Degree Differentiation and Changing Career Outcomes of Higher Education Graduates in Germany: A Matter of Specialization, Extracurricular Activities or Labor Market Segmentation?

Abstract

With the introduction of Bachelor's/Master's programs, the higher education system in Germany profoundly changed from having a one-tier to having a two-tier degree structure. So far, however, there is surprisingly little evidence on how the introduction of the new degree system has changed students' employment outcomes. This paper therefore asks 1) whether we can observe over time rising labor market inequalities in terms of wages and adequate employment between graduates holding Bachelor's, Master's and traditional degrees, and, if yes, 2) how these labor market differentials between different degree holders might be explained. By applying human capital, signaling and labor market segmentation theory we develop hypotheses on differentiated labor market outcomes. These are tested by estimating linear regression models and Blinder-Oaxaca Decompositions based on two graduate cohorts from the DZHW Graduate Panel Study, who graduated in the years 2009 and 2013. Results indicate that Bachelor graduates earn less and have lower job adequacy than traditional (for example Diplom, Magister, Staatsexamen) and Master's degree holders. These labor market differentials are partly explained by internal labor market segments and extracurricular qualifications, mostly in form of study-related student jobs, while gaining specific human capital through higher education seems to matter less.