Educational mismatch and mobility

With increasing educational attainment in Germany, the issue of inefficient human capital allocation gains importance. Especially overeducation seems to be a problem, since more and more highly educated individuals are required to take jobs that do not match their educational level, settling for lower wages than their peers. This raises the question, how these individuals perform in these jobs and whether they have an advantage compared to their adequately educated colleagues performing the same job. The career mobility model suggests that this is indeed the case, with overeducated workers being more prone to take up on-the-job training, to climb up the career ladder, or to eventually leave to professions more suitable to their educational level. Our empirical analysis, using the German SOEP, confirms this theory for Germany. We find that overeducated workers have a significantly higher probability to take up on-the-job training than adequately educated workers and, at least in certain jobs, have a higher probability to move to jobs that better match their educational level. Furthermore, we find that overeducated workers experience higher wage growth than their colleagues in all job types.