The Impact of Educational Mismatch on Firm Productivity, Wages and Productivity-Wage Gaps in Different Working Environments

Given the clear development of the educational mismatch phenomenon in our advanced economies, it seems interesting to investigate the effects of such phenomenon on the labour market. Based on available databases, this thesis gets into the research area of new working organizations and their effects on firm performance in a broader sense, by relying on a double stance. From the firm’s point of view, it analyses how educational mismatch impacts firm productivity (Chapter 2) and profitability (Chapter 3), according to different working environments. Chapter 2 provides first evidence on whether the direct relationship between educational mismatch and firm productivity varies across working environments, materialized as a socially responsible environment and a challenging environment. The results show that corporate social responsibility creates a working environment that fosters the positive impact of over-education on productivity, suggesting that socially responsible firms are more able than others to take advantage of the surplus knowledge of their over-educated workers. When investigating the role of a challenging environment, our results show that over-educated workers are more productive in firms that (i) require higher skills, (ii) rely on high-technological/knowledge processes, and (iii) operate in a more uncertain economic context, these three environments materializing a challenging situation. Chapter 3 reveals a profit-ability profile in the form of an inverted L with, at firm level, under-education being associated with a negative impact on profits, whereas higher levels of normal and over-education are associated with positive returns for firms. It also underlines caveats of relying on human capital hypothesis since increasing educational norms is associated with productivity gains that outpace hikes in labour costs, with the returns, in the case of Belgium, being captures by firms in the form of higher profits. Finally, it shows that in the particular context of high-tech industries, over-education could be a profitable strategy because hiring above educational norms leads to higher levels of profitability.From the workers’ point of view, this thesis analyses the wages impacts of educational mismatch by deepening and expanding the educational mismatch phenomenon to the skills mismatch phenomenon. Chapter 4 investigates the impact of educational and skills mismatches on workers’ wages by relying on three mismatch situations: (i) the apparent matching, where a worker is found to be properly educated but over-skilled; (ii) the apparent over-education, where a worker is found to be over-educated but properly skilled; and (iii) the genuine over-education, where a worker is found to be over-educated and over-skilled. Beside these considerations, this chapter also analyses whether the origin of the worker may influence the wage response to educational and skills mismatches. The results show that all specifications of over-education and over-skilling impact wages negatively, with the highest penalties for genuine over-education. When investigating differences between native and immigrant workers, the results suggest that immigrants suffer from a slightly higher pay penalty than natives. European immigrant and native workers thus do not seem to be that differently impacted by mismatches in terms of education and/or skills.