Educational Mismatch and Promotions to Managerial Positions: A Test of the Career Mobility Theory

Career mobility theory suggests that, given a certain occupation, schooling improves upward mobility in terms of promotion and wage growth. We are the first to test its implications for over- and undereducation by means of direct information on promotions to managerial positions. Using German administrative data entailing an employer-reported – hence objective – measure of educational requirements, we show that overeducated workers are indeed more likely to be promoted and that their career mobility advantage is more pronounced at early stages of working life. In contrast, undereducated workers are less likely to be promoted to a managerial position. Moreover, in terms of wage growth, overeducated workers benefit more and those undereducated benefit less from external promotions than their well-matched educational peers. Altogether, these findings provide support for the career mobility theory. Furthermore, by differentiating between internal and external promotions, we provide evidence that for the overeducated, promotion is more likely within the establishment, whereas the opposite applies for undereducation, hence pointing towards the relevance of over- and undereducation as signals for true productivity to other employers. Finally, our results point to the existence of two different groups of overeducated workers, which can be distinguished by whether they accepted their job voluntarily (apparent overeducation) because of better career prospects or involuntarily (genuine overeducation).