Measuring over-education

Previous work on over-education has assumed homogeneity of workers and jobs. Relaxing these assumptions, we find that over-educated workers have lower education credentials than matched graduates. Among the over-educated graduates we distinguish between the apparently over-educated workers, who have similar unobserved skills as matched graduates, and the genuinely over-educated workers, who have a much lower skill endowment. Over-education is associated with a pay penalty of 5%-11% for apparently over-educated workers compared with matched graduates and of 22%-26% for the genuinely over-educated. Over-education originates from the lack of skills of graduates. This should be taken into consideration in the current debate on the future of higher education in the UK.