Overeducation does not significantly affect people’s mental well-being, overskilling does

The labor market outcomes of education–occupation mismatches have been extensively studied during the last three decades. Overeducation, in which case workers have received more years of education than is required for their job, is prevalent and widespread in many countries. Studies generally find that overeducation has adverse consequences for labour market outcomes. Overeducated workers are found to have lower earnings compared to those matched ones with the same educational attainment. They also have lower job satisfaction and higher propensity to quit voluntarily from their position.

A few recent studies notice that overskilling is a distinct type of worker-job mismatch that is different from overeducation. Overeducation relies on the comparison between educational attainments with the entry skill requirements of the job. However, overskilling provides a comparison between workers’ accumulated skills with the actual skill requirement on the job. Consequently, overskilling can be considered as a more direct measure of skill mismatch. Similar to overeducation, overskilling has also been found to exert negative influences on labor market outcomes such as wages and job satisfaction.

This paper contributes to the understanding of the impact of the two types of job mis- matches on workers’ mental well-being. Such impact can exist for several reasons. For example, compared to well-matched workers, overeducated/overskilled workers may have unmet aspirations or expectations about their job, which are likely to generate a psycho- logical wellbeing loss. Furthermore, overeducated or overspilled people may compare themselves with people having the same educational attainments/skills but with a matched job, who have been widely found in existing studies to have better la- bor market outcomes such as higher wages. Such relative concerns have been proved in many existing studies to be an important channel for damaging people’s subjective well-being. If overeducation or overskilling exert a detrimental impact on people’s mental well-being, then existing studies focusing primarily on their labor market outcomes may have understated the negative consequences of educational and skill mismatches for the society.

This paper estimates the effects of overeducation and overskilling on mental well-being using fixed effects panel estimations. Our analysis shows that overeducation does not significantly affect people’s mental well-being. However, overskilling has strong detrimental well-being consequences, and the adverse impact is stronger for males than for females. Using a recently developed panel data quantile regression model with fixed effects, we show that the negative effects of overskilling are highly heterogeneous, with a larger impact at the lower end of the mental well-being distri-bution than other parts. Furthermore, our dynamic analysis shows that the damaging effects of overskilling on well-being are transitory, and we find evidence of complete well-being adaptation one year after becoming overspilled.

Chosen excerpts by Job Market Monitor. Read the whole story at Overeducation, overskilling and mental well-being – Flinders University