Trends in income effects of education mismatch and skill mismatch among Chinese undergraduate graduates from 2018 to 2022

Abstract

As higher education expands, concerns about its value have arisen due to rising educational mismatches among undergraduate graduates. Using data from the Shaanxi University Graduates’ Employment and Entrepreneurship Quality Tracking Survey from 2018 to 2022, this study employs multiple linear regression and Heckman’s two-step method to analyze the distribution patterns, income effects, and trends associated with education and skill mismatches among Chinese undergraduate graduates. Key findings include: (1) The proportion of various education and skill mismatch combinations ranged from 47.86% to 53.87%, indicating that nearly half of undergraduate graduates face education or skill mismatch risks. (2) A weak but stable correlation exists between educational mismatch and skill mismatch in employment. (3) Different combinations of education and skill mismatch result in distinct income effects compared to the genuine educational match (the reference category). Specifically, compared to the reference category, the matched-in-education but overskilled category yields an income premium due to superior skill, consistent with human capital theory; the mismatch types related to overeducation impose an income penalty because these individuals are generally employed in lower-level positions, aligning with job competition theory. Over time, the earnings premium associated with combinations of education and skill mismatch tends to decrease, while the earnings penalty increases. Our findings are contextualized within China’s economic development and higher education policies.