Overeducation, Job Mobility, and Earnings Mobility among Holders of First Degrees in Israel

Overeducation—the situation in which one has more schooling than is needed to do one’s job—has been researched extensively for nearly three decades, but some major issues in regard to it are still topics of ongoing debate. By using a panel data, that combines a survey of two cohorts of Israeli first-degree holders and data from administrative sources on jobs and wages, we examine the contribution of job turnover, cognitive abilities and continuing graduate studies to the likelihood of overeducation and wage dynamics. The study produces four main findings. First, rapid job-switching makes a negative contribution to the increase in employee’s wage and there is a negative correlation between two variables—an employee’s tenure and the number of past employers in the years after the completion of degree studies—and the probability of being overeducated. Second, the contribution of the individual’s cognitive abilities and quantitative reasoning skills to the likelihood of becoming overeducated is negative. Third, the wages of overeducated employees are some 11 percent lower and rise more slowly than the wages of those whose level of schooling corresponds to their jobs; this outcome may be interpreted as indicating that the "scars " of being overeducated tend to be long-lasting. Fourth, the overeducated workers have lower propensity to continue to advanced academic studies