Published: June 2013
Author(s): Nigel O'Leary, Kostas Mavromaras, Peter Sloane, Zhang Wei, Seamus McGuinness

The interpretation of graduate mismatch manifested either as over‐education or as over‐skilling remains problematical. This article analyses the relationship of educational and skills mismatch with pay, job satisfaction and job mobility using unique data from the Household, Income and Labour Dynamics in Australia (HILDA) survey. Over‐education and over‐skilling are found to be distinct phenomena and their combination results in the most severe negative labour market outcomes. Using panel methodology reduces strongly the size of many relevant coefficients, questioning previous cross‐sectional results in the literature. The article shows that the relationship between mismatch and labour market outcomes is strongly influenced by unobserved heterogeneity.