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Underemployment – A negative impact on future pay research finds

In recent years, the number of people graduating from higher education has increased rapidly all over the world. In most countries, however, this increase in labor supply quality has not been followed by an equal rise in labor demand, leading to a larger mismatch on the labor market for graduate students. The current turbulent state of the economy and the enduring economic crisis further disturb flexibility on the labor market. Graduates are therefore increasingly confronted with the risk of underemployment, i.e. employment which is, in some way, of inferior quality than could be expected given one’s educational level, skills or experience. Underemployment has been associated with all sorts of negative connotations, such as being inadequately employed, underutilized, overeducated, overqualified, and over-skilled.

This study examines the impact of three types of underemployment, i.e. level underemployment, content underemployment and contingent employment, on subsequent objective (i.e. salary) and subjective career success (i.e. job satisfaction) using a 10-year longitudinal dataset with 335 Dutch university graduates. Thanks to our longitudinal design, we were able to examine the impact of preceding underemployment and the speci c timing of the underemployment in one’s career, in that way explicitly addressing the role of time in career success research.

We tested our hypotheses through multilevel analyses. Level and contingent underemployment, but not content underemployment, were found to have a negative impact on future pay; whereas content employment, but not level or contingent underemployment, were found to affect job satisfaction five years later. In addition, for one type of underemployment (i.e., level underemployment), also the timing of the underemployment turned out to matter, indicating that the signal that level underemployment sends to employers may differ depending on when in one’s career it happens. Taken together, these findings point to the importance of using a path-dependency perspective when trying to understand people’s career success.

Our study shows that accepting an underemployed job is not without risks for young graduates. Indeed, underemployment in the first years after graduation may impact graduates’ salary and job satisfaction up till 10 years after graduation. Even if individuals succeed to make the transition to a more suitable job afterwards, part of the differences in wage and job satisfaction seem to sustain. It is therefore important to make graduates aware of these consequences; only then can they make careful and well-thought-through first career choices. Of course, this study does not provide a complete picture of the consequences of early career underemployment. We only looked at two consequences of underemployment, i.e. lower pay and less job satisfaction, and did not include potential positive outcomes, such as a shorter job search duration. Indeed, it is likely that there is a trade-off between the speed of finding employment and the quality of this employment (Baert et al., 2012). For graduates to make truly informed early career choices, more information is needed about this trade-off and about the longer term career paths and outcomes of opting for underemployment versus extending one’s job search to find more suitable employment.

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Chosen excerpts by Job Market Monitor. Read the whole story at Does early-career underemployment impact future career success?: a path dependency perspective

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