Educated Unemployed, Educational Subsidies and Growth

In: The Pakistan development review: PDR, Band 23, Heft 2-3, S. 395-412

Abstract

The subject matter of the present study is educated
unemployment, a commonly observed phenomenon. especially in some of the
more populous LDCs like India. Such an inquiry is warranted for two
different reasons. First of all, It is a common observation that
educated unemployment does not deter the demand for education; see, for
example, Blaug et at. [3]. The question that needs to be answered is why
do people go in for education in spite of this widespread unemployment?
Secondly, it is an important policy question for governments of such
LDCs as to whether education should be subsidized or not. Whereas the
long-term gains in productivity accruing from a more educated labour
force are undeniable, there is now also a growing realization that
educational subsidies, by affecting educational costs, have a part to
play in increased educated unemployment. In addition, such subsidies,
being financed by taxes, reduce disposable income and hence further
reduce an already inadequate supply of domestic savings for physical
capital formation.