The mismatch between workers’ supply of skills and demand for skills in the labour market is at the forefront of the policy debate in European countries. On the one hand, the education sector is heavily subsidised in Germany and other European countries. Particularly, tertiary education expanded in the last decade with an increase in public investment. In the context of strong public budget constraints, this gives rise to concerns of a possible overinvestment in education resulting in an oversupply of skills. On the other hand, firms claim that they increasingly face difficulties in filling their vacancies because of a lack of sufficiently qualified labour force. The effectiveness of higher education in producing adequately skilled graduates thus represents a concern for many economic actors.

In this study, we provide a conceptual underpinning of the possible explanations of job-worker mismatch and its implication for different actors in the economy. We define mismatch distinguishing between the perspective of the employee, the employer and the overall economy. From the overall economy and the employer perspective, optimality of a job match hinges on productivity, while what matters for employees is the utility associated to a job. The empirical literature generally employs two kinds of concepts for identifying job-worker mismatches. Qualification mismatch occurs if the level of formal education a worker possesses deviates from the one required for the job; skill mismatch occurs if the worker possesses a higher or lower level of skills than required to perform the job. This study provides an overview of measures and empirical findings concerning these concepts.

Focusing on German graduates, we examine the incidence and direct consequences of job mismatch employing measures from three different datasets. The rate of overqualification and skill mismatch is found to differ strongly between fields of study, type of university and gender. Information about job requirements and the worker’s level in jobrelevant competences are employed to infer skill surpluses and deficits among graduates in more detail.

Additionally, we investigate to what extent jobs of overqualified or skill mismatched graduates are different from jobs held by matched graduates. The results indicate that jobs of matched graduates exhibit higher complexity and creativity requirements while being less monotone than jobs of mismatched graduates. The highest differences in these job characteristics are found if matched graduates are compared to graduates being overqualified and skill mismatched simultaneously. For causal analyses, i.e. regarding wage effects of job mismatch, self-selection is a severe problem. Using direct survey information on reasons for accepting a particular job and satisfaction with job characteristics, this study provides results pointing towards possible self-selection of graduates into job mismatch.

Keywords

job mismatch, overqualification, skill mismatch