Education-Occupation Mismatch and the Effect on Wages of Egyptian Workers

This study attempts to fill a void in the literature by examining education-occupation mismatches in Egypt. Using the Egypt Labor Market Panel Survey (ELMPS) 2006 and Egypt Labor Market Survey (ELMS) 1998, this paper investigates whether the empirical evidences of studies on over-education and under-education carry over to the private sector of the Egyptian labor market; evaluates the incidence and magnitude of the education-occupation mismatch by gender and by occupational categories; and determines whether the incidence of educational mismatches has increased over time. The main findings are as follows: there is evidence of an education-occupation mismatch in the Egyptian private sector. The incidence has declined from 51% to 42% during the eight year period, and males are more likely to be mismatched than females. The Egyptian labor market has witnessed a drop in the percentage of overeducated workers at the expense of an expansion in the share of under-educated workers. Empirical findings do not support the main stream literature. Returns to overeducation for white collar and blue collar males are higher than those of adequately educated males and are greater in 2006 than in 1998. Females in white collar jobs, both over and undereducated, received higher returns than adequately educated females in 1998, but returns to over-education were higher and returns to under-education were lower than adequate education in 2006. Females in blue collar jobs are being penalized if they are inadequately matched, especially in 2006, and are rewarded less than males. These findings support the job competition model in a labor market with an imperfect information system whereby employers use education as an indicator of the cost of investing in job training. Workers, on the other hand, may accept these jobs while competing for a job.