U-shaped curve for job search duration and level of education in India

Abstract

It is observed, particularly in the developed countries that there is a negative correlation between level of education and duration of unemployment. With increasing level of education, unemployment decreases in most of the developed countries. In some other developed country contexts—it has been observed that whereas this negative relationship holds generally, at the highest level of education—there is slight growth in unemployment. However, there is a lack of research on duration of unemployment in the developing countries. There were some indications of inverted “U” shaped nature of education and unemployment relationship in the Indian context. However, these are the outcomes of small surveys. Based on NSSO data of several rounds, this paper observes an existence of inverted “U” shaped relationship between level of education and duration of unemployment in the Indian context. It further attempts to explore the reason for this relationship. It argues that this phenomenon is not a supply-curve phenomenon and rather it is a demand-curve phenomenon. Using 61^st, 66^th and 68^th round NSSO data, possible reasons for the duration of unemployment are explored. It has been observed that there is a pattern of job search among the unemployed people. Whereas, the higher educated people look for jobs in the formal sector, people with low level of education are predominantly looking  for jobs in the informal sector. It appears that the level of education leads to higher expectation about the job market and consequently there is a long queue of overeducated people for formal sector jobs. We have looked at other likely factors which might contribute to duration of unemployment. Some of the works on unemployment in the developing countries suggest that consumption pattern might influence duration of unemployment since affordability may lead one to stay out of labour force while searching for a better job. However, this variable does not appear to have significant contribution towards duration of unemployment. It is a well-known fact that age influences incidences of unemployment negatively. However, we observe that age has little to do with duration of unemployment. However, lack of employment in the formal sector (a demand-side phenomenon) and the heightened job expectation due to high education are possibly the reasons for the inverted “U” shaped curve.

Appendix: Classification of “protected” and “unprotected” sector based on NCO code

We have codified “protected” sector employment and “unprotected” sector employment from NCO codes (2004). NSSO provides data for areas of employment one is seeking for using NCO codes. Following is the description of the codes used to represent these two categories. Authors have used discretion while this categorisation was done.

Codes starting with 1 are indicative of legislators, senior officials and managers. These are the most coveted and prestigious jobs. Codes starting with 2 represent professionals, including teachers, professors, engineers, architects, health care workers, businesspersons, and legal and religious professionals. Codes starting with 3 represent skill-based professionals, such as, science professionals, computer professionals, optical equipment professionals, ship- and aircraft-based professionals, quality inspectors, nurses come in this category. All these three sectors can safely be assumed to be included in the “Protected” sector. One particular code 324, which is described as “Traditional Medicine Practitioners and Faith Healers”, is considered a “non-protected” sector. Occupation starting with a 4 indicates clerical jobs. These jobs are also high in demand in India as a “protected” sector job. Among all the codes starting with 5, 521 can be considered as a “protected” sector job since it indicates Fashion and Other models. This job may or may not have benefits apart from salary. But there is no denying that these jobs are quite lucrative and aspired for. Other jobs starting with 52 represent jobs as salespersons and the like. These can also, to some extent, be considered as “protected” (though they are not really protected in the sense that there is lack of long-term contract, health benefit). But some aspects such as salaried employment, entry barrier (it requires education) may represent these jobs as “protected sector” jobs to some extent. The rest of the occupations starting with code 5 can be considered to be in unprotected sector. These are travel attendants, guides, personal care, astrologers, market salespersons, shop salesperson, and demonstrators.

In fact, if we carefully consider the codes used in NSSO as well as the codes used in NCO, we would be able to find out employment in the informal sector which we could coin as “desirable” employment and as good as employment in the “protected” sector, if not better than some of them. Principal Status of occupation: code 12 in NSSO indicates “Employer”. One would become employer when one possesses at least a micro enterprise. To own a micro enterprise requires entrepreneurial capability and it is often desired over many types of wage employments. Similarly, NCO code (2004) starting with 611, 612, 613 broadly indicate entrepreneurial activities. These are entrepreneurial activities in the areas of agriculture, dairy, etc. These occupations are omitted from our analysis.

Occupations starting with code 8 can be considered as “protected” sector. These occupations are operator posts in the manufacturing sectors.

Among the occupations starting with code 7, except the codes starting with 72, can be considered as jobs in the unprotected sector. Codes starting with 72 are jobs for metal moulders, fitters, electronic mechanics, etc. Rest of the codes started with 7 are mining, building-related works, wood, textile, leather-related works, show making, etc.

Any of the occupations starting with 9 can be categorised as non-protected sector jobs. These jobs are the following: street vendors, domestic helpers, shoe repairers, porters, launderers, agricultural and fishery-related workers, mining and construction labourers, and manufacturing labourers.