Consequences of Overeducation among Career Starters in Germany: A Trap for the Vocationally Trained as well as for University Graduates?

Abstract

AbstractResearch on the consequences of starting in overeducation often focuses on either secondary or tertiary graduates. We focus on both within one country, Germany. While matching and search models imply the improvement of initial overeducation, human capital theory and stigma associated with overeducation predict entrapment. The strongly skill- and occupation-based labour market for the vocationally trained in Germany mitigates the bridge function of overeducation. As the less standardized tertiary system creates more uncertainties, initial overeducation should be more prevalent and should serve as a bridge to better positions. However, depreciation of human capital and the stigma associated with overeducation oppose the bridge function of overeducation here, too. Using data from the German National Educational Panel Study (NEPS), we compare labour market positions of career starters in overeducation with those not in overeducation in subsequent years using propensity score matching. In the fifth year after labour market entrance, the differences in overeducation between initially overeducated and non-overeducated individuals amounts to 38 percentage points for graduates and 28 for vocationally trained persons. In addition, vocationally trained persons starting in overeducation face higher unemployment risks later on. Our findings challenge the assumption of a bridge function in both educational groups.