Overeducation and earnings in the Australian graduate labour market: an application of the Vahey model

This study explores the effects on earnings of overeducation, required education, and undereducation (ORU) in the Australian graduate labour market, using data from the 1999–2009 Graduate Destination Surveys. The Vahey [2000. “The Great Canadian Training Robbery: Evidence on the Returns to Educational Mismatch.” Economics of Education Review 19 (2): 219–227] dummy variable specification, which permits an assessment of ORU earnings effects at different extents of educational mismatch, is adopted in the analysis. The findings reveal that while ORU earnings effects vary considerably across different extents of mismatch, earnings penalties were especially large in lower job categories. There is a strong tendency for earnings to follow jobs and for the distinction among types of university qualifications to lessen the more extensive the overeducation.