How does education–occupation mismatch shape racial/ethnic labor market inequality among highly educated workers? Bridging the literatures on racial/ethnic discrimination and labor market signaling, we propose a new concept, “racialized signaling,” to explain inequality in the college-to-work transition, operationalized through education–occupation mismatch. We then use longitudinal data to examine the labor market consequences of racialized signaling, analyzing vertical and horizontal dimensions of mismatch. We find that Black and Hispanic graduates experience the negative consequences of mismatch most strongly at the point of occupational allocation relative to their White peers, whereas Asian graduates experience the greatest negative consequences of mismatch regarding wage penalties. Advanced degrees, STEM degrees, and degrees from more selective institutions have some moderating effects, but they do not fully level the playing field for minority graduates. Overall, our findings suggest education–occupation mismatch is a powerful, although heterogeneous, mechanism reproducing racial/ethnic inequality among the most educated segment of the U.S. population.
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