Labour market outcomes of immigrants in Austria: with a special focus on over-qualification

This thesis addresses the question of over-education of immigrants in the Austrian labour market. It relies on the recently released PIAAC data of 2011/2012 to give multiple estimates of the extent of over-education of immigrants and compare it to the over-education of natives. Descriptive statistics as well as a logit regression model show that immigrants are much more likely to be over-educated than natives. The incidence of over-education using the direct measure of over-qualification is 40.8% for immigrants, whereas the proportion of natives that is over-qualified is 25.7%. It is interesting that a much lower proportion of immigrants perceive themselves as over-educated. Contrasting over-education with skill mismatch shows that a very high proportion (67%) of the over-qualified immigrants are also over-skilled, indicating that there is a real over-qualification, i.e. that a majority of them are under-utilizing their skills. The second question of this thesis focuses on the wage differences between over-qualified and adequately qualified workers. Estimations of a simple Verdugo N. and Verdugo R. (1989) model show that over-educated immigrants earn on average 10.9% per hour less than the well-matched colleges with the same level of education. While skill control measures do not play a role for the pay implications, controlling for skill under-utilization yields a much lower estimate of the wage penalty of immigrants, which reduces to 4.7%. This magnitude is, however, insignificant and one can conclude that the wage penalty reduces to 0% when skill proviciency and skill controls are controlled for. This evidence suggests that, for immigrants, the pay penalties are to a large extent the result of their under-utilization of skills.