February 2024

IZA DP No. 16798: Overeducation and Economic Mobility

Simen Markussen, Maria Nareklishvili, Knut Røed

We assess the hypothesis that declining intergenerational economic mobility in Norway is attributable to a rising signaling value of education accompanied by more overeducation particularly among upperclass offspring. We identify five empirical facts that together point in this direction: • The educational earnings premium has risen, but only through the extensive (employment) margin. • The earnings premium has increased more when education is measured as years corresponding to completed degrees than when measured as time actually invested. • Both educational attainment and the labor market's skill-requirements (as predicted by the occupational distribution) have increased, but attainment has risen faster than requirements such that the incidence of overeducation has increased. • There is a steep positive social gradient in overeducation: Overeducation is more frequent and has risen faster among offspring in upper-class families. • There is a steep negative social gradient in non-employment: Non-employment is more frequent and has risen faster among offspring in lower-class families.