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 the implications of this theory for over- and under-education by means of direct information about promotions to managerial positions. Using German administrative data entailing an employer-reported – and hence objective – measure of educational requirements, we show that over-educated workers are indeed more likely to be promoted and that this career mobility advantage is more pronounced in the early stages of their working lives. By contrast, under-educated workers are less likely to be promoted to managerial positions. Moreover, in terms of wage growth, while over-educated workers benefit more, under-educated workers benefit less from promotions than their well-matched educational peers. Altogether, these findings strongly support the career mobility theory. Furthermore, by differentiating between internal and external promotions, we provide evidence that promotions are more likely for over-educated workers within the establishment, whereas the opposite applies for under-educated workers. This finding indicates the relevance of both over- and under-education as signals of true ability to other employers