Does vocational education and training act as a safety net in labour markets? Some recent evidence from India

Abstract This study revisits the “safety net” hypothesis of vocational education and training (VET), which posits that vocational training reduces the risk of unemployment, albeit potentially at the cost of lower wage outcomes. Using unit-level data obtained from the Periodic Labour Force Survey (PLFS, 2023-24), the paper examines the relevance of the safety net hypothesis in explaining labour market outcomes of VET-trained individuals in India. In order to do that, we employ a multinomial probit model to analyze employment status and estimate the Mincerian earnings function to examine wage outcomes of VET trained and untrained individuals using a sample of individuals aged between 25 and 59 years. The findings indicate that employment effects differ across employment categories. Informally trained individuals exhibit more favourable employment outcomes than formally trained individuals, particularly through higher probabilities of casual employment. Formal training does not improve access to regular salaried employment relative to untrained individuals and reduces the probability of casual employment, although it increases the likelihood of self-employment. It is also evident from the estimation results of Mincerian earning function that both formal and informal training yield higher monthly earning from wages and salaries compared to untrained persons. Combining these estimation results, this study proves that the safety net view holds only partially in the Indian labour market.