Overqualification: Permanent or Transitory?

This paper analyzes job mismatches in Switzerland based on a subjective measure of overqualification. According to job search and job matching theories, overqualification is a transitory problem for the individual worker that results from informational deficits. This problem ceases to exist once access to better information about the labor market allows the worker to move to a job with a better match. Other theories, however, show that overqualification can also be of a permanent nature because of lasting rigidities such as geographical immobility or discriminatory behavior of employers. Moreover, enduring overqualification may be induced by signaling or sheepskin effects. We test perpetuity of overqualification using panel data from the first five waves of the Swiss Household Panel covering the years 1999 to 2003. Overall, 13% of all workers assessed themselves as overqualified, 80% as adequately qualified and 2% as underqualified. The remaining 5% stated that there is no relation between their qualifications and their jobs. Our empirical analysis reveals little evidence for lasting rigidities that would cause permanent job mismatches. Rather, spells of overqualification are relatively short: about half of all individuals who were overqualified in a given year had an adequate job match one year later. While a short duration of overqualification would be consistent with job search and job matching theories, our observation that the probability of a job mismatch does not significantly decrease with age is at odds with these theories. Our paper provides an alternative explanation for this phenomenon; specifically, that the constant accumulation of experience and qualifications throughout a worker's career implies that, for a good job match to be maintained, qualification-specific job requirements must increase as the worker ages. Should this not occur, even older workers face a risk of becoming overqualified. JEL Classification: I21, J24, J62