English Language and Skill Mismatch: The Case of South Korea.*

Abstract Most prior research addressing the topic of job mismatch focuses on educational mismatch, while the economic analysis of skills-job mismatch in terms of skill utilization has received relatively little attention in the literature. Using the 2007 Korea Labor and Income Panel Survey (KLIPS), this paper examines the impact on wages of skills-job mismatch between acquired and required English language proficiency in the Korean workplace. The major findings confirm the validity of the assignment theory proposed by Sattinger (1993), which asserts that the returns to additional investment in human capital appear to depend in part on the quality of the assignment of heterogeneous workers to heterogeneous jobs, and thus returns to investment in skills are limited by how well jobs exploit workers’ skills. Specifically, the results are first, that skills-job mismatch based on English language job requirements has a strong statistically significant impact on wages, second, that the returns to over-skilling are negative (the wage penalty), while the returns to under-skilling are positive (the wage premium), and third, that the wage penalty associated with over-skilling is stronger than the wage premium associated with under-skilling.