The incidence of, and returns to overeducation in the UK

Abstract

The 1991 wave of the British Household Panel Survey is used to examine the extent of, and the returns to overeducation in the UK. About 11% of the workers are overeducated, while another 9% are undereducated for their job. The results show that the allocation of female workers is more efficient than the allocation of males. The probability of being overeducated decreases with work experience, but increases with tenure. Overeducated workers earn less, while undereducated workers earn more than correctly allocated workers. Both the hypothesis that productivity is fully embodied and the hypothesis that productivity is completely job determined are rejected by the data. It is found that there are substantial wage gains obtainable from a more efficient allocation of skills over jobs.