Educational mismatch and the cost of underutilization in Turkish labour markets

There is no guarantee that the right candidate will be matched with the right job in labour markets. If the mismatch is substantial, the surplus education and the deficit in schooling lead to underutilization and a loss in productivity in the economy as a whole. The aim of this study is to understand the importance of these issues for Turkish Economy by analyzing the economic returns of educational mismatch in Turkey. First we explore educational mismatch levels in Turkey for nine different occupation areas in different regions and for different industries using four recent household surveys from 2009 to 2012, which include more than one million observations. Based on this data, we analyze effects of educational mismatch on wages in Turkish labor market by using the ORU models. Results indicate that wage loss of over-educated workers is substantially higher for higher age. Regional ORU estimations show that Istanbul is the region with highest benefit for additional required education. Over-education rewards and under-education penalties are also among the highest for İstanbul. Manufacturing is the industry with the highest population and with the highest wage effects for both over-education and under-education. Among the major occupations, wage effects are in general highest for office clerks. Finally, the cost of underutilization and productivity loss due to educational mismatch is substantial in Turkey.