Skills in Demand? Higher Education and Social Investment in Europe

Scholars have vigorously debated what has caused recent shifts in employment structure and wage returns across advanced industrial countries, with debate often falling along a technology versus globalization split. However, recent studies have argued that much of the action in overall income inequality emerges from differences within occupations rather than between them, and that the returns to skill may not always represent effective use of human capital. We argue that the ‘massification’ of higher education across the OECD has starkly different impacts on occupational structure and returns depending on countries’ institutional environment. We identify four ideal types in terms of the employment prospects and premia associated with higher education: credentialism, mismatch, social investment, and ‘winner take all’. We use employment and wage data drawn from the ECHP and SILC datasets to demonstrate these patterns. We conclude by examining individual survey data drawn from the ESS, examining the effects of graduate skill mismatch on employment and policy attitudes.