The Overqualified Worker Problem

Americans are increasingly taking jobs that deviate backwards from their career path. That's not good.

In these tough times, many unemployed Americans are feeling forced to settle for jobs well below their experience level and pay grade. The New York Times has an article about this today, using several such new hires as examples of workers who are overqualified for their jobs. This is a pretty serious problem for the economy for a few reasons.

First, I should mention a little more about the Times article. It is by no means an exhaustive or compelling argument that overqualified workers are invading job openings everywhere. In fact, it essentially relies on two workers' stories and a few interviews at one of the firms where its main character, Don Carroll, works. It would have been nice to see the Times talk to some head hunters, temp agencies or large firms' HR departments for more concrete data. But to be fair, statistics showing the overqualified worker problem are very hard to come by. I checked, and the Bureau of Labor Statistics has nothing that could help.

But since the contention seems fairly obvious, given the turmoil in the labor market, let's take it for granted that many Americans are feeling compelled to take jobs for which they're overqualified. Carroll is a former financial analyst with an MBA from a "top university" who now works a job which had a posting specifying "bachelor's degree preferred but not required." Why is it such a problem when people like Carroll are willing to take whatever they can get?

Less Qualified Workers

First, it's bad for the workers with weaker resumes who are more appropriately qualified for these jobs. This is especially worrisome for younger workers or recent graduates. It will stunt their career development. Many managers would jump at the chance to hire someone with 10 years experience for an entry-level job. Training will certainly be much easier. It's hard to imagine performance wouldn't be better too, as long as you weed out anyone with a chip on their shoulder from being too qualified.

That leaves workers with shorter experience or less-developed skills out of the work force for an extended period of time. Indeed, this data from a recent Gallup poll appears to indicate this pretty clearly, regarding education level:

gallup 2010-03-26.gif

As you can see, underemployment and unemployment are much higher for those with less education. If the labor recovery is painfully slow, then these Americans will suffer disproportionally. That might suggest education and job training programs should be getting more attention from Washington.

Slower U.S. Growth

Second, it's bad for the broader U.S. economy when Americans take jobs below their experience level. With more workers failing to work at their greatest potential, the nation's economy won't flourish to the same extent it would if employment better reflected workers' experience levels. Stunting the experience of less-experienced workers has the same effect. Combined, these factors will cause the economy to essentially take a step backward.

In theory, this could end up having a muted effect. There aren't currently job openings for highly qualified workers in some industries, which is why they're settling for lower-level positions. But once those jobs return, these workers may choose to leave the jobs they held during the recession for which they were overqualified. In many cases, I'm sure they will try. But they will now be competing with other workers with their same experience level who hadn't been laid off and hadn't taken jobs that took them off their career path. So it may prove difficult for these workers to get back on track, even when more appropriate jobs for their experience become available.

This overqualified workers problem is another reason why this recession will be long-felt. Some damage to the labor market will be permanent, even though most jobs lost will eventually return.