Abstract
In Malaysia, skilled‐job creation does not match the rising number of tertiary‐educated workers. The resultant accumulation of skill and ability competencies and work experience raises the question of the extent to which this enhances (mitigates) the wage premium (penalty) of over‐education (under‐education). Using data collected in Peninsular Malaysia in 2015, the authors estimate the effects of ability on returns to education. Their findings suggest that improving specific types of ability may be a means of rectifying wage deficiencies resulting from over‐ and under‐education. On this basis, human resource development in schools and in the workplace should focus on developing job‐specific workplace abilities.