Aspiration bias and job satisfaction of young Italian graduates

It is often contended that the process of labour market insertion of graduates in Italy is problematic also due to major educational and skill mismatches. We use a unique dataset based on a population survey, which covers 92% of Italian graduates to assess the major determinants of graduates’ job satisfaction at entry in the labour market, i.e., three and five years from graduation. We look at two main forms of mismatch and corresponding potential sources of job (dis)satisfaction: the gap between actual and expected real wage (wage aspiration) and the gap between the skills possessed by graduates and those required by the tasks they perform, i.e., the effectiveness of the degree in the workplace. Our results confirm our predictions on the impact of the twin mismatches and show that whereas the impact of the skills mismatch decreases over time, the impact of the wage aspiration bias increases over time, i.e., going from three to five years from graduation. Finally, our results on the asymmetric response to the wage aspiration bias provide support to the idea that graduates are endowed with reference dependent preferences characterized by loss aversion, where the reference point is given by graduates’ expected wage.