown over the economic downturn.

14. The fitted lines in Figure 2 are depicted excluding workers with general education (GE).