Overeducation and Its Effect on Wages: The Case of Young Workers in Malaysia
This article presents two main objectives: i) to examine the occurrence and determinants of overeducation on young workers in Malaysia, and ii) to examine the effect of overeducation on wages. The analysis covered data of 3,070 young workers using the first survey of The School-to-Work Transition of Young Malaysians (SWTS) study in Malaysia conducted in 2017/2018. Overeducation and overskilling was high at 23.0% and 10%, respectively, when compared to other developing economies. By gender, the probability of being overeducated and overskilled was higher in females than males. The probability was also higher among young workers whose parents have lower education level. Fields of study related to education, health, welfare and services have higher probability for overeducation. Those in arts and social sciences, and general field of study have higher probability to be overskilled. Family-economic status factor suggested that it was essentially linked to the probability of finding a job. This study found that the wage penalties of 21.3% and 6% were due to overeducation and overskilling, respectively. By considering the potential of sample selection bias, the Heckit sample correction method was applied. This study provides a novel analysis of overeducation among young people in the Malaysian context, which has not been previously explored.
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