Over-education: What influence does the workplace have?

The wage and job satisfaction impacts for over-educated workers have been well-documented; yet little attention has been paid to the consequences for firms. In this paper we examine over-education from the perspective of the workplace. Using linked employer–employee data for the United Kingdom, we derive the standard worker-level penalties on wages and job satisfaction. We then show how over-education rates across workplaces adversely influence workplace pay and workplace labor relations. For individual workers who may be at-risk of over-education, we also distinguish between workforce composition effects and workplace labor practices, such as hiring. The effect of over-education on job satisfaction is particularly strong and its effects are evident at the workplace level. Our results suggest that investigations of over-education at the level of the firm are a promising area of inquiry.