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Evaluation of the effects of education on job satisfaction: independent single-equation vs. structural equation models.

Article Excerpt
Abstract Independent single-equation models and structural equation models are used to analyze both direct and indirect impacts of education length, and of the match between education and employment, on job satisfaction after controlling for individual-specific and job-specific attributes, including health status and wages. The main results show that: (1) education/job mismatches, both in level and domain, reduce utility from work irrespective of schooling years and other individual/job characteristics; (2) the effects of education on job satisfaction are mainly indirect effects transmitted though the influence of schooling on workers' health status, wages and other observable job characteristics; and (3) neglecting the structure of covariance among the determinants of job satisfaction results in upward bias in the estimation of the direct effect of schooling length, and in downward bias in the estimates for the effects of other personal circumstances.

Keywords Occupational effects of education * Education and job match * Structure of covariance

JEL Categories C10 * J21 * J30

Introduction

Empirical analyses on the value of education have traditionally focused on the contribution of formal schooling to increased earning capacity in the labor market, although rate-of-return studies estimate only part of the returns to education. The occupational benefits of education promote not only higher wages but also other non-pecuniary expansions in workers' welfare possibilities (Haveman and Wolfe 1984; McMahon 1998). The basic idea is that longer schooling promotes a more efficient use of information both on the formation of expectations and on individual choices regarding the labor market (Arrow 1997). Therefore, highly educated people are thought to form more accurate expectations and to pursue their aspirations more efficiently than poorly educated people do. Consequently, they are more likely to reap additional education-enhanced benefits in terms of personal utility arising from a variety of work-related sources. These may include items such as reduced uncertainty, performing more interesting or challenging tasks, holding a responsibility level matched to one's qualification, working under healthier or more attractive conditions, developing good relationships with co-workers, taking on a tenured position, or enjoying greater work autonomy or higher social prestige (Vila 2000).

These non-monetary occupational outcomes of education are difficult to identify and measure because most of them are subjective; that is, they depend on personal preferences. However, they do increase people's wellbeing and quality of life, and must be taken into account when analyzing educational investments (Wolfe and Zuvekas 1997).

Self-assessments of job satisfaction reflect how people value the whole package of both monetary and non-monetary returns to their effort according to their own personal preferences and expectations. Therefore, job satisfaction may be used to clarify the effects of workers' education on utility from work and, ultimately, on general welfare (Vila 2005).

Under the assumption that job satisfaction reflects workers' utility, we attempt to gain insight into the effects of education investment by addressing two main research hypotheses:

(1) Workers' perception of the match between education and employment, regarding both job level and job domain, may have significant effects on self-assessed job satisfaction.

(2) The use of structural equation models (SEMs) may be useful to clarify the effects of education investment on job satisfaction because it allows for consideration of the complex links among workers' schooling, education/job match, wages, labor market situation, and workers' health status.

In this study we use a representative sample of Spanish workers to analyze the direct and indirect impacts of workers' education on job satisfaction. The rest of the paper is organized as follows. The next section summarizes earlier research on job satisfaction and its determinants; the third section describes the data set, the choice of variables, and the models; the fourth section discusses the estimation results; and the last section concludes.

Summary of Earlier Research on the Determinants of Job Satisfaction

Standard economic theory predicts that utility from work depends negatively on effort and positively on income, and that it depends as well on other job-specific and worker-specific characteristics (see, among others, Blanchflower and Oswald 2002; Hamermesh 2001; Sloane and Williams 1996; Souza-Poza and Souza-Poza 2000). A number of studies do include education level as explanatory variable for job satisfaction; however, the evidence provided is rather limited. Idson (1990) reports no significant effects of education level on three out of four different measures of overall job satisfaction. Meng (1990) finds that education increases workers' freedom to decide how to do the work, workers' influence on the decisions of supervisors, and their content with the physical environment of the job. Clark (1996) reports that individuals with longer schooling have comparative lower levels of job satisfaction, as do men, middle-aged people, those working longer hours, and employees in larger establishments. Clark and Oswald (1996) find that overall job satisfaction is declining in the level of education when income is held constant, and that satisfaction depends inversely on workers' comparison wage rates. In brief, the existing evidence on the effects of education level on job satisfaction is mixed and rather...

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