Abstract
Although the populations of the richest advanced industrial societies have achieved unprecedented levels of formal credentials, analysts report on the massive scale of underutilisation of knowledge and skills in current market economies. This paper describes the underemployment situation in the Netherlands (1977-1995). We show by different methods that the ‘education-jobs gap’ has increasingly widened. Although the statistical association between employees' level of education and their jobs remained stable over time, employees' return to credentials has diminished for every educational category. Within the total labour population, an increasing share of employees can be considered underemployed and suffering from credential inflation. At the lower levels of education men have suffered from underemployment and credential inflation more than women. At the higher levels of education it is the reverse. It also appears that young people deal with a ‘waiting room effect’: they enter the labour market at relatively low skill levels, given their educational level and gender. A further breakdown of the return on credentials by educational specialisation shows that employees with an educational background in health care or technical studies have suffered relatively more from credential inflation than those in commercial education. We conclude by stating that in spite of much rhetoric about the skill deficiencies of the current workforce, the lack of decent jobs has caused basic allocation problems in the Dutch labour market. From a human resources perspective the growing wastage of employees’ potential should not be underestimated or dismissed. We argue that an effective allocation of knowledge and skills to occupations will be the basic tenet of new forms of work organisation.