Over-Education and Wages in the Labour Market: Evidence from Iran's Micro-Data

Over the recent past years the supply of educated labor has increased in the Iranian labor market. This change has led to over-education. The concepts of over-education refers to the individual possesses a level of education that is above the required level of education to perform a certain job. This study has dealt with the incidence of Over-education and its wage consequences in the labor market of Iran. The years of education needed for each job has been determined using two criteria, i.e., realized match and job analysis. Based on these two criteria, individuals have been classified in three groups including adequately educated, over-educated and under-educated. More years of schooling, less job experience, being male and employment in private sector lead to higher probability of being overeducated. The wage effect of the relationship between education and the individual’s job is studied using Duncan & Hoffman model. The findings of this model based on realized match criterion show that there is a direct and significant relationship between the years of education which is adequate for each job and monthly salary of the individuals. However, the return of years of over-education and under-education is insignificant.