The Effect of Vertical Educational Mismatch on Wages: Evidence from Indonesia's Waged Sector

Vertical educational mismatch affects nearly half of workers in Indonesia’s wage sector, meaning their education level does not align with job requirements. Wage outcomes vary depending on gender, field of study, and location. Both overeducated and undereducated workers generally receive wage premiums, though overeducated workers in urban areas benefit more than those in rural areas. However, wage penalties occur in several specific fields of study. These patterns reflect differences in labour supply and demand across industries and disciplines, highlighting structural imbalances that influence earnings and the efficiency of workforce allocation.

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