Overeducation among Dutch Higher Vocational Education Graduates and Its Consequences for their Wages

The number of Dutch hbo-graduates increased from approximately 60.000 per year in 2000 to 68.000 per year in 2010. Recently, Dutch popular media reported that more and more hbo-graduates are work- ing in mbo-level jobs: overeducation thus seems to be an increasing phenomenon among Dutch hbo-graduates. In this paper we focus on the economic eects of overeducation, our research question is twofold: 1) What is the extent of overeducation, that is, the dierence in wages earned by hbo-graduates in jobs at and below their education level? 2) How did this wage dierential develop over time and how can we explain this development? We nd that there is a large wage penalty to being overeducated: from 17 up to 37 percentage points. A sub- stantial part of this wage penalty can be explained by the fact that overeducated hbo-graduates are truly overskilled for their (temporary) job. The incidence of overeducation among hbo-graduates increased over time and we nd the same increasing trend for the wage penalty to being overeducated. We nd evidence that there is an oversupply of hbo-graduates in the short run: overeducated hbo-graduates are work- ing in increasingly `bad' jobs, but labor market frictions also play an important role in explaining the increasing trend in the wage penalty.