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If an employer wants to hire for a mid level (level 5) job, in most cases they want to hire someone who is doing a similar job at either slightly below the level of the advertised job, or at that level. What they don't want, in most cases, is someone who is doing a more advanced version of the job currently, because that would be a demotion. Their over qualified applicant would be bored and his/her heart would not be in it and would spend most of their mental energy figuring out how to get back to their previous level of employment. (Pay and responsibilities.)
So what is an overqualified applicant to do when the current job market does not have any opening for someone at their current job title and pay?
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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The perception of an overqualified worker being bored and leaving as soon as possible for something better is real, it's up to you to convince them that you are there to stay and work back up to where you were before, at their organization.
During the interview, talk about using your experience and advanced skills to help co-workers.
As a hiring manager now, I have not worried about overqualified applicants. Because we require from 3 to 10 years specialized experience, depending on the positions in our group, we tend to get people in their low 30s and above. When we get older, "over qualified" people, they tend to have been laid off during the recession, currently working for less money than their pre-recession job. Our pay is generally somewhere in-between, but we have good benefits including a pension so they are likely to stay around and work their way back up again. I hired one guy with an MBA for a position requiring only two years of college, and he worked out great, just getting a promotion last month. When I started here in 2009 I was over qualified, but they took a chance on me because I had the potential to turn around a disastrous function that had been suffering from incompetence the previous 6 years. It was only 18 months before I was promoted, then again a year later.
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