Occupational hazard: Inequalities in labour market mismatch

In this paper we depart from traditional skills-based measures of occupational mismatch. Whereas skill-based measures are typically non-hierarchical, and involve comparing an individual's skills to those required by their occupation, we devise a new hierarchical method. Specifically, we create two continuous, measures of occupational quality: an `input' measure derived from the initial qualifications of others in an occupation, and an `output' measure derived from the realized wages of others, alongside a corresponding measure of individual ability. We use these detailed, comparable measures to examine the extent to which individuals mismatch into occupations, for the first time in the literature. We explore the nature of mismatch throughout the ability distribution, focusing on systematic differences by socio-economic status (SES) and gender. We find low SES individuals are employed in lower wage and lower qualification occupations compared to their similarly qualified peers. Meanwhile, while females match to occupation groups with higher achieving employees than males, they are employed in lower wage occupations. Educational routes between compulsory education and occupations at age 25 can explain around 33% of these SES gaps among high achievers, but persistent sizeable difference remain, conditional on all post-16 activity. By contrast the gender gap in mismatch remains stable, suggesting that education choices are not driving the differences. Instead, industry worked in accounts for most of the gender gap, though only among low achievers.