A Task-Based Indicator for Labour Market Mismatch

Abstract

This article uses a task-based approach to measure labour market mismatch and to study the wage effects of mismatch. We propose a new indicator—cognitive mismatch—and contrast it with the commonly used overqualification indicator. We argue that considering the tasks performed in each occupation captures more adequately the complexity of job requirements and tackles the major drawbacks of the existing approaches measuring mismatch. Using rich administrative data from the German Sample of Integrated Labour Market Biographies, we find that 4.8% of the total employment episodes are matched in terms of qualification but mismatched in terms of the tasks performed. Fixed Effects models show that the largest wage loss occurs in cases of mismatch in both education level and tasks performed at work. We conclude that each indicator is capturing different facets of mismatch and that they should be used complementarily in labour market mismatch analyses.