The return to over-education in Israel: evidence from PIAAC data

This study examines the return to a year of schooling and the 'wage penalty' of over-education in the Israeli labour market. I used 2014–2015 PIAAC survey data to examine whether the basic assumption of the ORU wage model, i.e. that the return to a year of over-education is independent of the level of education, is plausible. I find that in Israel, M.A. graduates who are over-educated for their job suffer the highest wage penalty for every year of over-education, which is about twice the size of the wage penalty of B.A. over-educated graduates.