One Apple Today Rather Than Two Apples Tomorrow: How Can Behavioural Economics Explain Overeducation in Labour Markets?
Halah Essam Alattas*
Published: October 11, 2022
DOI: 10.55162/MCET.03.084
Abstract
Overeducation is a frequently discussed term in the neoclassical conventional view of the labour market. According to this perspective, overeducation resulted from a temporary disequilibrium in labour markets. People are rational participants in the labour market; they opt to overeducate themselves in order to signal their ability, obtain experience and subsequently advance to better jobs. However, behavioural economics rose to prominence due to its distinctive contributions to the study of human behaviour and its challenges to the rationality assumption. In light of concepts such as fairness, loss aversion and hyperbolic discounting models, many long-held neoclassical assumptions are challenged or perhaps need to be reconsidered. This study intends to contribute to the overeducation literature by explaining the phenomena as a kind of labour market stratification that disadvantages overeducated employees relative to others with the same educational level engaged in a well-matched job.
Keywords: Overeducation; behavioural economics; reference point; prospect theory