Overqualification, Job Dissatisfaction, and Increasing Dispersion in the Returns to Graduate Education

Increasing dispersion in the returns to graduate education is found, using

quantile regression. This trend is related to rising overqualification. We

distinguish between and validate measures of “Real” and “Formal”

overqualification, according to whether it is or is not accompanied by

underutilisation of skill; and using a unique data series in Britain we report the

trend in overqualification types between 1992 and 2006. The distinction

between types is relevant because employees in the Real Overqualification

group experience greater, and more sharply rising, pay penalties than those in

the Formal Overqualification group. Real Overqualification, but not Formal

Overqualification, is associated with job dissatisfaction. Formal

Overqualification has been increasing over time, and in 2006 characterised

nearly one in four graduates. Real Overqualification has been steady or rising

only slowly; in 2006 it affected less than one in ten graduates. Conditioning on

graduates being matched to graduate jobs, it is found that there is no

significant increase in the dispersion of returns to graduate education. The

normative implication drawn is that the state should provide regular public

information on the distribution of the returns to graduate education.