Migrant educational mismatch and the labour market

Labor market mismatch, particularly ‘over-education’, has a long and controversial history in the labor economics literature. Freeman (1976), who argued that an oversupply of university-educated individuals in the US since the start of 1970s had resulted in the fall in return to education, set the scene for further research on the topic. Even though Freeman’s claims were challenged in a number of papers in subsequent years and the issue seemed to have been resolved with Smith and Welch (1978) declaring that‘ at best Freeman exaggerates the case for an oversupply of college-educated manpower and that he may in fact be dead wrong’, the revival came in a paper by Duncan and Hoffman (1981). Unlike the previous literature which used aggregate data, Duncan and Hoffman used individual level data and compared those who were properly matched, that is, had the required level of education, with those who had either less or more education than their job required. They found that there is indeed some ‘misallocation of education resources’. With this paper a subfield of economics of over-education was born.