Causes of graduate unemployment in India

The Unit, which now has some twenty full-time research staff working on eight projects, has been seeking to remedy many of the weaknesses in thinking about education systems that were revealed by the Robbins Report. We have been trying to answer such questions as these: Can one establish a connexion between the number of educated people and the productive efficiency of the economy? Can one effectively study the education system as a whole rather than in separate sectors as official inquiries
normally do? Do different ways of financing and providing education affect the opportunities open to students?
The present book takes one such problem: the relation between supply and demand for educated manpower in a developing country. The paradox of educated unemployment in such countries is becoming all too familiar, and the authors have tried to explain how it arises and what can be done about it. They conclude that the persistence of educated unemployment in India can be explained by the resistance of educated people to the fall in their earnings which, according to economic theory, should accompany the increase in their relative supply. This resistance is strongly reinforced by the high correlation between starting salaries and life-time income resulting from the low mobility of labour in India. But how is it that the supply of educated people continues to grow faster than the demand for their services? The authors calculate private rates of return to primary, second-
ary and higher education and show conclusively that, even with unemployment, the pursuit of higher education is a financially profitable investment for the individual. But then using social rates of return, they demonstrate that from society's point of view there has been serious under-investment in primary schooling and relative over-investment at the higher levels of education. They end by suggesting a number of ways which the Indian authorities might consider in trying to control the explosion of higher education.