Premiums and penalties for surplus and deficit education -: Evidence from the United States and Germany

An intriguing finding ih the literature on the role of education in the labor market concerns workers who have acquired either more or less education than they say their jobs require. Contrary to predictions from a rigid, structural view of jobs, several authors have found that the labor market rewards workers for having completed more schooling than their jobs require and penalizes workers who have 'too little' schooling. We investigate whether the structural changes in the labor market in the United States over the 1970s and 1980s (see Levy, F., & Murnane, R. (1992). US earnings levels and earnings inequality: a review of recent trends and proposed explanations. Journal of Economic Literature, 30, 1333-1381) affected the rewards and penalties associated with having too much or too little schooling for a job. We then examine whether the same rewards and penalties for surplus and deficit education observed in the United States apply in Germany, a country with a much more structured educational system and labor market. We test explicitly for differences over time in the United States and at a point in time between the United States and Germany. We find, consistent with a universalistic view of labor markets, more similarities across countries than over time. (C) 2000 Elsevier Science Ltd. All rights reserved.