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Thursday, 9 April 2015

Unemployed workers with low education suffer from the influx of higher educated workers, during their attempts to acquire and keep jobs, especially fit for them

At the beginning of this week, a report was presented by Platform31, an expertise and network organization for city and region.

After extensive research by Platform31, in cooperation with the University of Groningen and a number of Dutch cities, the following had been found: an influx of highly educated people in cities definitely yielded additional low qualified commercial services jobs in these cities, which led to an actual increase in employment possibilities. That was the good news.

The bad news from this investigation, however, was that a substantial part of these newly created, simple jobs were filled in by the same highly educated people. Many (unemployed) workers with a low education, which would theoretically be a perfect fit for the jobs, did not get these jobs after all.

The following snippets contain the most important conclusions from the report of Platform 31:

Cities with more highly educated people offer more economic opportunities for low educated workers, for the simple reason that there are less low educated workers in these cities. Besides that, in cities with a positive growth rate in the number of highly educated people, the number of jobs for low educated workers also increases.

The spendings of highly educated people on consumer services is often seen as the driving force behind the ‘trickle down’ phenomenon. An analysis on sector level shows that this effect is particularly visible in consumer services in the leisure market: pubs and coffee bars, restaurants and cultural centres.

Nevertheless, more jobs in cities for low educated workers do not automatically lead to one-on-one lower unemployment for the low educated workers in these cities. It often happens that low qualified workers from outside the city fill in these jobs.

Depending on the characteristics of the local labour market, the low educated worker in the city either has “to deal with” the competition from lower educated workers coming from the region (for instance in Leeuwarden, Delft and Amsterdam) or profits from the supply of jobs in the surroundings (Haarlem and Zaanstad [both cities are close to Amsterdam – EL])

More available jobs for low educated workers in a particular city consequently offers a bigger chance to find work for low educated workers in the city itself, but also in the surroundings of the city. A bigger chance to acquire work for the low educated people in the cities is logically correlated with a lower unemployment rate among low educated people; however, this correlation is not so strong as one would expect.

Among other things, this is caused by repression: people with an intermediate or higher education working below their level, thus pushing the lower educated workers away from the labour market in the process.

This means, that when cities succeed in binding more highly educated people to them, this will lead to more jobs on an elementary or lower level, but not automatically to lower unemployment among the lower educated people in the city.

Depending from the local labour market characteristics, a part of this jobs will be taken by people from outside the city and / or intermediate and higher educated people working below their qualification level.

The chances for new policies lie at both the demand and supply side of the labour market. At the demand side, the low educated workers could be made more competitive by increasing their quality through education or by reducing their costs, through abolishment of the legal minimal wage for workers. 

At the supply side, companies and communities should supply more high-value labour, so that highly educated workers would not be forced to accept jobs below their level. 

Also maintaining a strict surveillance upon the hotel and catering industry regarding moonlighting students would help, as well as stimulation of legal charwomen, through the introduction of service checks. And last, but not least:  students should perhaps be discouraged to take a job next to their study. Only then the 'trickle down effect' will be accomplished in the attractive cities, where it can improve the chances of the people at the bottom of the labour market.

For me this was a very interesting report, as it pointed at one of the disturbing phenomena on the current Dutch labour market: the fact that jobs which are meant for lower qualified workers are often filled in by high(er) educated people. These are people like students, youngsters and freshly unemployed, but well educated young people, who do such jobs as a short-term solution, while applying for a better suitable job. 

This is one of the reasons that the unemployment among lower educated workers remains strongly elevated in The Netherlands, in comparison with higher educated workers. This is visible in the following chart:

Unemployment in The Netherlands
per level of education (1997 - 2014)
Data courtesy of:
Chart by: Ernst's Economy for You
Click to enlarge

One of the current problems with low education  jobs, like orderpicker, store assistent, waiter, barkeeper, cashier and other simple commercial service jobs, is that it is a demander's market, with much more available workers than available jobs. 

Employers can afford to be picky. This is the reason that employers often choose for the higher qualified persons and especially students (see first red & bold text), when they are available and qualified for the job. 

These higher qualified workers and students have the following advantages above lower educated workers:

  • They are often smarter and also more agile and adaptable in many cases;
  • There are a "zillion" of them, who are all looking for work, which they can do besides their study. Supply is never a problem.
    • Mostly they don't object against moonlighting and/or flexible contracts at quite unfavourable terms;
    • They often accept relatively low wages, as they really need their payments for their study and leisure time;
  • They are not planning to do the job for a long period of time and don't require all kinds of guarantees and job certainty;
    • They can be found easily through temporary labour agencies or through their personal network of friends and 'friends of friends';
    • They mostly don't bring the hassle of wanting a fixed job and taxed payments. When they are not needed anymore, they can be sent away quite easily, which makes them quite flexible indeed.

Only the really heavy, hands-on jobs and jobs that rather require technical skills and skilled hands or brute force and stamina than brains, will in the majority of the cases remain for lower educated workers only. 

Many of those low educated workers were either failing or bored at school and wanted to do something with their hands or with certain skills. These workers can be helped with good hands-on education from craftsmen at special craft schools and companies with introduction courses and hybrid school/training programs for freshmen workers.
The worst thing that could happen is that the race to the bottom in The Netherlands gets in a new leg, through the abolishment of the legal minimum wage (see second red & bold text). This is not a real solution for the aforementioned problem. 

The reason that this is definitely not a solution is, that it only reduces the wages of workers, but on the other hand will not accelerate the influx of lower educated workers for such jobs. Still, there will be all kinds of higher educated workers with a temporary need for labour, to do such jobs. 

The only effect will be, that people, for whom such low-paid jobs become their steady job, will need even more jobs to earn a monthly income of which they can live. What would help in my opinion, is when the direct taxes and social premiums on labour would be drastically reduced, thus suppressing the wage expenses for the employers.

Still, this repression on the labour market remains a complex conundrum and something which you don't solve with the easy and (too) obvious solutions in the conclusions of this report by Platform31. 

Before the availability of labour and jobs drastically increases and low educated workers become in higher demand again, this particular problem and the other problems coming out of the increasingly flexible labour markets will not be solved for too many low educated workers.

This is sad, but true!

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