The Impacts of Skill Mismatch on Earnings and Job Satisfaction : Evidence from Japan

Abstract

It is generally found that over-skilled （under-skilled） workers earn less （more） than their correctly placed colleagues. Over-skilling （under-skilling） refers to the mismatch wherein an individual has higher （lower） skills than that required for his/her position. In sharp contrast to the lively debate on the economic effects of skill mismatch in western countries, evidence from Japan on this issue is relatively scarce. In this paper, we analyze the effects of over-skilling and under-skilling on wages and job satisfaction in the Japanese regional youth labor market. Our study uses the microdata gathered from our original survey ; the survey was conducted in January 2017. This study found substantial over-skilling penalties and under-skilling bonuses, in line with previous research. 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 labor policy.