Over education among older workers: impact on wages and early retirement decisions

Abstract

As baby boomers approach the later years of their careers and potentially face early retirement decisions, it is worth remembering that their average level of schooling exceeds that of all previous generations. Accordingly, this paper examines the effects of overeducation on wages and early retirement decisions. The impact of overeducation on the wages of older workers is remarkably similar to that found in younger cohorts. With regards to the retirement decision, the literature suggests a link between overeducation and job dissatisfaction and a separate link between job dissatisfaction and early retirement. However, overeducation late in one's career may not be reflective of genuine skill mismatches or job dissatisfaction if skill mismatches occur. If overeducation has any impact on the likelihood of early retirement it is small as the empirical analysis finds no such evidence