Career Prospects of Overeducated Americans

In this paper we analyze career dynamics for the nearly 30% of U.S. workers who are deemed overeducated in the literature. We use data from the National Longitudinal Survey of Youth 1979 combined with the pooled 1989-1991 waves of the Current Population Survey to analyze overeducation status transitions and the corresponding effects on wages. We find that overeducation is a persistent phenomenon at the aggregate and individual levels, with 73% of workers remaining overeducated after one year. Further, the hazard rate out of overeducation drops by about 60% during the first 5 years spent overeducated. However, the estimation of a mixed proportional hazard model suggests that this is attributable to selection on unobservables rather than true duration dependence. Finally, overeducation is associated with lower current as well as future wages, which points to the existence of scarring effects.