How Does Overeducation Depend on Immigrants’ Admission Class?

Abstract

This study offers new insights into the phenomenon of overeducation by showing that the overeducation rates among immigrants and the wage returns of overeducated immigrants are closely linked to their admission classes. The overeducation rate in Denmark is highest among immigrants from countries that became members of the EU after 2003, 61% of whom are overeducated as compared to 24% of natives. Controlling for demographic and educational characteristics, citizens from these new EU countries, as well as reunified family members, refugees, and students, are highly overeducated compared to natives, while this is not the case for citizens from the Nordics and older EU countries, that is, those that joined the EU before 2003. Furthermore, overeducated higher-educated citizens from the Nordics and from older EU countries only suffer minor wage losses, while other admission classes typically earn between 17% and 36% less than if they had work appropriate to their educational levels. For highly educated refugees, the gap is even larger. These results emphasize the importance of the differences in immigrants’ outside options (e.g., wages and living conditions in the home country) and the admission requirements they face. The results also highlight the potential gains for immigrants as well as their host countries of acknowledging immigrants’ educational skills.