ESRI Discussion Paper Series No.303
Overeducation in the Japanese Labor Market:Evidence from the 2007 Employment Status Survey

Tomotaka Hirao
Assistant Professor, Institute of Education and Student Support, Ehime University

Abstract

It is generally found that overeducated (undereducated) workers earn less (more) than their correctly placed colleagues and reported that the return to year of overeducation, though positive, is smaller than the return to year of required education. Overeducation (undereducation) refers to the mismatch wherein an individual has higher (lower) qualifications than that required for his/her current jobs. In sharp contrast to the lively debate on the economic effects of overeducation in the United States and other western countries, evidence from Japan on this issue is relatively scarce. In this paper, we analyze the effects of overeducation and undereducation on wages in the Japanese labor market. Our study uses the micro data of the 2007 Employment Status Survey gathered from a national sample of workers on educational attainments and present job; the survey was conducted in October 2007 by the Statistics Bureau, Ministry of Internal Affairs in Japan. This study found substantial overeducation penalties and undereducation bonuses, in line with previous researches. This suggests that the occupational structure of the Japanese labor market lacks the capacity to absorb the rising number of educated workers into traditional occupations. Thus, the empirical results of this study raise a number of important issues for Japanese educational and labor policy.

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