Job mismatches in Pakistan: Is there some wage penalty to graduates?

Abstract

In this study, an attempt has been made to estimate the incidence of job mismatch and its impacts on graduate's earnings in Pakistan. The study has divided the job mismatch into three categories; qualification-job mismatch, skill mismatch and field of study and job mismatch. The primary dataset has been used in which the formal sector employed graduates have been studied. This study has measured the qualification-job mismatch by three approaches and found that about one-Third of the graduates are facing qualification-job mismatch. Similarly, more than one-fourth of the graduates are mismatched in skill, about half of them are over-skilled and the half are under-skilled. The analysis also shows that 11.3 percent of the graduates have irrelevant and 13.8 percent have slightly relevant jobs to their studied field of disciplines. Our analysis shows that over-qualified graduates face wage penalty under different approaches. After controlling skill heterogeneity, there is less penalty to apparently over-qualified and more penalty to genuinely over-qualified. The over-skilled graduates face wage penalties and the under-skilled get wage premiums as compared to the matched workers. A good field of study and job matches also improve the wages of graduates.