Impact of skills mismatch on gender wage gap
Published: 23 September 2007
The concept of a skills mismatch means that employees’ skills do not match the level of expertise required to perform a particular task or role. A skills mismatch – being overeducated or undereducated for a job – can be defined in different ways, including, for example, through employee self-assessments or by an independent assessment of the level of education required for a particular job category.
A study published by the Institute for Labour Market Policy Evaluation in October 2006 concludes that a mismatch of workers’ skills to the level of education required for their job contributes to the gender wage gap. In this regard, if women were overeducated or undereducated for their occupation to the same extent as men the wage gap would decrease. Overall, the mismatch of skills is more prevalent in private sector jobs and is more common among women.
The concept of a skills mismatch means that employees’ skills do not match the level of expertise required to perform a particular task or role. A skills mismatch – being overeducated or undereducated for a job – can be defined in different ways, including, for example, through employee self-assessments or by an independent assessment of the level of education required for a particular job category.
About the study
The Institute for Labour Market Policy Evaluation (Institutet för arbetsmarknadspolitisk utvärdering, IFAU) has financed the study Wage differences between women and men in Sweden – the impact of skill mismatch (1Mb PDF), which was published in October 2006.
The study analyses the incidence of overeducation and undereducation among employees in Sweden from 1993 to 2002 and examines the impact of these factors on the gender wage gap. To define and determine a mismatch of skills, the study independently assesses the level or number of years of education required for a particular job category.
Data from the annual Swedish Household Income Survey (Hushållens ekonomi, HEK) has been used in the study. From each HEK over the period 1993–2002, a subsample of data relating to respondents aged 20–64 years has been drawn, providing data sets of between 6,500 and 10,200 individuals.
Job-skills mismatch more common among women
Overeducation and undereducation are more common in the private than in the public sector. In the private sector, 42% of women and 48% of men have an education that matches the required level of education for their job, whereas these figures are higher in the public sector – 56% of women and 55% of men. It can therefore be concluded that a job-skills mismatch exists for 58% of women and 52% of men in the private sector and for 44% of women and 45% of men in the public sector.
Only about half of the employed men and women have an occupation that matches their level of education. A higher proportion of women (36%) are overeducated for their job compared with men (26%), while undereducation is more common among men (25%) than women (14%).
Relation between skills mismatch and gender wage gap
Results from the study show that overeducation and undereducation contribute to the gender wage gap. The Table below shows that 1.5%–2.1% of the total wage gap in 2002 could be attributed to a mismatch of skills, while work experience only accounted for 0.5% of the total wage gap.
Over the 10-year period studied, a mismatch of skills contributes to the gender wage gap more than other factors such as work experience and formal education. The sector of economic activity is the only factor examined that contributes considerably more to the wage gap between men and women – the sectors are classified by SNI codes, which are the Swedish equivalent of the NACE classification.
| Year | Total wage gap | Work experience | Education | Skills mismatch | Sector |
|---|---|---|---|---|---|
| 1993 | 16.3 | 0.8/1.3 | -0.5/-0.8 | 1.4/2.2 | 2.6/3.2 |
| 1994 | 15.5 | 0.6/1.5 | -0.4/-0.8 | 1.5/2.9 | 0.1/2.9 |
| 1995 | 16.1 | 0.5/0.8 | -0.8/-1.1 | 1.4/1.9 | 2.9/5.2 |
| 1996 | 14.8 | 0.5/0.8 | -0.7/-1.1 | 0.9/2.2 | 4.1/5.4 |
| 1997 | 15.0 | 0.0/0.0 | -0.6/-0.9 | 1.3/2.2 | 3.0/5.3 |
| 1998 | 16.9 | 0.0/0.4 | -0.5/-0.8 | 1.4/2.3 | 4.2/5.9 |
| 1999 | 16.2 | 0.1/0.1 | -0.8/-1.1 | 1.4/2.1 | 4.2/5.8 |
| 2000 | 15.1 | 0.3/0.5 | -1.6/-2.2 | 1.4/2.2 | 4.8/5.6 |
| 2001 | 15.8 | 0.0/0.0 | -1.9/-2.4 | 2.0/2.8 | 4.6/5.1 |
| 2002 | 14.2 | 0.5/0.0 | -1.4/-2.0 | 1.5/2.1 | 3.2/5.5 |
Notes: The pair of parameters indicated in the Table (columns 2–5) refers to different methods of estimation and can be understood as an approximation of the real values – see p. 12 of the IFAU report for details on how the wage gap is calculated. A negative figure means that the factor tends to decrease the wage difference. An analysis of other factors contributing to the wage gap was not part of this study.
Source: IFAU, 2007
The study further concludes that if women were undereducated to the same extent as men, with everything else being equal, the wage difference between men and women would be 1.6 percentage points lower. If women were overeducated only to the same degree as men, it would decrease the wage gap by a further 0.7 percentage points.
Commentary
Traditionally, factors such as age, education, working time and profession are taken into account and weighted when reporting on wage differences. However, when taking education into account, it is often not considered in relation to the formal level of education required for a specific job category.
The IFAU study shows that taking the mismatch of skills into account is important in order to get a better understanding of why a gender wage gap may exist.
Jenny Lundberg, Oxford Research
Eurofound recommends citing this publication in the following way.
Eurofound (2007), Impact of skills mismatch on gender wage gap, article.
