Turning to the equation for immigrants with foreign education, one sees that being placed initially on Track 1 of the Danish language training programmed slightly reduces one’s risk of being overeducated, whilst being placed on Track 2 significantly increases it. The reference category is Track 3.<sup>41</sup> Recall that it is individuals who have not learned to read and write their mother tongue or the Latin alphabet who are placed on Track 1. In this sub-sample this would typically be workers with vocational training, whose risk of being overeducated is low. The second track is for individuals with a short higher education from their home-country. The results here suggest that workers initially placed on Track 2 are more at risk of becoming overeducated compared with workers initially placed on Track 3.

Other studies, such as Green et al. (2005), show that immigrants to Australia, who do not have English as their primary language, have a significantly reduced chance of being employed at all. So it seems safe to say that strong language skills are important in terms of labor market attachment and therefore those that do secure a job (almost regardless of the match) probably have at least a minimum level of Danish language skills necessary to perform that particular job. In any case, our results in section 5.1 indicated that fewer immigrants with a Danish education are overeducated compared with immigrants with a foreign education. This result is probably due to a combination of two effects: First, employers are more at ease about employing individuals with a Danish education because they are familiar with the content and are able to assess the quality hereof because they know the grading and evaluation systems being used. Second, individuals who have completed a Danish education have thereby proved to master the Danish language at a certain level.

Finally, note that in all four estimations, we find that the correlation coefficient rho is large and highly significant. This means that there are substantial unobserved individual effects that affect the probability of being overeducated.<sup>42</sup>

# **_5.3. Earnings consequences of overeducation_**

The main results of the random effects wage regressions are presented in Table 17, while the complete results may be found in Appendix Tables A5-A8. There are separate estimations for each of the four groups: immigrants in total, immigrants with a Danish education, immigrants with a foreign education, and native Danes. As for the logit estimations, we restrict ourselves to the sub-sample of workers with either a vocational education or a short, medium or long higher

> 41 The track variables are only included in the equation for immigrants with a foreign education because this is where it is most relevant. In general, immigrants who have completed a Danish education must be assumed to have sufficient Danish language skills and do not need the type of general language training provided by the public authorities. Also, this particular language training programme has only been provided (and registered) since 1999. Most immigrants who have completed a Danish education will probably have arrived in Denmark some time before 1999 and will therefore have participated in other Danish language training programmes. Indeed, the data show that less than 2% of immigrants with a Danish education are placed on one of the tracks in this language training programme.

> 42 The results also show e.g. an increasing tendency for native Danes to experience overeducation during the period 2000-2002 compared to earlier years. This result is most probably due to a data break in the DISCO variable. As of the year 2000, certain sources of information used to construct the DISCO variable are no longer available to Statistics Denmark, resulting in a reduced number of individuals with relevant DISCO classifications. This problem, however, is judged to be of minor importance for this analysis.

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