Vertical Skills Mismatch in Türkiye’s Labor Market : Evidence from Refined Measures

This paper examines vertical skills mismatch in Türkiye using a refined measure that adjusts for occupation, age group, sector, and year to isolate genuine education-job misalignment from compositional artifacts. Drawing on nationally representative labor force survey microdata from 2009 to 2022, the authors show that overeducation and undereducation are both widespread, together affecting more than half of wage-employed workers. The refined measure yields a flatter time trend in mismatch incidence than the standard occupation-only approach - correcting for rising educational attainment among younger cohorts - and produces a slightly lower overall mismatch rate. The authors analyze how mismatch incidence and its wage consequences vary by job- and worker-side characteristics, including firm size, formality, gender, place of birth, and recent job entry. Overeducation is particularly concentrated in formal jobs and medium-sized and large firms, where employers may rely more heavily on educational credentials such as screening devices. Undereducation is more prevalent in micro firms and informal jobs, where hiring norms tend to be more flexible. Compared to matched peers, overeducated workers earn substantially less, while undereducated workers earn modest wage premiums. Mismatch-related wage penalties are largest among women, foreign-born workers, and low wage earners. These findings underscore the value of refined measurement for diagnosing labor market inefficiencies and designing effective policies.