Ruhr Economic Papers

Ruhr Economic Papers #423

Walking Wounded – The Causal Welfare Loss of Underemployment through Overeducation

by John P. Haisken-DeNew and Jan Kleibrink

RUB, 07/2013, 22 S./p., 8 Euro, ISBN 978-3-86788-479-2 DOI: 10.4419/86788479

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Abstract

Using data from the SOEP, we analyze the wellbeing impact of underemployment through overeducation to examine a broader definition of employment loss. Persons leaving a job through exogenous reasons but entering directly into immediate employment may not find a perfect employment match and cannot use their skills fully in the new job. We demonstrate that a „downchange“, although welfare reducing, may be more desirable than suffering the large welfare losses associated with unemployment whilst searching for a more suitable job match. Nonetheless, underemployed persons do not enter into the official job statistics, whilst their welfare loss due to „downchange“ is approximately 50% of the welfare loss of entry into unemployment.

JEL-Classification: C23, J24, J62

Keywords: Life satisfaction; skill mismatch; job change

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