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A growing proportion of recent university graduates – as much as 40 per cent – face the potential frustration of being overqualified for their jobs, a new report has revealed.

An analysis, released Thursday by the federal parliamentary budget office, also found the rate of young graduates holding down jobs that match their education level had dropped.

The report warned that these numbers can have real-life consequences for the job market.

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"There are costs associated with a rising number of overqualified workers," the budget watchdog said.

"These workers may face lower levels of job satisfaction and attachment, which could increase turnover rates for employers."

On top of that, the study said graduates take on added costs to obtain a university education, such as missing out on work experience and wages they could have earned in the labour force.

The research found the country's over-qualification rate among university grads aged 25 to 34 climbed to 40 per cent last year, up from about 32 per cent in 1991. In 2014, there were 582,000 people in the overqualified category, 795,000 identified as "rightfully qualified" and 77,000 unemployed, the study said.

Over the same period, the analysis showed the proportion of grads employed in positions that matched their credentials decreased to 55 per cent from 62 per cent.

The report found college graduates have fared better in recent years – their overqualification rate dropped to 34 per cent last year from 37 per cent in 2006. The proportion of recent college grads who held positions that matched their education level reached 50 per cent in 2014, up from 45 per cent in 1998.

The report notes that its methodology only used level of education to measure credentials and did not incorporate factors such as work experience and job-market demand.

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The budget office document also pointed to a Statistics Canada report released last year that found more than 60 per cent of overqualified recent university grads had credentials concentrated in three fields of study: business, management and public administration; social and behavioural sciences and law; and humanities.

During the federal election campaign, the Liberals vowed to spend about $1.5-billion over four years that they argued would help at least 125,000 young people find work.

The Liberals, who won a majority mandate in the October vote, said part of the plan would include waiving employment-insurance premiums for 12 months for any employer who gave full-time work to someone aged 18 to 24 in 2016, 2017 or 2018.

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