Wage Losses Due to Overqualification

The Role of Formal Degrees and Occupational Skills

Nancy Kracke, Malte Reichelt, Basha Vicari

    Research output: Contribution to journalArticle

    Abstract

    Wage penalties in overqualified employment are well documented, but little is known regarding the underlying mechanisms. Drawing on new methods to measure the mismatch between jobs and qualifications, we test two explanations: formal overqualification and a mismatch of occupational skills, which have so far not been analysed. Using the National Educational Panel Study survey that is linked to German administrative data, we can objectively measure both types of mismatch. By using fixed-effects models, we confirm that overqualification is associated with a wage loss of approximately 5%, which indicates penalties when working at a lower requirement level. We find that some of this wage loss can be explained by a mismatch of skills between the current and training occupation. Further analyses show that mismatches of occupational skills explain the wage loss of formal overqualification for employees with vocational training. For academics, the two types of mismatch are unrelated. We conclude that, because of occupational boundaries and more specific occupational skills, vocationally trained people who are overqualified more often work in jobs with lower and different skill requirements. We emphasize that measuring both formal degrees and occupational skills and their mismatch allows for a deeper understanding of overqualification and wage-setting.

    Original languageEnglish (US)
    Pages (from-to)1-24
    Number of pages24
    JournalSocial Indicators Research
    DOIs
    StateAccepted/In press - Sep 12 2017

    Fingerprint

    Salaries and Fringe Benefits
    mismatch
    wage
    Vocational Education
    penalty
    Occupations
    aptitude test
    vocational education
    Wages
    Mismatch
    occupation
    employee

    Keywords

    • Mismatch
    • Occupational skills
    • Overqualification
    • Wages

    ASJC Scopus subject areas

    • Developmental and Educational Psychology
    • Arts and Humanities (miscellaneous)
    • Sociology and Political Science
    • Social Sciences(all)

    Cite this

    Wage Losses Due to Overqualification : The Role of Formal Degrees and Occupational Skills. / Kracke, Nancy; Reichelt, Malte; Vicari, Basha.

    In: Social Indicators Research, 12.09.2017, p. 1-24.

    Research output: Contribution to journalArticle

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