Educational Mismatch and the Indigenous Labour Market: A Longitudinal Analysis

A key factor that affects the efficiency of investments in human capital is whether people are employed in jobs in which their skills (education) match those required by the job. This paper provides the first longitudinal analysis of educational mismatch among Indigenous Australians in comparison with their non-Indigenous counterparts. Employed Indigenous Australians are substantially more likely to be under-educated and less likely to be over-educated or well-matched than non-Indigenous workers. Over-educated Indigenous workers transition more readily into well-matched or under-educated positions than their non-Indigenous counterparts. Over ten years, income growth was highest for well-matched workers, followed by the under-educated, with the over-educated experiencing the smallest gains. Indigenous workers who were under-educated or well-matched achieved substantially larger income increases over five and ten years than comparable non-Indigenous workers. The higher under-education rate among Indigenous employees may reflect affirmative action policies promoting workers beyond typical educational requirements, or employment practices that value the cultural knowledge and competencies of Indigenous people not captured by formal education credentials.