It is one of the most common, and yet arguably most misunderstood, rejections for job applicants – overqualification. Many candidates immediately ask themselves: Is there really such a thing as being ‘too good’? In general, we have a perception that striving for the better is always beneficial, up to the point where things are ‘too good to be true’ – but even in this phrase, it is not the status of someone or something being good that is problematic, but the inherent fear of an entity or situation being so perfect that there must be a catch to it.

In order to understand the motive behind the argument of overqualification, we must assume the perspective of organizations, for which employment is always an economical calculation: if the cost of employing and retaining an individual is below, or in some cases equal to, the value that is generated through the employed individual, the company is likely to go forward with hiring said individual. This equation works for both positions that directly generate revenue (such as sales) and those that generate indirect revenue (such as administration). Given that equation, would it not be beneficial for organizations to hire those who are as qualified as possible? No, not necessarily – hence the reason of rejection for overqualified candidates.

Economics has the concept of diminishing returns, which, with small variations, hold true for human talent as well – the organization has a requirement, which needs to be addressed by an employee. The aim is to satisfy the requirement (be it, for example, selling products, staffing the reception, or processing paperwork) through hiring someone qualified and sufficiently competent to carry out said task. It is the company that establishes which qualifications have to be met to fill a given requirement, with such qualifications often focusing on quantifiable items such as years of experience and academic degrees.

Let’s assume the organization hires a candidate. Now that the initial requirements of the organization are satisfied, there is the question of how much value qualification that exceeds the job’s requirements will actually add – will someone with more years of experience necessarily sell more products or process papers faster? To some degree, yes, but such value addition is subject to diminishing returns. While someone with two years of experience might process papers faster than someone with no experience whatsoever, there is a ceiling in each job that renders qualification that exceeds such ceiling produce no tangibly more valuable (both quantitatively and qualitatively) results than the qualification required to reach the ceiling. To take our example further, someone with 5 years of experience might again process papers faster than someone with two years of experience – but how much faster can someone with 10, 15, or even 20 years of experience process papers in comparison to someone with 5 years? The difference will be neglectable, as it can be argued that someone who processed papers for 5 years is fully sufficient to handle the task in an efficient manner. Even worse: the cost the company would have to bear when retaining someone much more qualified could possible far exceed the minor difference that such qualification would produce - resulting in the company not hiring due to overqualification.

It is due to supply and demand that higher qualification renders individuals with certifications and more years of experience under their belt to be thought to be more sought after in the market – simply because the number of individuals with such feats is limited. It is the arguably also the dynamic of supply and demand that ultimately renders organizations shying away from hiring individuals they deem to be overqualified – while the value addition of overqualified candidates is often marginal, sought-after individuals are often aware of their relative rarity and can command higher salary or would be difficult to retain for extended periods of time given that they are more prone to be poached by competitors, adding further implied cost to the already higher cost of remuneration.

There are other factors that come into play – such as employers fearing that overqualified candidates would become bored or would push for a promotion too soon – and some companies try to limit their exposure to legal liability by using overqualification as an excuse for rejecting applications. However, when assuming the perspective of the organization and economic theories, it becomes easier to understand the reservations employers have when it comes to hiring candidates that exceed the internal requirements companies envision for the job they are hiring for.