Estimating Skill Mismatch in the Indian Labour Market: A Regional Dimension

Abstract

The article provides an overview of the very pertinent skill mismatch issue in the Indian labour market. It specifically looks into the state-wise overeducation rates, a type of vertical skill mismatch where the education level of the worker exceeds the job requirements. The article tries to provide a regional dimension to the estimates of overeducation and addresses the problem by linking it to the incidence of vocational training among employees. Given that vocational training plays an important role in imparting industry-relevant skills, the article recommends its expansion as a necessary factor for curbing overeducation in states lagging in the industrial sector. Using the recent Periodic Labour Force Survey (PLFS) data, the article unveils trends in recent years where, though the propensity to take vocational training has increased, it is not sufficient to meet the industry’s demands. Also, the stunted proportion of individuals with government-sponsored vocational training signals either inferior quality or low access. The later fact is reinstated when we look at the bias towards higher income households in undertaking such training. Apart from the need to address the supply side of skilled labour, by making training programmes more inclusive, there is also a need to address the demand side to ensure proper alignment between the skills derived from training programmes and those required by the industry. Besides, given the huge informal labour market, there is an urgent need for proper certification and recognition of skills derived from training programmes to ensure their productive employment. The article shows a severe imbalance between the demand and supply sides and calls for active participation of different stakeholders, including the private sector, to address the problem. In this regard, the article shows instances of successful implementation of vocational training facilities in other countries, which can form a basis for rolling out well-defined and coherent programmes.