The Indian Journal of Labour Economics

, Volume 62, Issue 3, pp 389–411 | Cite as

Effect of Education–Occupation Mismatch on Wages in India

  • Banantika DattaEmail author
  • Udaya S. Mishra


This paper investigates the effect of educational levels on wages across different occupational groups. The existing literature relating to this topic concludes that returns to surplus schooling are less than that of ideal level of schooling required for a job. This observation is not in accordance with the theory of human capital. Many authors observe that workers who are over-educated for a job are paid less than their counterparts (with ideal education level) who are in a job for which they are adequately educated. However, such observations are limited to developed countries and have not been empirically validated in the case of developing countries. Thus, this is an attempt towards analysing the effect of education, especially over-education as regards its bearing on wages in the Indian labour market. This study delves deeper into unfolding the education-wage nexus within each of the seven occupational groups defined for this study. Realised Matches method is used for calculating the over and under-educated for each occupational group. It is found that there is an agreement with human capital theory among all occupational categories in India.


Skill mismatch Over-education Returns to surplus schooling Human capital theory 

JEL Classification

I26 J31 J24 



  1. Acemoglu, D, Autor, D. 2011. Skills, Tasks and Technologies: Implications for Employment and Earnings. Handbook of Labor Economics 4: 1043–1171.Google Scholar
  2. Ahmed, S.F. 2007. Underemployment, Education, and Job Satisfaction. The Pakistan Development Review 46: 905.Google Scholar
  3. Amador, L. 2008. Education and Competence Mismatches: Job Satisfaction Consequences for Workers. In Actas_16.Google Scholar
  4. Bano, R. 2014. 45 Lakh Graduates Jobless. The Times of India. Retrieved from, Accessed 14 May 2019.
  5. Becker, G.S. 1962. Investment in Human Capital: theoretical Analysis. Jounal of Politcal Economy 70 (5): 12–13.Google Scholar
  6. Budría, S. 2008. Education, Educational Mismatch, and Wage Inequality: Evidence for Spain. Economics of Education Review 27 (3): 332–341.CrossRefGoogle Scholar
  7. Budría, S. 2011. Are Educational Mismatches Responsible for the ‘Inequality Increasing Effect’ of Education? Social Indicators Research 102(3): 409–437.CrossRefGoogle Scholar
  8. Daniel P.M., Paul T.S., Larry D.S. 2007. A Mismatch Made in Heaven: A Hedonic Analysis of Overeducation and Undereducation. Southern Economic Journal 73: 901–930.Google Scholar
  9. Duncan, G.J., Hoffman, S.D. 1981. The Incidence and Wage Effects of Overeducation. Economics of Education Review 1: 75–86.CrossRefGoogle Scholar
  10. Grip, A. 2008. Job-Worker Mismatch and Cognitive Decline. Oxford Economic Papers 60: 238–239.Google Scholar
  11. Hartog, J. 2000. Human Capital as an Instrument of Analysis for the Economics of Education. European Journal of Education 35(1): 7–20.CrossRefGoogle Scholar
  12. Hersch, J. 1991. Education Match and Job Match. The Review of Economics and Statistics 73: 140–144.CrossRefGoogle Scholar
  13. Kiker, B.F. 1997. Over-education and Under-education: Evidence for Portugal. Economics of Education Review V 16: 111–125.CrossRefGoogle Scholar
  14. McGuinness, S. 2006. Overeducation in the Labour Market. Journal of Economic Surveys 20: 411.CrossRefGoogle Scholar
  15. McMillen, D.P. 2007. A Mismatch Made in Heaven: A Hedonic Analysis of Overeducation and Undereducation. Southern Economic Journal 73: 901–930.Google Scholar
  16. Mincer, J. A. 1974. The Human Capital Earnings Function. National Bureau of Economic Research, 84: 83–96.Google Scholar
  17. Rubb, M.A. 2005. The Importance of Education-Occupation Matching in Migration Decisions. Demography 42(1): 153–167.CrossRefGoogle Scholar
  18. Rumberger, R.W. 1987. The Impact of Surplus Schooling on Productivity and Earnings. The Journal of Human Resources, 22(1): 24–50.CrossRefGoogle Scholar
  19. Sattinger, M. 1993. Assignment models of the distribution of earnings. Journal of Economic Literature 31: 831–880.Google Scholar
  20. Sicherman, N. 1991. “Overeducation” in the Labor Market. Journal of Labor Economics 9 (102): 113.Google Scholar
  21. Solberg, A.M. 1992. Surplus Schooling and Earnings: A Critique. The Journal of Human Resources 27: 687.CrossRefGoogle Scholar
  22. Teixeira, P.N. 2014. Gary Becker’s Early Work on Human Capital—Collaborations and Distinctiveness. IZA Journal of Labor Economics. Scholar
  23. The National Classification of Occupation. 2004. The Ministry of Labour & Employment, Govt of India, Directorate General of Employment & Training.Google Scholar
  24. Thurow, L.C. 1975. Generating Inequality. New York: Basic BooksCrossRefGoogle Scholar
  25. Verdugo, R.R. 1989. The Impact of Surplus Schooling on Earnings: Some Additional Findings. The Journal of Human Resources 24 (630): 640.Google Scholar
  26. Verhaest, D. 2006. The Impact of Overeducation and Its Measurement. Social Indicators Research 77: 435.CrossRefGoogle Scholar
  27. Vignoles, P.D. 2000. The incidence and effects of overeducation in the U.K. graduate labour market. Economics of Education Review 181: 193.Google Scholar
  28. Wang, C.-H. 2005. The Incidence and Wage Effects of Overeducation: The Case of Taiwan. Journal of Economic Development 30: 43.Google Scholar
  29. Weert, J.A. 2007. What Do Educational Mismatches Tell Us About Skill Mismatches? A Cross-Country Analysis. European Journal of Educatio 42: 69.Google Scholar
  30. Zakariya, Z. 2014. Wage Effect of Over-education and Mismatch in Malaysia: Random Effect Approach. Jurnal Ekonomi Malaysia 48: 11.CrossRefGoogle Scholar
  31. Zhu, F.G. 2010. Overqualification, Job Dissatisfaction, and Increasing Dispersion in the Returns to Graduate Education. Oxford Economic Papers, New Series 62 (4): 743.Google Scholar

Copyright information

© Indian Society of Labour Economics 2019

Authors and Affiliations

  1. 1.Indian Institute of Management BangaloreBengaluruIndia
  2. 2.Centre for Development StudiesTrivandrumIndia

Personalised recommendations