Is it worth relying on potential overeducation?

Abstract

PurposeThe authors provide first evidence regarding the direct effect of a hiring policy oriented through higher (over) education on firm productivity. Moreover, the authors shine light on the moderating role of the working environment of the firm, qualified as (1) high-tech/knowledge-intensive and (2) knowledge-intensive activities.Design/methodology/approachThe authors use a detailed Belgian firm panel data and compute a measure of high-education hiring policy robust to sectorial bias.FindingsThe authors show that firms that decide to increase their hiring standards with a higher risk to hire overeducated workers are found to be more productive than others which follow the hiring norms in terms of educational levels. Concerning the role of the technological environment, the authors show that high-tech firms may take advantage of additional skills provided by highly educated workers to a bigger extent, such hiring policy leading to even higher productivity improvements.Originality/valueUnlike much of the earlier literature (still essentially focussed on workers' wages, job satisfaction and related attitudes and behaviours), the authors’ econometric estimates are based on direct measures of productivity. They are also robust to a range of measurement issues, such as time-invariant labour heterogeneity and firm characteristics.