Skills Training and Employment Outcomes in Rural Bihar

Abstract

In a number of countries, youth unemployment is a pressing concern. In India, 54% of the country’s population is below the age of 25 and faces a high rate of (disguised) unemployment. To augment youth employment, the Government of India has launched a number of skills training programs. This paper deals with participation in and the impact of one of these programs [Deen Dayal Upadhyaya Grameen Kaushal Yojana (DDUGKY)] located in rural Bihar, one of India’s poorest states. The analysis is based on data collected in mid-2016 and compares trained participants with non-participants who applied for the scheme but eventually did not attend. We find that the training program squarely reaches the intended target group—rural poor youth. Initially, the program leads to a 29 percentage point increase in the employment rate of the trained graduates. However, 2–6 months after the training, the employment effect of the program drops to zero. A third of the placed graduates leave their jobs due to caste-based discrimination, and another third leave due to a mismatch between the salaries offered and their living costs. The upshot is that while the training program enhances job market prospects, other labor market factors undo the positive effects.