Educational Mismatches versus Skill Mismatches: Effects on Wages, Job Satisfaction, and Onthe-Job Search

Author(s): Jim Allen and Rolf van der Velden

Source: Oxford Economic Papers, Vol. 53, No. 3, Special Issue on Skills Measurement and
Economic Analysis (Jul., 2001), pp. 434-452
Published by: Oxford University Press
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Allrights
reserved

OxfordEconomicPapers3 (2001), 434-452

434

versusskill
mismatches
Educational
on wages,
mismatches:
effects
job
search
andon-the-job
satisfaction,
ByJimAllen*and Rolfvan derVeldent
* ResearchCentreforEducationand theLabour
ofMaastricht,
Market,University
The Netherlands;
Postbus616,6200 MD Maastricht,
e-mail:J.Allen@ROA.UNIMAAS.NL.
ofMaastricht
t ResearchCentreforEducationand theLabourMarket,University
are reportedto have seriouseffects
on wagesand other
Education-jobmismatches
labour marketoutcomes.Such resultsare oftencited in supportof assignment
and humancapitalmodels.To test
but can also be explainedby institutional
theory,
theassignment
we examinetherelationbetweeneducationalmismatches
explanation,
and skillmismatches.
In linewithearlierresearch,
educationalmismatches
affect
wages
to theassumptions
ofassignment
thiseffect
is notexplained
theory,
strongly.
Contrary
skillmismatches
are muchbetterpredictors
of job
by skillmismatches.
Conversely,
satisfaction
and on-the-jobsearchthanare educationalmismatches.

1. Introduction
are reportedto haveseriouseffects
on a numberof
Education-jobmismatches
labourmarketoutcomes.Overeducation
is knownto affect
labourturnover
(Topel,
1986; Hersch,1991), occupationalchoice (Viscusi,1979), and job satisfaction
(Tsangand Levin,1985). A majorline of researchhas been developedregarding
the effectof education-jobmismatches
on wages.Empiricalresultssuggestthat
bothindividualhumancapitaland job characteristics
are relatedto wages.Individualsworkingin jobs forwhicha lowerlevelof educationthantheirown is
required(overeducation)are oftenfoundto earnless thanindividualswiththe
same level of educationworkingin jobs forwhichtheirown levelis required
(adequate education),but more than individualsworkingin an equivalentjob
with the level of educationactuallyrequired(Duncan and Hoffman,1981;
Hartogand Oosterbeek,1988; Sicherman,1991;Hersch,1991; Cohn and Khan,
andVan derVelden,2000). Conversely,
individuals
work1995;Van Smoorenburg
in
for
which
level
a
is
often
earn
more
ing jobs
required(undereducation)
higher
thanindividuals
withthesamelevelof educationworkingin jobs forwhichtheir
own levelis required,
butlessthanindividuals
withthelevelofeducationactually
of overeducation
are usuallystronger
than
requiredin suchjobs. The wageeffects
thewageeffects
of undereducation.

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JIM ALLEN AND ROLF VAN DER VELDEN

435

Such resultsare oftencitedin supportof so-called'assignment'

modelsof the
thereturns
to additionalinvestments
in
labourmarket(Sattinger,
1993),whereby
humancapitaldependin part on the matchbetweenthe workerand the job.
in general,
The basic idea is that,althoughhighereducationraisesproductivity
the actuallevelof productivity
realisedis also determined
by thematchbetween
educationalleveland job level.Workingin a job belowone's own levelimposesa
to theutilisation
of skills.The lowerlevelof thejob in effect
limitation
imposes
in lowerwages.Conversely,
worka ceilingon theworker's
productivity,
resulting
raisesthis'productivity
ceiling',allowing
ingin a job aboveone'sownlevelin effect
workersto be moreproductivethantheywould be whenworkingat theirown
level.However,in thiscase,theworker'sownabilitiesarethemainfactorlimiting
Becauseworkersemployedin a job at theirown levelare already
productivity.
at a levelclose to theirown personalproductivity
ceiling,the wage
performing
modest.Thisaccountsfor
ofworkingaboveone's ownlevelare generally
benefits
in thewageeffects
of over-and undereducation.
theobservedasymmetry
theory,the allocationis optimalwhenworkersare
Accordingto assignment
allocated top-downaccordingto their skills,wherebythe most competent
workeris assignedto the most complexjob and the leastcompetentworkeris
can thusbe
job.' The incidenceofeducationalmismatches
assignedto thesimplest
Howin thesharesof complexjobs and skilledworkers.
explainedby differences
and
undereducation
can
also
be
as
has
overever, Hartog(2000)
pointedout,
explainedin otherways.Accordingto searchand matchingtheory,temporary
information.
The factthatovermismatches
mayoccuras a resultof imperfect
educationis typically
in
the
of
the
transition
from
schoolto workis
higher
phase
oftentakenas evidenceforthisinterpretation.
However,othershaveargued,from
thepointofviewofhumancapitaltheory,
thatthehighincidenceofovereducation
reflects
theseworkers'lack of workexperience(Grootand
amongschool-leavers
Maassenvan den Brink,1996).
Thishumancapitalargument
canbe statedin a moregeneralway,to providean
alternative
for
the
effects
to assignment
explanation
normallyattributed
theory.
Althoughthe intuitiveappeal of assignmenttheoryis considerable,the wage
derivedfromassignment
equationsused are not directly
theory(Hartog,2000).
The observedwagedifferences
forjobs belowand aboveone's ownlevelmightjust
as easilyreflectindividualdifferences
in humancapitalwithineducationlevels,
whichare roughlysortedaccordingto job level.Thoseworking'belowtheirown
level'are in thatcase lessproductive
on averagethanthoseworking'at theirown
on theirproductivity,
but because
level',not becausethejob imposeslimitations
have
less
human
on
to
with.
those
they
capital average begin
Similarly,
working
'In additionto theeffects
ofa mismatch
betweenrequiredand actuallevelof education,manystudies
also takeintoaccounttheeffects
ofworking
in a job forwhicha fieldofeducationdifferent
fromone's
own fieldis required.

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436

EDUCATIONAL

VS SKILL

MISMATCHES

'abovetheirownlevel'haveaccordingto thisviewmorehumancapitalon average

thanthoseworkingat theirown level.
Institutionaltheoriesofferyet anotherpossible explanationfor the same
oftenforcedto base wages
observedwage effects.
Theypointout thatemployers
or jobs,ratherthanon individual
ofemployees
characteristics
on easilyobservable
theobservedwagediffer(Thurow,1975). Fromsucha perspective,
performance
encescouldbe accountedforbythefactthatboththeformaleducationofemployin wage
ees and the requirededucationforthe job are frequently
incorporated
not
The
differences
in collective
scalesas determined
may
agreements.
bargaining
eduto
value
the
rather
but
in productivity,
individualdifferences
reflect
assigned
in suchagreements.
cationand job categories
Wage analysesbased on attainedand requirededucationcannotin themselves
The aim
is correct.
answerto thequestionofwhichexplanation
providea definitive
of thisarticleis to shed some further
lighton thisdiscussion,by examiningthe
ofindimatchon one handand theutilisation
relationbetweentheeducation-job
differ
theories
vidualskillson theother.Thebasicidea is thattheabove-mentioned
mismatch
in thewaytheypostulatea relationbetweenthe'formal'education-job
(hereaftercalled educationalmismatches)and the actual mismatchbetween
calledskillmismatches).
acquiredand requiredskills(hereafter
Skillmismismatches
educational
In assignment
implyskillmismatches.
theory,
of over-and undermatchesarebelievedto accountfortheobservedwageeffects
findthat
education.If the assignment
explanationis valid,we shouldtherefore
and
their
their
own
level
are
below
individuals
knowledge
underutilising
working
own
lack
their
level
above
while
individuals
skillsto a significant
working
degree,
in
and skillsthatarerequiredin orderto perform
someoftheknowledge
optimally
matchin wageanalyses
ofeducation-job
theirjob. We wouldalso expecttheeffects
ofknowledge
in theutilisation
to be accountedforto a largeextentbymismatches
and
on otheroutcomeslikejob satisfaction
and skills.The sameappliesto effects
to quit.
intention
do
Thispaperputstheassignment
theoryto thetest.Ifeducationalmismatches
of
for
the
effects
skill
and
skill
do
not
account
mismatches
notimply
mismatches,
educationalmismatcheson wages and otheroutcomes,assignmenttheoryis
In thepaperwe addressthefollowing
questions:
seriously
challenged.
(i) to what extentdo skill mismatchescorrespondto mismatchesbetween
availableand requirededucationin jobs?
be accountedforby
ofeducationalmismatches
(ii) to whatextentcanwageeffects
skillmismatches?
and educationalmis(iii) to whatextentand in whatwaysdo skillmismatches
satisfaction?
matchesinfluence
job
(iv) to what extentand in what ways do skill mismatchesand educational
mismatches
influenceemployees'decisionsto activelyseek otheremployment?

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JIM ALLEN

AND

ROLF

VAN

DER

VELDEN

437

2. Data
The datausedfortheanalyseswerecollectedfortheproject'HigherEducationand
in Europe', an international
GraduateEmployment
comparativestudyof the
educationin 11 European
labour marketsituationof graduatesfromtertiary
and Japan.2
In theNetherlands
twomaintypesofgraduates
fromtertiary
countries
those
who
from
and
educationare distinguished:
university, thosewho
graduate
graduatefroma collegeforhighervocationaleducation.Two graduatecohorts
wereapproachedat theend of 1998.The firstcohortconsistedofa representative
educationin the academicyear1990fromtertiary
sampleof thosegraduating
1991. The second cohort compriseda representative
sample of those who
graduatedin the academicyear 1994-95.For thisarticlethe Dutch data from
the formercohortare used,whichmeansthatour subjectsare individualswho
educationsome sevenyearspriorto thesurvey.Around
graduatedfromtertiary
6000 graduateswere approached,of which2723 respondedwith a completed
to the 2460 individualswho at the
The analysesare restricted
questionnaire.
for at least 12 hoursper week.
time of the surveywere in paid employment
and 1559 from
From these 2460 individuals901 graduatedfromuniversity
information
highervocationaleducationin theacademicyear1991. (For further
we referto Allenand Van derVelden(forthcoming).

3. Educationalmismatchand skillmismatch
Variousmeasureshavein thepastbeen proposedto indicatethematchbetween
educationand job. In thisarticlewe use an employeeself-rating
of the levelof
educationmostappropriate
forthecurrent
job,withresponsecategories:
university
plus postgraduate
study(1); university
only(2); highervocationaleducationplus
vocational
postgraduate
study(3); highervocationaleducationonly(4); secondary
educationor equivalent(5); or lower(6). Bycomparing
thisto thehighest
attained
levelof educationoftheworkers,3
and to whatextent,
whether,
we can determine
areworking
aboveor belowtheirownlevel.FortheNetherlands,
Van
respondents
derVeldenand Van Smoorenburg
are
(1997) haveshownthatworkers'
self-ratings
farmorevalidthana commonlyused alternative,
the
of
namely expert-ratingjob
titles.Fromthepointofviewofmatching
level'is preferable
to
theory,
'appropriate
theoften-used
alternative
of'requiredlevel'.Thelattermeasuremaypartly
measure
formalselectionrequirements,
whereastheformer
is morelikelyto referto actual
job content.
2 This projectwas partially
fundedby theEuropeanCommissionundertheTargetedSocio-Economic

Research(TSER) program(TSER EGS-SOE2-CT97-2023),

withadditionalfunding
bytheDutchMinof Kassel.
istryof Education.The projectis coordinated
by Prof.U. TeichlerfromtheUniversity

from
a university
orhigher
vocational
education
institute
in 1990/1991
3Manyofthosewhograduated
earneda higherdegreewithintertiary
education.
subsequently

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438

EDUCATIONAL

VS SKILL

MISMATCHES

to indicatewhichfieldof educationis most

Next we asked the respondents
with
for
their
responsecategories:
job,
'onlymyownfieldofeducation'
appropriate
different
fieldof education'(3);
(1); 'myown or a relatedfield'(2); 'a completely
field(yet)
'forthisjob no specific
fieldis required'(4); and 'forthisjob no specific
exists'(5). We collapsedthesefivecategories
intotwobydistinguishing
categories
(1) and (2) from(3), (4), and (5).
Examinationof the data revealsthateducationalmismatches
are a common
A considerable
ofhighervocationaleducationgraduates
phenomenon.
percentage
(14%) and university
graduates(8%) were workingin jobs for which they
considereda (somewhat)higherlevel of educationwas more appropriate.4
Abouta thirdofthehighervocationaleducationanduniversity
indicated
graduates
thattheywereworking
in a job forwhichtheyconsidered
a lowerlevelofeducation
would have been more appropriate.
Finally,aroundone in fivegraduateswere
workingin jobs forwhichtheirown or a relatedfieldof educationwas not
consideredmost appropriate.In all, some 50% of university
graduatesand
56% of highervocationaleducationgraduatesworkedin jobs forwhichthey
considereda level and/orfieldof educationotherthan theirown to be more
appropriate.
At firstsight,it seemsratheralarmingthatsucha largeproportion
ofthemost
ofparticipants
trainedcategory
in theDutchlabourmarkethavejobs which
highly
don't matchtheireducation.How seriousis this?Specifically:
to whatextentdo
suchmismatches
betweenown and requirededucationcorrespond
to mismatches
betweenthe knowledgeand skillspossessedby subjectsand the knowledgeand
skillsrequiredin theirwork?To investigate
this,subjectswereaskedto indicatethe
extentto whichtheyagreedwiththefollowing
statements:
1 My currentjob offersme sufficient
Statement
scope to use my knowledge
and skills.
Statement
2 I wouldperform
betterin mycurrent
job ifI possessedadditional
knowledgeand skills.
1 indicatethedegreeto which
The responses(on a fivepointscale)to statement
availableskillsarebeingutilisedin thecurrent
to statement
2
job,andtheresponses
theextentto whichtherespondent
possessestheskillsrequiredin thejob. Undertheskillscounterpart
of overeducation,
is thusindicatedbytheextent
utilisation,
to whichone disagreeswithstatement
1. A Skilldeficit,
the skillscounterpart
of
is indicatedby theextentto whichone agreeswithstatement
2.
undereducation,
The relationbetweenthesemeasuresof skillmismatches
and educationalmismatchesare shownin Table 1.

4These figuresincludethosewho have completedsome formof postgraduate

studywithinhigher

vocational education and universityrespectively.

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JIM ALLEN AND ROLF VAN DER VELDEN

439

and skillunderutilisation
Table 1 The relationbetweeneducationalmismatches
None
Skillsunderutilisation

Strong

42
34
30
14
28

42
48
48
37
44

13
11
14
20
15

1
6
6
21
10

1
2
2
8
4

25
30
18
20
25
26

51
42
49
38
42
43

16
15
20
21
18
16

6
10
6
15
11
11

2
3
8
6
5
4

Education-jobmatch

University

Higherlevel of educationappropriate
Own level and fieldof educationappropriate
fieldof educationappropriate
Own level and different
Lower level of educationappropriate
Total university

education
Highervocational

Higherlevelof educationappropriate
Own leveland fieldof educationappropriate
Own leveland different
fieldof educationappropriate
Lower levelof educationappropriate
Total highervocationaleducation
Total university
+ HVE

About 15% of all graduatesexperiencea high or very high degree of

underutilisation
ofskillsas indicatedbytheirresponseto statement
1. The pattern
ofanswersis clearlyrelatedto educationalmismatches.
The relationis,however,
far
fromperfect.
As mightbe expected,a largemajority
oftertiary
graduates
working
in jobs forwhichtheirown or a higherleveland theirown or a relatedfieldof
educationwas consideredappropriate
withthescope
appearto be quitesatisfied
which their job provides for using their knowledgeand skills. Somewhat
however,a relatively
surprisingly
largeproportionof graduatesworkingin jobs
below theirown level and/oroutsidetheirown fieldalso reportlittleor no
underutilisation.
Thisis particularly
thecaseforuniversity
Furthermore,
graduates.
evengraduates
whoseeducationmatchestheirjobs sometimes
reportrathersevere
All
underutilisation. in all,theseresultssuggest
thatwhilea goodmatchin termsof
formaleducationimprovesthechancesthatone willbe giventheopportunity
to
use one's knowledgeand skills,it is neithera necessary
nora sufficient
condition
forskillutilisation.
In effect,
1 takestheskillsofthesubjectas given,and seeksto deterstatement
minetheextentto whichthesubjectis in a positionto utilisethesein thecurrent
worksetting.
Statement
2 switches
theperspective
around,takingjob requirements
as given,and seekingto establishto whatextentthe subjectis equippedto fulfil
theserequirements.
Table 2 providesan overviewof skilldeficits
as measuredby
theresponsesto statement
2.
Somewhatunexpectedly,
a largeproportionof all categories
of graduatesshow
ratherhighlevelsofskilldeficits
to
this
measure.
This
could
indicatethat
according
statement
2 has a low threshold
in
the
sensethatsubjectsagreewiththe
value,

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440

EDUCATIONAL

VS SKILL MISMATCHES

Table 2 The relationbetweeneducationalmismatches

and skilldeficits
None
Skillsdeficits

Strong

13
7
9

19
19
6

21
23
22

26
37
43

21
15
20

34
32
33
30
32
34

15
13
26
13
14
15

Education-jobmatch

University
Higherlevelofeducation
appropriate
Ownlevelandfieldofeducation
appropriate
Ownleveland different
fieldofeducation
appropriate

Lower level of educationappropriate

Total university

education
Highervocational

Higherlevelof educationappropriate
Own leveland fieldof educationappropriate
Own leveland different
fieldof educationappropriate
Lowerlevel of educationappropriate
Total highervocationaleducation
Total university
+ HVE

7
8

5
5
10
10
7
7

18
18

19
18
14
20
19
18

22
22

28
32
18
28
29
26

38
37

15
16

statementeven in the case of relatively

minorskilldeficits."
This measureof
skilldeficitis onlyweaklyrelatedto education-jobmismatches.
Those working
outsidetheirown fieldappear to be somewhatmore inclinedto reportskill
deficitsthanthoseworkingwithintheirown field.However,thereseemsto be
littleor no relationbetweenjob level and skill deficits.One mightexpect
graduateswho workabove theirown educationallevelto showhigherlevelsof
skilldeficits
thangraduatesworkingat or (especially)belowtheirown level.This
is notthecase.
Takentogether,
theresultsshownin Tables1 and 2 appearto be in conflict
with
one ofthekeyassumptions
ofassignment
between
theory,
namelythatmismatches
educationandjob areaccompaniedbyseriousmismatches
betweenavailableskills
and requiredskills.The resultsindicateonlya relatively
weak relationbetween
educationalmismatches
and skillmismatches.6
From the point of view of the matchbetweenskillsand skillrequirements,
skillutilisation
and skilldeficits
as indicatedby theresponsesto statement
1 and
2 are not simplytwo sidesof thesame coin. It is possible,evenlikely,
statement
sA comparisonwiththe graduates'responsesbased on a listof 34 separateskillsindicatesthatthe
thresholdis indeedsomewhatlow. Even thosewho indicatedveryfewor no discrepancies
between
availableand requiredskillitemsoftenrespondedpositively
to statement
2. Nonetheless,
therewas a
clearpositiverelationbetweenthe numberof itemdiscrepancies
and the responseto statement
2,
thatthestatement
has at leasta certaindegreeofvalidity.
suggesting
6We also usedotherindicators
ofskillutilisation
andskilldeficit
byaskingrespondents
to indicatefora
listofskillswhether
theywererequiredin thejob andwhether
theypossessedtheseskills.Theseanalyses
showroughly
similarresults,
on labourmarketoutcomesare lessstrong.
althoughtheeffects

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JIM ALLEN AND ROLF VAN DER VELDEN

441

of skillunderutilisation
and skilldeficits
Table 3 Combinations
Skilldeficits
none/weak
Skillunderutilisation
None/weak

Strong
Total

strong

total

skillmatch
41.8%

skillshortage
43.0%

84.8%

skillsurplus

skills
wrong

15.2%

9.3%
51.0%

6.0%
49.0%

100.0%

that some people will simultaneously

experienceshortagesand surplusesof
combinations
of the
skills.To illustrate
this,Table 3 showsdifferent
(different)
twomeasures.
Table 3 revealsthattheresponsesto thetwo statements
are onlyquiteweakly
related:thosewho disagreewithstatement
1 are slightly
less likelyto agreewith
2 thanthosewho do not disagreewithstatement
1 and vice versa.A
statement
smallgroup(6%) of graduatessimultaneously
reportthattheirjob does not offer
themsufficient
and skillsand thattheycould do
scope forusingtheirknowledge
theirworkbetteriftheypossessedadditionalknowledge
and skills.This groupof
not
much
does
so
suffer
from
little
or
too fewskillsfortheir
too
graduates
having
jobs, as fromhavingthewrongskills.

4. The model
In each of the analyseson the effects
of educationalmismatches
and skillmismatcheson wages,job satisfaction
and on-the-jobsearch,we will use similar
models.We will beginwitha model containingindicatorsof acquiredlevelof
beforethe startof
education,withas controlvariableslabourmarketexperience
currentjob,7tenurein current
and
dummies
for
and temjob,
self-employment
The modelspecification
is:
poraryemployment.
Y = ao + alX + a2EDUC + e

(1)

WithY= dependentvariableunderconsideration
(i.e. log wages,job satisfaction,
lookingforanotherjob); X= a vectorof controlvariables,and EDUC = a set of
dummiesindicating
theacquirededucationallevel.
The dummiesrepresenting
the educationallevelare as follows:university
plus
educationonly(UE), highervocationaledupostgraduate
study(UE+), university
cationplus postgraduate
study(HVE+), and highervocationaleducationonly
(HVE) as thereference
category.
job as a proxyforpriorlabourmarketexperience.
7We used age at thestartof thecurrent

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442

EDUCATIONAL

VS SKILL MISMATCHES

In model (2) we add the mismatchesaccordingto the formaleducational

forthejob
requirements
Y - model1 + a3UNDEREDUC + a40VEREDUC
+ asOWNFIELD+ e

(2)

WithUNDEREDUC = degreeto whichjob levelis higherthanownschoolinglevel,

OVEREDUC = degreeto whichjob levelis lowerthanown schoolinglevel,and
OWNFIELD= dummyindicatingif one's own or a relatedfieldof educationis
consideredappropriate
(1), zerootherwise.
The variablesOVEREDUC and UNDEREDUC are measuredin termsof the
numberof yearsnormallyrequiredforthe subject'sown levelof educationand
forthelevelof educationconsideredmostappropriate
forthe current
job. Each
levelofeducationis assigneda scoredepending
bothon thenominallengthandthe
of the educationaltrack.The following
scoresare used: UE+ (21), UE
difficulty
(19), HVE+ (18), HVE (17), secondaryeducationand lower(14) (cf. Van der
VeldenandVan Smoorenburg,
we distinguish
1997).In linewithpreviousresearch
betweentheeffects
of overeducation
and undereducation.
Yearsof overeducation
havebeen calculatedby subtracting
theactuallevelof educationfromtheappropriatelevelof education,withall negativescoressetto zero.For yearsof undereducationthereverse
hasbeenapplied,againsetting
all negative
scoresto zero.The
reference
forbothvariablesis havinga matching
category
job. Becausethemodel
includestherespondent's
actuallevelofeducationinsteadofrequired
specification
the
in
effect
level, assignment
ofovereducation,
theorypredicts model2 a negative
sincein thisspecification
overeducation
the
impliesa job at a lowerlevel.Similarly
ofundereducation.
theorypredictsa (somewhatsmaller)positiveeffect
In orderto ascertain
to whatextentanyeffects
ofeducationalmismatch
aredue
to skillunderutilisation
and/ordeficits,
models3 and 4 incorporate
measuresfor
thetwotypesofskillmismatch.
In model3 we replacethetermsrepresenting
overand undereducation
ofskillutilisation
and deficits,
bytherespondents'
judgements
as measuredbytheresponsesto statements
1 and 2. The scoreson statement
1 are
recodedsuchthata highscoreindicateshighunderutilisation.
+ a7DEFICIT + e
Y = model 1 + a6,UNDERUTILISATION

(3)

withUNDERUTILISATION= measurebasedon recodedresponseto statement

I
and DEFICIT = measurebased on responseto statement
2.
Models 2 and 3 containspecifications
of the effects
of the two typesof mismatcheson labourmarketoutcomes.For model3, assignment
theoryleadsto the
of a negativeeffect
of underutilisation,
prediction
analogousto thenegativeeffect
The theoryalso predictsa (somewhatcounterintuipredictedforovereducation.
ofskilldeficits,
whichareinterpreted
tive)positiveeffect
hereas theskillcounterA skilldeficit
thusindicatesa job aboveone'sownlevel.A
partofundereducation.
comparisonofthesemodelswillprovidean indicationofwhichkindofmismatch
has thestronger
overalleffect
on theoutcomein question.

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JIM ALLEN AND ROLF VAN DER VELDEN

443

in whichboth
fromour pointofviewis a modelspecification
More interesting
areincludedtogether.
educationalmismatches
and skillmismatches
Thiswillallow
theneteffect
us to determine
ofeachkindsofmismatches
aftercontrolling
forthe
of theother.This specification
is shownin model4
effect
Y = model2 + a6UNDERUTILISATION+ a7DEFICIT+ e
(4)

5. The effects
on wages
of mismatches
Table 4 presentsthe resultsof the analysison the (naturallog) of hourlywages.
Model 1 showsthatonly 12% of the wage differences
can be explainedby the
variablesin themodel.Thisseemsquitelow,butbutone shouldbearin mindthe
of thegroupin termsof basichumancapitalaspects.There
relativehomogeneity
arein factquitelargedifferences
betweenthedifferent
educationallevelsacquired.
educationratherthan highervocationaleducation
Having followeduniversity
yieldsa wage increaseof 23% (exp(0.211)). Having followeduniversity
plus
Table 4 Resultsof regression-analyses
withdependentvariableIn (hourlywage)
Model 1
Dependentvariable:
In(hourlywage)

SE

Humancapital
Levelofeducation
(reference
groupHVE)
University+
postgraduatestudy
University
HVE+
postgraduatestudy
Tenure in currentjob
Experiencebefore
currentjob

match
Education-job

overeducation(years)
undereducation(years)
job outsideown field

match
Skill-job

skillunderutilisation
(statement1)
skilldeficit
(statement2)
Constant
AdjustedR2
N
*

SE

Model 3
B

SE

Model 4
B

SE

0.262* 0.023

0.316" 0.023

0.244* 0.023

0.304* 0.023

0.211" 0.018
0.073* 0.018

0.247* 0.018
0.110* 0.017

0.206* 0.018
0.065* 0.018

0.243* 0.018
0.103" 0.018

0.011" 0.002
0.011" 0.001

0.010" 0.002
0.011* 0.001

0.011* 0.002
0.011" 0.001

0.010* 0.002
0.011" 0.001

Jobcharacteristics
temporaryjob
self-employed

Model 2

-0.145*
-0.033

0.022 -0.154*
0.024 -0.043

0.021 -0.137"
0.023 -0.046

-0.081" 0.005
0.036* 0.012
-0.036
0.015

0.021 -0.148*
0.024 - 0.050

0.021
0.023

-0.071" 0.006
0.035* 0.012
0.031 0.015
-0.060*

0.005 -0.032*

0.006

0.000

0.005 - 0.004

0.005

2.938* 0.043
2.947* 0.042
3.080* 0.047
3.033
0.12
0.23
0.17
0.24
2217
2188
2170
2141

0.047

at 1% level
significant

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444

EDUCATIONAL

VS SKILL

MISMATCHES

studyafter
studyevenleadsto a wageincreaseof30%.8Postgraduate
postgraduate
highervocationaleducationincreaseswagesbyabout8%. Model 1 showspositive
ofbothexperience
effects
variablestenureand experience
beforecurrent
job, and a
has no significant
forhavinga temporary
negativeeffect
job. Beingself-employed
effect
on wages.
In model2 theindicatorsof educationalmismatches
are added to themodel.
in an adjustedR2 of0.23.Thereis
Thisimproves
themodelfitmarkedly,
resulting
a significant
of undereducation,
whichconfirms
theprediction
that
positiveeffect
educationallevelis higherthanthe one
holdinga job forwhichthe appropriate
followed
resultsin higherwages.Thepredicted
effect
of
bytherespondent
negative
overeducation
is also observed.In linewiththepredictions
of assignment
theory
and theresultsobtainedin earlierresearch,
of overeducation
theeffects
are conthan
for
those
undereducation.
Each
of
undereducation
siderablygreater
year
(workingaboveone's level)yieldsa wageincreaseofsome4%. Eachyearofovereducation(working
belowone'slevel)leadsto a decreasein wagesof8%. Thereis
no significant
effect
ofworkingin a job forwhichone's own or a relatedfieldof
educationis not required.It is interesting
to note thattakingeducationalmismatchesintoaccountincreasesthecoefficients
forowneducation.Thisreflects
the
factthatthereference
ofhighervocationaleducationwithoutany
group,graduates
additionalpostgraduate
ofindividuals
workstudy,showedthelowestproportion
ingbelowtheirown level.
In model3 we use skillmismatches
insteadofeducationalmismatches
to explain
differences.
the
'skills
of
shows
Underutilisation,
wage
counterpart' overeducation,
theexpectednegative
effect
on wages.Bycontrast,
a skilldeficit
appearsto haveno
effect
at all on wages.Skillmismatches
accountfora good deal lesswagevariance
thando educationalmismatches:
the adjustedR2 amountsto 0.17, comparedto
0.23 formodel2.
Model 4 combinesboth educationalmismatches
and skillmismatches.
Both
kindsof mismatches
have a significant
effecton wages,even when controlling
fortheother.However,abouthalfoftheeffect
of skillunderutilisation
disappears
wheneducationalmismatches
are takeninto account.By contrast,
onlya small
of over-and undereducation
are accountedforby skillmispartof the effects
matches.In termsof additionalexplainedvariance,educationalmismatches
seem
to be muchmoreimportant
thanskillmismatches.
Whereasthe adjustedR2 in
model4 is justbarelyhigherthanthatin model2, itis clearlymuchhigherthanin
model3.
The resultspresented
in Table4 are inconsistent
withtheexplanation
givenby
of over-and undereducation.
Thisexplanaassignment
theoryto thewageeffects
tion holds thatsuch effects
reflectdiffering
levelsof productivity
as the match
betweenrequiredand availableskillsis varied.In line withthisexpectation,
we
8Thesewagedifferentials
aregreater
thanthosenormally
foundforgraduates
one yearaftergraduation,
thattheage-earnings
foruniversity
is steeperthanforgraduates
fromhigher
indicating
profile
graduates
vocationaleducation.

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445

do observea significant
However,
negativewage effectof skillunderutilisation.
to whatwouldbe expectedon thebasis of assignment
skillmistheory,
contrary
matchesaccountforonlya smallproportionof the wage effects
of educational
mismatches.
Skilldeficitappearsto haveno effect
at all. Thismightbe due to the
lowereffects
of undereducation
in generalin combination
withthelow threshold
valueof our measureof deficits.
As indicatedat thestartofthispaper,educationalmismatches
havebeenfound
to affect
a broadrangeoflabourmarketoutcomes,notjustwages.Outcomessuch
as job satisfaction
and on-the-jobsearchare importantnot onlyto individual
but also fromthe pointof viewof the workings
of the labourmarket.
workers,
In particular,
we wouldliketo knowto whatextentand in whatwaydissatisfaction
withthematchbetweenschoolingand/orskillsand thecharacteristics
of thejob
constitutes
a motivation
forindividuals
to seekemployment
bettersuitedto their
owncapabilities.
In thefollowing
twosectionswe analysetheeffects
ofeducational
and skillsmismatches
on the dependentvariablesjob satisfaction
and job quit
intention.

6. Mismatchesand job satisfaction

In thissectionwe discussthe effects
of mismatches
and othervariableson job
satisfaction.
wereaskedto ratetheirover-alljob satisfaction
on a scale
Respondents
from1 (veryunsatisfied)
to 5 (verysatisfied).
Thisvariablehasbeenrecodedintoa
markedanswercategory
4 (satisfied)or 5
dummywithvalue 1 iftherespondent
0
and value otherwise.
To facilitate
a comparisonof effects,
the
(verysatisfied),
same independent
variableshave againbeen includedas used forthewage estimates.A numberofindicators
ofjob quality,including
have
In(hourly
wage)itself,
also been includedas controlvariables.The otherindicators
comprisethegraduates' ratingsof a numberof aspectsof theircurrentjob, namelythe degreeof
autonomy,the varietyof worktasks,the prestigeassociatedwiththe job, and
theopportunity
to introducetheirown ideas.Thesecontrolvariablesare importinfluence
bothjob satisfaction
ant,sincethequalityof thejob mightconceivably
and theresponsesto statements
1 and 2. Table5 presents
theresultsofthelogistic
regression
analysis.
Model 1 showsthatjob satisfaction
is strongly
influenced
byjob characteristics.
As one mightexpect,wageshave quite a strongeffecton job satisfaction,
and
are also moresatisfied.
The respondents'
self-employed
respondents
job quality
forvarietyand room for own ideas, also show a strong
ratings,particularly
effect.
we findno significant
effect
of holdinga temporary
Surprisingly,
job.
Model 2 showsno improvement
in modelfit.Overeducation-working
in a job
thatrequiresa lowerlevelof educationthanone's own-has a negativeeffect
on
thejob occupant'ssatisfaction,
buttheeffect
is notsignificant.
Undereducation
has
no significant
effect
on job satisfaction.
The sameappliesto workingin a job that
does not matchtherespondent's
fieldof education.

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446

EDUCATIONAL

VS SKILL MISMATCHES

Table 5 Resultsoflogisticregression-analyses
withdependent
variablejob satisfaction
variable:
Dependent
(very) satisfie
d.
withcurrent
job

Model1

Model2

Model3

Model4

. .B. . . . . . .SE
....

. .B. . . . . . .SE
....

. .B. . . . . . .SE
....

. .B. . . . . . .SE
...

Humancapital
Levelofeducation
(reference
groupHVE)
0.225 0.224 0.323 0.237 0.292 0.238 0.218 0.253
University+
study
postgraduate
-0.051 0.170 0.057 0.178 0.060 0.181 0.038 0.190
University
0.199 0.162 0.273 0.170 0.217 0.172 0.202 0.181
HVE+
postgraduate
study
Tenurein current
-0.032 0.016 -0.035 0.016 -0.038 0.017 -0.040 0.017
job
before
-0.007 0.013 -0.008 0.011 -0.002 0.012 -0.003 0.012
Experience
current
job
Jobcharacteristics
In (hourly
0.830* 0.208 0.638* 0.220 0.458 0.224 0.499 0.236
wage)
0.049 0.195 0.037 0.200 -0.076 0.208 -0.037 0.213
temporary
job
0.797* 0.300 0.774 0.303 0.794 0.315 0.787 0.318
self-employment
0.204* 0.062 0.187" 0.063 0.197" 0.066 0.190* 0.067
autonomy
0.570* 0.062 0.572* 0.063 0.424* 0.068 0.424* 0.068
variety
prestige
0.196" 0.062 0.181" 0.063 0.104 0.068 0.112 0.069
roomforownideas
0.500* 0.066 0.486* 0.067 0.339* 0.071 0.353* 0.072
match
Education-job
overeducation
-0.134 0.055
0.020 0.061
(years)
undereducation
0.124 0.129
0.029 0.136
(years)
-0.190 0.143
job outsideownfield
0.098 0.152
match
Skill-job
skillunderutilisation
-0.760* 0.059 -0.755* 0.062
(statement
1)
skilldeficit
-0.129 0.053 -0.141" 0.053
(statement
2)
Constant
0.756
0.814
0.884
0.928
- 2.230
- 6.381*
- 2.429*
--7.062*
Modelchi-square
405.5*
416.8*
577.5*
571.7"
d.f.
12
15
14
17
11.3
172.0
changein chi-square
166.2
relative
to model1
3
2
changein d.f.
5
relative
to model1
*significant
at 1%level.

In model 3, skillmismatches
are introducedin the place of educationalmismatches.In contrast
to educationalmismatches,
skillmismatches
appearto exerta
on job satisfaction.
The modelfitis greatly
stronginfluence
Skillunderimproved.
utilisation
has a strongnegativeeffect
on satisfaction.
The effect
of skilldeficits
is
also negative,
Skillmismatches
accountfora considerable
althoughnotsignificant.
of job qualityindicators.Notably,the effects
part of the effects
of wages and
prestigeare no longersignificant.

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JIM ALLEN

AND

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VELDEN

447

Thismodelfitsthe
botheducationaland skillmismatches.
Model4 incorporates
the
additional
three
model
data lesswellthan
3, despite
degreesof freedomused.
is now (just) significant.
in model4 theeffect
of skilldeficits
These
Interestingly,
Evenaftercontrolling
resultsshowthatskillmismatches
reallymatterto workers.
a poor matchbetweenavailableand required
fora rangeofjob qualityindicators,
In thefollowing
on job satisfaction.
skillshas a strongnegativeeffect
section,we
on thepart
this
constitutes
a
motivation
to
determine
to
what
extent
effect
attempt
of workersto seekalternative
employment.

7. Mismatchesand on-the-jobsearch
We haveseenthat,althoughskillmismatches
on
onlyhaverathermoderateeffects
An important
questionnowis
wages,theyhavea strongimpacton job satisfaction.
whetherthishas any real behaviouralconsequencesforemployees.Are workers
who experience
a poor matchbetweentheirownskillsand thoserequiredin their
motivated
currentjob
by thisto quit theirjob in favourof otherwork?In this
sectionwe examineeffects
of mismatches
on thelikelihoodthatrespondents
are
We askedtherespondents
whether
theyhad
lookingforalternative
employment.
theresultsofthe
actively
soughtotherworkin thepastfourweeks.Table6 presents
logisticregression
analysis.
Model 1 showsthaton-the-jobsearchis strongly
influenced
by thevarietyof
worktasksand theroomto introduce
ownideas.Othercharacteristics
thatshowed
an effecton satisfaction,
such as wages,don't appearto constitute
a sufficient
motivation
to actively
seekotherwork.
Model 2, in whicheducationalmismatches
havebeen introduced,
does not fit
thedatasignificantly
betterthanmodel1. A poormatchbetweenformalschooling
and thatconsideredappropriate
to thejob does notincreasetheprobability
thata
workerwillseekotheremployment.
Model 3 showsthatskillmismatches,
in particular
underutilisation
ofskills,do
haverealconsequences,
in termsof on-the-jobsearchbehaviour.The modelfitis
of thesetwo variables.Workerswho
improvedconsiderably
by the introduction
an
of
morelikelyto look foralterreport underutilisation skillsare significantly
nativeemployment
thanthosewhoreportlittleor no underutilisation.
Skilldeficits
also have a positiveeffect,
on conalthoughthisis not significant.
Interestingly,
of skillmismatches,
trollingforthe effects
wages now also show a significant
positiveeffecton on-the-jobsearch. By contrast,the effectsof varietyand
to introduceown ideas are no longersignificant.
opportunity
As was thecase in theanalysesof job satisfaction,
model4 resembles
model3
educational
mismatches
into
account
increases
the
effect
of skill
greatly.
Taking
deficits
to thepointofsignificance,
but negatesthesignificant
ofwages.The
effect
resultsestablishthatskillmismatches
clearlyhave behaviouralconsequences.In
showa significant
effect
on on-thefact,of all thevariables,
onlyskillmismatches
job search.

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448

VS SKILL MISMATCHES

EDUCATIONAL

withdependent
variablelookingfor
Table 6 Resultsoflogisticregression-analyses
otherwork
Model 1

Dependentvariable:
looking
for..............
otherwork

SE

Humancapital
Levelofeducation
groupHVE)
(reference
University+
postgraduatestudy
University
HVE+
postgraduatestudy
Tenurein currentjob
Experiencebefore
currentjob

Jobcharacteristics
In (hourlywage)
job
temporary
self-employment
autonomy
variety
prestige
room forown ideas

.............
B
SE

....
SE

0.067

0.249

0.091

0.240

0.160

0.256

0.167
0.141

0.187
0.179

0.155
0.106

0.195
0.187

0.101
0.140

0.192
0.184

0.148
0.150

0.201
0.193

-0.006
0.000

0.018
0.012

-0.002
0.001

0.018
0.012

-0.004
-0.003

0.018
0.013

-0.001
-0.002

0.018
0.013

-0.169
0.471
-0.259
-0.089
-0.190"
-0.023
-0.246*

0.213
0.189
0.281
0.065
0.065
0.066
0.069

-0.117
0.428
-0.251
-0.089
-0.191"
0.031
-0.237*

0.226
0.194
0.282
0.065
0.065
0.067
0.070

0.047
0.556*
-0.206
-0.072
-0.089
0.069
-0.133

0.221
0.193
0.283
0.067
0.068
0.068
0.073

-0.005
0.478
-0.196
-0.079
-0.093
0.064
-0.138

0.233
0.198
0.285
0.067
0.069
0.069
0.074

0.016
-0.213
-0.151

0.056
0.140
0.148

-0.042
-0.137
-0.069

0.060
0.141
0.152

match
Skill-job

changein d.f.
relativeto model 1

........
B

0.235

overeducation(years)
undereducation(years)
job outsideown field

inchi-square
change
tomodel1
relative

.............
B
SE

0.078

match
Education-job

skillunderutilisation
(statement1)
skilldeficit
(statement2)
Constant
Model chi-square
d.f.

Model 4

Model 3

Model 2

0.873 0.754
62.5
66.5
12
15

0.750

4.0

0.821

0.380* 0.059

0.380* 0.061

0.130

0.052

0.138" 0.053

-2.169

0.889

-1.917

102.5"
14

103.3"
17

40.0*

0.933

40.8*

*significant
at 1% level.

8. Conclusion
In this paper we have exploredthe relationbetweeneducationalmismatches
are indicatedby comparingthe
and skillmismatches.
Educationalmismatches
level
of
with
the
level
and fieldof educationconand
field
education
acquired
sideredmostappropriate
the
Skill
for job.
mismatches
are indicatedby worker's
me sufficient
responsesto thestatements
'My current
job offers
scope to use my
and skills'and 'I wouldperform
betterin mycurrent
job ifI possessed
knowledge

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JIM ALLEN

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VELDEN

449

additional knowledgeand skills'. In assignmenttheorythe two concepts

educationaland skillmismatches
are assumedto be closelyrelated:educational
on productivity
mismatches
whichin turnhave an effect
implyskillmismatches
and wages.
in thispaper have important
Our findings
forresearchinto the
implications
of educationon labourmarketoutcomes.Theyestablishbeyondreasonable
effect
of thedistinction
doubttheimportance
betweenschoolingand skills.The results
for
the
providestrongsupport
assumptionthatthe matchbetweenindividual
human capital and the characteristics
of the job matters.In line with the
predictionsof assignmenttheoryand with findingsfrom earlier research,
educationalmismatches
werefoundto have a strongeffecton wages.Contrary
to the assumptionsof assignment
are
theoryhowever,educationalmismatches
neithera necessary
nor a sufficient
conditionforskillmismatches.
Furthermore,
ofthewageeffects
is accounted
ofeducationalmismatches
onlya smallproportion
forby skillmismatches.
Underutilisation
of skillsalso exertsa negativeeffect
on
of overeducation,
but the effects
are verysmall.
wagesdistinctfromthe effects
do have a strongeffecton job satisfaction
and onHowever,skillmismatches
forjob quality,whereaseducationalmismatches
the-jobsearch,aftercontrolling
on theseoutcomes.
lackanyeffect
Whatdo thesefindings
mean?One explanation
could be thatour operationalisationof skillmismatchesis inadequate.In particularthe indicatorfor skill
deficitsseemsto be somewhatlackingin discriminatory
power,and its effects
are weak.Althoughthisindicatoris not entirely
throughout
lackingin content
and predictionvalidity,
thismeasureis clearlyan important
aim for
improving
futureresearch.Fortunately,
the resultspertaining
to overeducation
and underwhicharein termsofboththetheoryand empiricalfindings
utilisation,
byfarthe
most important,
are in no way affected
by thisindicator.The resultson these
variableshardlychangeat all whenskilldeficits
and undereducation
are omitted
fromtheanalyses.
Thereis no reasonto doubtthebasic validityof theindicatorforskillunderThereis undoubtedly
utilisation.
somenoisein thisvariable,as in everymeasure
obtainedthroughsurveyresearch,
thatrespondents
However,it seemsimplausible
who areworking
belowtheirownlevelto theextentthatthishas a strongnegative
effecton theirwageswould failto reportthattheirskillswerenot beingfully
utilised,ifthiswas in factthecase.The lowerwagesassociatedwithovereducation
musthavea different
cause.
Humancapitaltheory
fortheobserved
providesus withone possibleexplanation
that
with
the
same
level
of
education
but differing
effects,
wage
namely
graduates
abilitiesare sortedin themarket,
withthemostcompetent
obtainingjobs 'above
theirownlevel'and theleastcompetent
obtaining
jobs 'belowtheirlevel'.Accordworkers
arerewarded
ingto thisexplanation,
accordingto individualproductivity,
whichis not dependentin any major extenton the job. In otherwords,the
of over-and undereducation
are spurious,maskingunmeasured
apparenteffects

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450

EDUCATIONAL

VS SKILL

MISMATCHES

ofproductivity
thataretherealdeterminants
and thencewages.
abilitydifferences
This humancapitalexplanationdoes not providean explanationforour finding
ofworkersreportquiteseriousunderutilisation
thata considerable
of
proportion
skills.This could be accountedforby a watered-down
versionof assignment
due to differtheeffects
of educationalmismatches
are primarily
theory,
whereby
ences in unmeasuredabilities,but wherethereis stilla distincteffectof skill
mismatches.
an alternative
fortheobservedeffects.
It has
Screening
explanation
theoryoffers
in commonwiththehumancapitalexplanationthe assumptionthatindividuals
are sortedin the labourmarket.However,in contrastto humancapitaltheory,
on
screening
theoryassertsthatindividualsare sorted-and rewarded-primarily
thebasisof easilyobservableproxiesforproductivity,
ratherthanon thebasisof
itself.One suchproxyis education,buttherearemanyotherssuchas
productivity
workexperience,
Becausetheseotherindicators
are
genderand socialbackground.
distributedwithineducationalcategories,and because different
differentially
employersassigndifferent
weightsto each indicator,a considerableproportion
of workersend up in jobs whichdon't matchtheireducation.Those who as a
resultof thissortingprocessend up in a job belowtheirown levelwillearnless
thanthoseworkingat theirown level,regardless
of theiractuallevelof skill,and
ofthedegreeto whichtheirskillsare beingutilised.In a highlyinstituregardless
tionalisedsystem
ofwagebargaining
as in theNetherlands,
rulesaboutthelevelof
thejob and theeducationalleveloftheoccupantare frequently
into
incorporated
wagescales.
Our resultsrelatingto job satisfaction
and in particular
on-the-jobsearchare
since
shed
on
the
mechanisms
important,
they
light
throughwhichadjustments
take place in the market.Skillmismatchesare an importantcause of job diswhichprovidean incentivefor workersto look for otherwork,
satisfaction,
workwhichis bettersuitedto theirown abilities.This showsthat
presumably
in thelabourmarketare strongly
drivenbytherelationbetweenjob
adjustments
contentand individualabilities,and less by the materialand social rewards
providedbywork.9

Acknowledgements
Thisarticle
is a revised
version
ofa paperprepared
fortheconference
'SkillMeasurement
and Economic Analysis',27-29 March 2000, Universityof Kent, Canterbury.We would like

to thankLexBorghans,
LiaPotma,
TimoHuijgen,
andtwoanonymous
reviewers
fortheir
comments
on earlier
versions
ofthearticle.

are notimportant
to workers,
butcouldsimplymeanthatthe
9 Thisneednotmeanthatsuchrewards
differencesbetween currentrewards and those available elsewhereare not sufficiently
large.

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JIM ALLEN AND ROLF VAN DER VELDEN

451

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452

EDUCATIONAL

VS SKILL

MISMATCHES

Appendix
ofvariablesused
statistics
Descriptive
Table Al Intervalvariables
Variable

mean

standard
deviation

Hourlywage(guilders)
Tenure(years)
job (years)
Ageat startofcurrent
Yearsofovereducation
Yearsofundereducation
Skillunderutilisation
(5-pointscale)
Skilldeficit
(5-pointscale)
injob (5-pointscale)
Autonomy
in job (5-pointscale)
Variety
ofjob (5-pointscale)
Prestige
Roomforownideasin job (5-pointscale)

33.0
3.8
31.1
0.6
0.2
2.2
3.3
3.7
3.9
3.3
3.9

10.3
3.6
5.1
1.1
0.5
1.1
1.2
0.9
0.9
0.9
0.9

Table A2 Dummyvariables
Variable

Percentage

Jobsatisfaction
Lookingforotherwork
Levelofeducation:
+ postgraduate
University
study
University
only
education
+ postgraduate
Highervocational
study
education
Highervocational
only
job
Temporary
Self-employed
Workoutsideownfield

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73
18
12
36
37
16
9
6
20