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Youth jobs, skill and educational mismatches in Africa

Adamon Mukasa
Youth jobs, skills and entrepreneurship

This paper contributes to the empirical literature on the incidence of skill and educational mismatches among African youth and explores the relationship between job mismatch and wages, job satisfaction, and on-job-search. It uses cross-sectional datasets from the School-to-work transition surveys from 10 African countries for the period 2012-2015  and stresses the importance of controlling for unobserved heterogeneity, sample selection bias and endogeneity problem when analyzing labor market and aggregate effects of job mismatch. Results show that skill and educational mismatches are more pervasive in Africa than in developed countries: 17.5% of employed youth are overskilled, 28.9% are underskilled, 8.3% are overeducated and 56.9% are undereducated. Using an IV-2SLS approach, our estimation results strongly reject the assumptions of the human capital and job competition theories that youth’s wages are only determined by their education levels. In line with earlier research, we found that overskilling and overeducation are associated with a wage penalty and undereducation leads to a wage premium. When included together into the model, both overskilling and overeducation reduce job satisfaction and increase the likelihood of on-job-search of the youth. Using a pseudo-panel approach, our findings suggest that skill and educational mismatches of employed youth are persistent over time and skill mismatched youth are more susceptible to transition towards better matched jobs than youth with inadequate education. Finally, our estimation results show that unemployment has a scarring effect for underskilled youth whereas for overskilled and overeducated, it has both a scarring effect and a stepping-stone effect. The findings have important policy implications on how to address the persistent skill and educational mismatches among employed African youth.