The Dec. 2010 issues of Harvard Business Review has a short article entitled, The Myth of the Overqualified Worker that discusses new research that reveals that overqualified applicants/new hires are not more likely to quit sooner or under perform on the job because they feel they are superior. Counter to conventional wisdom, overqualified workers tend to perform better than other employees and they don't quit any faster.
Keep this in mind as you start to hire new employees coming out of this period of economic depression. There are many overqualified applicants out there that are more than worth a second look.
Why would you not hire somebody capable and willing to deliver more than you ask for?
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