Skill Mismatch and Returns to Education in Manufacturing: A Case of India's Textile and Clothing Industry

Prateek Kukreja ()
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Prateek Kukreja: Indian Council for Research on International Economic Relations (ICRIER)

Indian Council for Research on International Economic Relations (ICRIER) Working Paper from Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India

Abstract: Today, as India treads the path of becoming a knowledge economy, we face a paradox of intensifying skill shortages coupled with unemployment or underemployment among highly educated workers. While a shortage of skills (or under-education) is definitely a cause of concern, surplus education (or over-education) can also lead to underutilization of skills and further lower demand for low skill workers. Given this scenario, the paper attempts to measure the incidence and extent of skill/education mismatch and analyse the economic returns/cost to over/under education in one of India's largest labour intensive industries: Textiles and Clothing (T & C). The study is based on the 68th round of NSS Employment and Unemployment Survey estimates. Using the over-education/required education/undereducation (ORU) models on a cross section dataset of individuals employed (as a regular salaried/ wage employee or as casual wage labour) in India's T & C industry, we find that the overall educational mismatch ratio during 2011-12 was to the tune of 67.61%. Further, results indicate that while returns to surplus education is positive, it is less in magnitude as compared to returns to required education, suggesting underutilization of excess education. There's also a significant wage penalty associated with each deficit year of education.

Keywords: textiles; clothing; over-education; undereducation; unemployment (search for similar items in EconPapers)
Pages: 25 page
Date: 2018-09
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