This paper by Nachum Sicherman explores the phenomenon of over-education in the labor market, examining the discrepancy between workers' actual and required levels of schooling. The study uses data from the Panel Study of Income Dynamics (PSID) to analyze the impact of over-education on wages and labor mobility. Key findings include: 1. **Wage Effects**: Workers with over-education earn higher wages than their co-workers but lower than those with similar education levels in jobs requiring their actual education. Workers with under-education earn lower wages than their co-workers but higher than those with similar education levels in jobs requiring their actual education. 2. **Labor Mobility**: Over-educated workers are younger, have less training, and report higher rates of firm and occupational mobility. They are more likely to move to higher-level occupations. Under-educated workers have more on-the-job training, are older, and have higher rates of firm mobility but lower rates of occupational mobility. 3. **Career Mobility**: Over-educated workers experience greater wage growth when changing occupations, while under-educated workers have steeper wage profiles when changing firms. 4. **Theoretical Explanations**: The paper provides two main explanations for the discrepancy between actual and required education levels: - **Trade-off in Human Capital**: Workers may have similar levels of total human capital despite different levels of schooling. - **Mismatch and Career Path**: The discrepancy may result from a mismatch between worker and job, or it could be a temporary stage in a career path where skills acquired in one job are useful in another. 5. **Quality Hypothesis**: The paper rejects the hypothesis that the discrepancy is primarily due to differences in worker quality as a dominant explanation. The study concludes that the observed discrepancies are more likely due to mismatches and career path considerations rather than quality differences.This paper by Nachum Sicherman explores the phenomenon of over-education in the labor market, examining the discrepancy between workers' actual and required levels of schooling. The study uses data from the Panel Study of Income Dynamics (PSID) to analyze the impact of over-education on wages and labor mobility. Key findings include: 1. **Wage Effects**: Workers with over-education earn higher wages than their co-workers but lower than those with similar education levels in jobs requiring their actual education. Workers with under-education earn lower wages than their co-workers but higher than those with similar education levels in jobs requiring their actual education. 2. **Labor Mobility**: Over-educated workers are younger, have less training, and report higher rates of firm and occupational mobility. They are more likely to move to higher-level occupations. Under-educated workers have more on-the-job training, are older, and have higher rates of firm mobility but lower rates of occupational mobility. 3. **Career Mobility**: Over-educated workers experience greater wage growth when changing occupations, while under-educated workers have steeper wage profiles when changing firms. 4. **Theoretical Explanations**: The paper provides two main explanations for the discrepancy between actual and required education levels: - **Trade-off in Human Capital**: Workers may have similar levels of total human capital despite different levels of schooling. - **Mismatch and Career Path**: The discrepancy may result from a mismatch between worker and job, or it could be a temporary stage in a career path where skills acquired in one job are useful in another. 5. **Quality Hypothesis**: The paper rejects the hypothesis that the discrepancy is primarily due to differences in worker quality as a dominant explanation. The study concludes that the observed discrepancies are more likely due to mismatches and career path considerations rather than quality differences.