The View | Hong Kong not overeducated as tight labour market rules

From 1981 to 1994, the number of undergraduate places funded by the University Grants Committee increased from 2,500 to 15,000. The change reflected a shift in government policy to boost the number of undergraduate places from about 2.2 per cent of the relevant admissions age cohort to 18 per cent. This targeted percentage has since remained unchanged.

There is a belief in some quarters, including among some government officials, that Hong Kong is perhaps overeducated. They point to numerous reports of recent graduates having difficulty in finding well-paid jobs, growing numbers of graduates in clerical jobs, young graduates whose salaries have failed to increase for years and complaints of few upward mobility opportunities for the young.

These officials are worried that if more undergraduates are trained, then there will be more frustration among the educated youths who fail to land good jobs. Social unrest may become a worrying issue if upward mobility is affected. Economically, any over-investment is a waste of valuable resources that should be avoided.

So is Hong Kong overeducated?

The number of university graduates in the working age (20 to 59) population rose rapidly from 87,000 in 1976 (4.1 per cent of this population) to 1.03 million in 2011 (23.1 per cent).

Despite this substantial increase in graduates, the average private rate of return to education has also grown from 8.8 per cent to 14.8 per cent over the same period (see chart).