The phenomenon of education mismatch is common at workplace. It occurs when the educational attainment of workers do not match with the education level required by their jobs. Over-education happens when individual’s educational attainment is higher than what is required by the job, creating surplus education, whereas under-education occurs when the job itself requires higher qualification than what the worker is holding, thereby producing deficit education. The major negative effect of education mismatch in particular over-education is suboptimal allocation of resources in that it brings serious negative consequences such as lower earnings (Chevalier, 2003; Wolbers, 2003), lower job satisfaction (Burris, 1985) and lower productivity (Tsang et al, 1991).

Past research on mismatch have mainly concentrated on a single country (e.g. BudrÍa, Moro-Egido, 2008; Murillo, Rahona-Lopex, and Salinas-Jimenez, 2012), a specific group of individuals (e.g Bender & Roche, 2013 on self-employed) or a specific working condition (Bender and Roche, 2013 on type of employment).  Cross-country research and national-wide samples were few and restricted to a limited number of countries. This study is the first study that uses 20 countries to examine education mismatch.

Various theories are trying to explain the mismatch phenomenon of over- and under-education, and researchers also attempt to quantify the extent of mismatch, and measuring the magnitude of resources waste on mismatch. Using PIAAC data, an international survey on adult competency, this paper tests hypothesis for four fundamental theories that explain mismatch phenomenon, namely human capital theory, job competition model, assignment framework and technological theory. Empirically results from the 20 countries (including 16 European countries) that participated in the PIAAC survey will inform whether the data are in line with these four theories.

Human capital theory (Becker, 1964) perhaps is the earliest formalized theory that explains the education mismatch phenomenon. It argues that the skills acquired through education represent human capital and investing in it leads to higher productivity and returns to education, and deduces that wages are determined mainly by the supply of human capital.

The job competition model provides an entire different view from that of the human capital theory. Here, the job characteristics are the determinants of wages, not the education attained of workers (Thurow, 1975) i.e. it is education required by job that determines the wage. The job competition model is thus a demand side view affecting earnings. The mismatch (or in particular over-education) arises when workers obtain education in excess of the job requirements to stay in the queue for jobs or to bump out less educated individual.

Assignment framework provides the third framework that explains the mismatch phenomenon. It states that workers differ in attributes are allocated jobs with differing levels of complexities. A group of equally educated individuals have inevitably varying degrees of performance when made to accomplish the same task due to diversity in tasks, responsibilities, expected output, skills sets, and technologies utilised. Thus, the assignment framework considers both the supply and demand factors.  

The technological theory states that the existence of over-education and under-education is due mainly to technological changes. Rapid pace of technological changes turn firms to look for over-educated person that has acquired the school-provided technological skills that currently employed workers do not possess them. The assumption is that innovations and technological change progress are readily handled by the more educated individuals. As such, overeducated workers are those that the employers wish to retain and for whom the bulk of training and firm-specific investments are slotted; hence, their tenure is rewarded. On the other hand, undereducated workers, confined in dead-end jobs, should expect no such benefits from the employer. 

Becker, G. (1964). Human Capital: A Theoretical and Empirical Analysis, with a Special Reference to Education. National Bureau of Economic Research, New York. Bender, K. A. & Roche, K. (2013). Educational mismatch and self-employment. Economics of Education Review, 34, 85-95. BudrÍa, S., Moro-Egido, A. I. (2008). Education, educational mismatch, and wage inequality: Evidence for Spain. Economics of Education Review 27, 332–341. Burris, V. (1985). The social and political consequences of overeducation. American Sociological Review, 48, 454-467. Chevalier, A. (2003). Education, motivation and pay of UK graduates: Are they different for women? European Journal of Education, 37, 347-369. Groot, W. (1996). The incidence of, and returns to overeducation in the UK. Applied Economics, 28, 1345-1350. Hartog, J. (2000). Over-education and earnings: where are we, where should we go? Economics of Education Review, 19, 131-147. Mehta, A., Felipe, J., Quising, P., and Camingue, S. (2011). Overeducation in developing economies: How can we test for it, and what does it mean? Economics of Education Review, 30, 1334-1347. Mendes de Oliverira, M., Santos, M. C., and Kiker, B. F. (2000). The role of human capital and technological change I overeducation. Economic of Education Review, 19, 199-206. Mincer, J. (1974). Schooling, Experience and Earnings. New York: National Bureau of Economic Research. Murillo, I. P., Rahona-Lopex, and Salinas-Jimenez, M. D. M. (2012). Effects of educational mismatch on private returns to education: An analysis of the Spanish case (1995-2006). Journal of Policy Modeling, 34, 649-659. Rubb, S. (2003). Overeducation in the labor market: a comment and re-analysis of a meta-analysis. Economics of Education Review, 22, 621-629. Sattinger, M. (1993). Assignment Models of the Distribution of Earnings. Journal of Economic Literature, 31, 851-880. Spence, M. (1973). Job market signalling. The Quarterly Journal of economics, 87(3), 355-374. Tsang, M., Rumberger, R. and Levin, H. (1991). The impact of surplus schooling on worker productivity. Industrial Relations 30(2), 209–228. Thurow, L. (1975). Generating Inequality: Mechanisms of Distribution in the U.S. Economy. New York: Basic Books. Van der Velden, R.K.W., and van Smoorenburg, M.S.M., (1997). The measurement of overeducation and undereducation: Selfreport vs job-analyst method. Working paper, Research Center for Education and the Labour Market, Maastricht University. Verdugo, R., & Verdugo, N. (1989). The impact of surplus schooling on earnings. Journal of Human Resources, 24 (4), 629–643. Wolbers, M. H. (2003). Job mismatches and their labour-market effects among school-leavers in Europe. European Sociological Review, 19(3), 249-266.