The European Skills and Jobs Survey, conducted by CEDEFOP, European Centre for the Development of Vocational Training, has shown that one in five young Europeans are educated more highly than their current jobs require. On the other hand, the same percentage of Europe’s workers are found to be underskilled at the time of their hire. The study states that understanding reasons behind underskilling is particularly important when employees’ level of education is higher than required for their jobs. Several theories were developed to explain this phenomenon. The first one is that employers might receive insufficient information signals about the job candidates – they have the required education and experience, but there is difficulty of ascertaining the exact level of a particular skill that the prospective employee possesses. Another theory states that underskilling reflects skills shortages in the economy where the existing workforce lacks skills when hired but is able to do their job at the minimum level. A third theory reasons that underskilling stems from some companies’ practice to hire underskilled candidates in order to save money. The analysis based on the survey also examines factors that trigger underskilling and provide several suggestions of how to improve the situation. The microdata of this survey are available here.