Vocational training in India: determinants of participation and effect on wages

Abstract

India is at the cusp of a population change and is currently undergoing the phase of ‘demographic dividend.’ This has thrown a challenge towards the policymakers to ensure that there are enough employment opportunities for the ever-increasing labour force. One of the areas where improvement is urgently required in India is skill development. This paper attempts to identify the factors, which affect an individual’s participation in vocational training using nationally representative National Sample Survey Office (NSSO) data. Further, we investigate the impact of vocational training on the wages of an individual at overall and sectoral levels. For addressing the first question of factors that are associated with participation in vocational training programmes, we will be applying logit and multi-nominal logit models. The explanatory variables will broadly be social and economic indicators of the individual as well as the individual’s household characteristics. The second issue of identifying the effect formal vocational training on wages will be analysed through a multiple regression model. We found that being an urban dweller increases the odds of participating in formal vocational training. Further, being male increases the odds of receiving formal vocational training. We found that having formal training increases the wage by 4.7% in the overall economy as compared to a person without any training. The effect is highest in the primary sector, where the individuals with vocational training had a wage increase of 36.9%. Workers with formal vocational training in the secondary sector had an increase in wages by 17.6%. The analysis done in the paper reveals that formal vocational training is associated with higher wages with the effect being the highest in the primary sector. Being male and urban dweller improved the odds of participating in formal vocational training. The model suggests that there exist good economic returns, which are associated with formal vocational training, and hence, it makes sense to invest resources in vocational training.

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