Which skills protect graduates against a slack labour market?

This paper explores the relationship between graduates’ skill levels and the risk of overeducation and unemployment in 17 European countries. We distinguish between field-specific and academic skills and hypothesise that field-specific skills largely determine the allocation of graduates to jobs in the occupational domain of a particular field of study, and that academic skills largely determine the allocation of graduates to jobs in the overall labour market. In line with the predictions of the crowding out hypothesis, we find that the level of protection afforded by field-specific skills against the risk of overeducation is higher when the degree of excess labour supply in the occupational domain of the graduate's field of study is higher. Conversely, academic skills offer more protection against the risk of overeducation when excess labour supply in the overall labour market is higher. Field-specific skills also protect graduates against the risk of unemployment, whereas graduates’ level of academic skills appears to be unrelated to the risk of becoming unemployed.