# **1. Introduction**

Anecdotes abound in the Danish public debate about well-educated immigrants who cannot seem to obtain jobs that match their formal qualifications. An individual, who has a job that he is formally overqualified for, is said to be overeducated. That is, he has more education than is strictly required for his position. Whether or not this is a problem depends on the underlying reason for this occupation-to-education mismatch, whether it is a temporary or permanent phenomenon experienced by the individual, and whether it is a structural feature of the labor market as a whole. Concern arises when overeducation leads to reduced job satisfaction, which in turn may lower worker productivity and thereby also wages. Furthermore, being overeducated for a longer period of time may lower the labor market value of an individual’s formal qualifications if these skills become outdated. Overeducation can have macroeconomic implications as well. The skills of an overeducated worker are underutilized and therefore overeducation can be thought of as a form of skill-related underemployment. Hence, overeducation can be costly for the economy at large because human capital resources are allocated in an inefficient manner. Consequently, widespread and persistent overeducation can lead to lower overall productivity and economic growth.

Against this background, it is relevant to ask how large a problem immigrant overeducation is in the context of the Danish labor market. More specifically, three questions are addressed:

- (1) To what extent are immigrants overeducated?

- (2) Why are some immigrants more likely to become overeducated than others?

- (3) What are the consequences of overeducation for individual wages?<sup>1</sup>

This study fills a gap in the existing literature by examining the phenomenon of immigrant overeducation for the case of Denmark. Most European studies on overeducation – concerning both immigrants and natives – consider the cases of Germany, the Netherlands, Portugal, Spain, Sweden and the United Kingdom (see e.g. Büchel et al. 2003 for a recent overview).<sup>2</sup> In terms of methodology, this study builds on the existing literature, using panel data from administrative registers and applying econometric methods to address the questions posed above. This study distinguishes itself by proposing an alternative measure of overeducation and by having access to a large register-based data set.

> 1 In Denmark assimilation of immigrants in the labour market is typically evaluated in relation to employment rates because high effective minimum wages make it difficult for low-skilled workers (and thereby certain groups of immigrants) to obtain employment. Wage consequences are a “standard“ topic in the overeducation literature, however, which makes comparisons with other studies interesting. Moreover, “[o]ne of the most striking empirical regularities that has emerged from comparative analyses of the earnings of immigrants and the native born is that the partial effect on earnings of a year of schooling is lower for the foreign born than for the native born.” (Chiswick and Miller 2005, p.2) Therefore, in this study we investigate what job-to-education mismatches mean for wages and whether there are differences between immigrants and native borns.

> 2 As far as the author is aware, studies on immigrant overeducation in Denmark limit themselves to two studies concerning young second-generation immigrants whose parents came to Denmark from Turkey, Pakistan and the former Yugoslavia in the late 1960s and early 1970s (Jakobsen 2004, Schmidt and Jakobsen 2000).

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