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 61st, 66th and 68th 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. � 2016, Indian Society of Labour Economics.