Qualitative Mismatches

Qualitative mismatches arise when the qualifications or skills of workers, individually or in the aggregate, are different from the qualifications or skills required or specified for their jobs. This review provides an introduction to the subject as well as a survey for social scientists conducting research on incidence, causes and consequences of qualitative mismatches. The review distinguishes between short run mismatches occurring between workers and jobs and long run aggregate mismatches that arise from shifts in supplies and demands for workers. Incidence of qualitative mismatches is related to regression toward the mean and wage consequences are explained by assignment models with Nash bargaining, among other theories. The review considers explanations of current long run qualitative mismatches provided by Goldin and Katz as well as others, and describes the differences between the U.S. and other countries in the evolution of the imbalance. A primary source for the difference in outcomes is that private costs of higher education are significantly higher in the U.S. The review considers policy implications of qualitative mismatches and contrasts educational approaches in the U.S. and European countries. Open questions in qualitative mismatches are considered including the determinants of wage consequences, how qualitative mismatches change with the business cycle, the relevance of qualitative mismatches for search and matching models of the aggregate labor market, the reduced supply response of higher education in the U.S. in spite of greater educational differentials, causes of increasing inequality, and optimal policies in the short and long run to reduce qualitative mismatches.