At present more than 230 million people, i.e. one out of every 33 persons in the world is a migrant. Given the unprecedented scale of recent flows, immigration will continue to be a relevant mechanism that has a huge transformative power to change the composition of labour markets. Labour migration policies in developed countries increasingly attract highly skilled immigrants through offering generous subsidies and funding schemes for employees and talented students. The migration literature documents that many skilled people however struggle to find jobs within host countries or take jobs well under their educational level. When workers are overqualified for their jobs there are substantial private and social losses in economic welfare such as deferred labour market assimilation, growing earnings inequality and crowding-out. Moreover, recent technological developments and the changing nature of the tasks of the workers at their workplaces, especially for those who are in routine occupations, act as an additional mechanism that may lead to pockets of over-qualification in the labour markets. Nevertheless coupled with technological developments, areas with greater absorptive capacity and higher human capital are likely to attract diversified skills, and benefit from positive human capital externalities. Therefore, role of dense urban areas (agglomeration economies) and location-specific factors are likely factors on decreasing or escalating skills mismatch in the form of overeducation.
Skills mismatch can be challenging for society and economies in number of ways. The potential issues can be listed as job (dis)satisfaction of employees; poor productivity at the individual level; poor productivity at the firm level; lack of sustained employment; and poor integration of immigrants into labour markets in host countries. Eurostat (2011) highlights this well by showing a skills mismatch for 19 % for natives and 39 % for foreign workers in the EU-27. The employees’ country of origin can influence the magnitude of the mismatch through transferability of hard (credentials) skills and soft (language, ability, cultural factors) skills. When the home country of immigrants’ differs significantly from the host in terms of development level the incomers may even face state dependency for being over or under-qualified in the long term, hence depressing integration into the labour market.
The overall aim of this research is to develop new knowledge on the individual and regional level impacts of skill mismatch. By integrating firm, location, tasks-complexity and cultural attributes into the skills mismatch literature, this program builds an agenda comprising of four lines of inquiry on the firm specific determinants and firms’ pricing of skills mismatch. The specific research objectives are as follows:
1. To investigate whether particular types of firms or sectors reward skill surpluses of employees differently
2. To investigate whether technological change through routinisation has caused overeducation and a respective wage penalty for the overeducated workers
3. To examine whether wages of overqualified employees vary with respect to country of origin
4. To determine whether the utilization of skill surpluses of workers differ between urban and non-urban areas.
