http://www.iser.essex.ac.uk/publications/working-papers/iser/2009-17

In the ongoing debate concerning the tightened job competition among the highly educated, the question of the effects on wages of the increased supply of highly educated workers has been raised. The empirical evidence of the deterioration of the position of university graduates in the labour market is, however, weak and not straightforward (e.g., Sicherman, 1991; van Ours and Ridder, 1995; Battu et al., 1999; Gautier et al., 2002; Chevalier, 2003; Cardoso, 2007; Gottschalk and Hansen, 2003; Grazier et al., 2008). This study takes part in the debate by concentrating on the dependence between the wages of the highly educated and the intensity of the job competition among them; i.e., we examine how the increased job search among the highly educated affects their wages in regional labour markets. The study contributes to the wage curve literature. Blanchflower and Oswald (1990; 1994; 2005) presented the “empirical law” of the negative dependence between the level of job competition and the level of wages in regional labour markets. According to that empirical law, the unemployment elasticity of wages will be around -0.1. The highly educated are a special group of wage earners since they are more prone to relocation than the rest of the population; however, they are more likely to migrate from remote regions to centres of economic activity than vice versa (Ritsilä and Ovaskainen, 2001). We examine the relevance of the wage curve for the highly educated wages in Finland and allow for the job competition to include both the unemployed and the employed job searches separated by the education level. We concentrate on the salaries of those who have either a graduate or a post-graduate degree and who are working in the private or municipality sectors. The study period runs from 1997 to 2004. Since the data are collected from three levels - years, individuals and regions - we apply multi-level modelling in order to control for the grouped data bias (Johnes, 2007). In addition, we estimate the fixed effects models as well as test for the endogeneity of the search rates.

The study examines how the job competition among the highly educated affects their wages in regional labour markets. We estimate individual-level wage curves separately for graduates and post-graduates and divide the job competition in unemployed and employed job search by level of education. The study does not find a wage curve for the highly educated in Finland. The results indicate that the dynamics of the market apparent in the increased employed job search creates more job opportunities for the graduates in the private sector, while declining the opportunities of both the graduates and the postgraduates in the municipality sector. Working Paper 2009-17 2009-06-11 Sanna-Mari Hynninen University of Jyvaskyla sanna-mari.hynninen@econ.jyu.fi