economy is seemingly crying out for qualified employees, but a third of workers have qualifications they don’t even need. Jon Slater reports on how a new LSE think-tank is tackling the conundrum.

DOES a secretary really need a degree in medieval history? What about that doctor of classics who can now be seen at the grill of the local burger bar?

It has become received wisdom that under-education is at the root of Britain’s economic malaise. Young people, it is said, need to get the message that qualifications lead to higher wages and better jobs.

But is this always true? Despite the political consensus about the need for more and better education, a new report shows that almost one in three employees in the UK is “over-qualified”.

Of course, in a liberal society, education has value for its own sake. But the Government has not made education its top three priorities just so that the next generation can understand Proust or debate the causes of the First World War. It wants an economic return on its billions of pounds of investment.

Discovering how best to get that return will be the job of Britain’s first think-tank devoted to the economics of education.

The Centre for the Economics of Education, based at the London School of Economics, will be funded by the Department for Education and Employment and is a collaboration between the LSE, the Institute for Education and the Institute of Fiscal Studies.

Over the next year, the centre will examine what skills employers want, the return to the individuals from different kinds of qualification and how schools can be made more cost-effective.

Ministers are also likely to want to assess the economic impact of initiatives designed to boost learning such as individual learning accounts. David Blunkett is believed to be keen to see every young person given an account of up to pound;10,000 to pay for training.

“The idea will be to provide the people who are providing the money - the DFEE - with guidance for drawing up education policy,” said Stephen Machin, the centre’s director.

“Expenditure on education is - partly at least - an investment by the country as a whole. So it is crucial that we understand more about which types of investment are going to be more effective in achieving our economic and social goals.”

But the new research from the LSE may make ministers wish they had not asked for answers to these difficult questions. It suggests that many people are being educated to degree level and beyond without making full use of their qualifications. According to the research - to be published on Monday - 32 per cent of us have more educational qualifications than we need to do our jobs.

The figure is based on the findings of the UK Skills Survey in 1997 and is backed up by earlier studies. A similar survey in 1986 - which put the figure at 29 per cent - suggests that a decade of rising educational opportunities has seen a slight rise in the number of “overeducated” people. An overeducated person is defined by the researchers as someone who has a higher evel of qualification than is required for their job.

On average, overeducated men earn 5 per cent less than those with jobs that match their education. And the situation is even worse for overqualified women. They suffer a pay shortfall of 12 per cent.

Could we be in danger of producing a nation of over-qualified, under-paid and probably frustrated hamburger salesmen and estate agents?

As the LSE team points out: “The estate agent with a doctoral thesis will be no better at being an estate agent than someone with a degree; the graduate secretary will not need any of the skills acquired on a degree course to do the job properly.”

The Government faces the prospect of increasing the supply of education without the demand to fill it. With the advent of tuition fees, those considering university, in particular, will want evidence that they will benefit financially by gaining a degree.

What must be said is that education, although no guarantee of success, is certainly still helpful. On average, graduates are still more than three times less likely to be unemployed as those with no qualifications.

But for large numbers of people, it seems qualifications are not opening the door of opportunity but leading them down a dead-end.

A study of 1980s male graduates showed that those who were over-educated in their first job were more likely than not to be at below graduate-level employment six years later.

Perhaps it is not just a question of the level, but the right type of education. After all, year after year, business leaders complain about the lack of skilled labour. The latest figures from the British Chambers of Commerce show that almost three- quarters of small and medium- sized companies reported difficulties in recruiting people with appropriate skills.

The LSE research backs up this idea. It indicates that some types of education are more beneficial to both individuals and the economy than others. For example, the team found that those with good numeracy skills were most likely to have a job commensurate with their qualifications. The message to learners is clear; maths means money. One of the LSE team, Anna Vignoles, published research last year showing that people with maths A-level increase their earning power by up to 10 per cent.

There are significant policy implications. The LSE team suggest that if Britain is to reduce over-education on the one hand and bridge the skills gap on the other, then more people need to be encouraged to pursue subjects that meet the needs of emerging industries: maths, engineering and information technology. Arts and humanities graduates are most likely to end up in a job which does not use their skills.

The new centre will hope that it can recommend ways of marrying people’s qualifications and skills and the demands of their subsequent careers.

“Overeducation: a tough nut to crack” is written by Francis Green, Steven McIntosh and Anna Vignoles, and will be published by the Centre for Economic Performance, in their magazine Centrepiece on Monday.

To order a copy please telephone the centre on 020 7955 7798