Determinants of vacancies for management graduates in Indian firms.

AuthorMurti, Ashutosh Bishnu


To understand the determinants of vacancies (1), it is important to understand supply of job opportunities in a labor market. To understand supply of job opportunities, it is a noteworthy idea to explore why certain job seekers are unable to secure employment in the job market. Interestingly, job opportunities are prevailing despite growth in unemployment. The evidence of mismatch between job seekers and job opportunities with reference to skills and competencies of the unemployed can explain the prevailing job opportunities despite growth in unemployment. Quite importantly, it could indicate problems with the operation of the labor market in terms of allocating workforce to jobs and jobs to workforce--for example poor individual job search effectiveness and/or failures in the recruitment strategies of companies. Explanations for the coexistence of vacancies and unemployment include temporal misallocations arising through sluggish adjustment and change especially in periods of rapid firm expansion, which may be intensified by more macro-based persistence effects in unemployment, occupational or demographic immobility--perhaps related to local costs, relative wages and rigidities associated with housing ownership and prices, high reservation wages amongst the unemployed relative to the employment opportunities available, and functional differences in the demographic identification of 'local' labor markets (particularly for vacancies) especially in regions with better commuting infrastructure. Indeed, above mentioned explanations may be complementary rather than competing to examine the coexistence of 'jobs without workforce' and 'workforce without jobs'.

From a macroeconomic prospective, until very recently, the aggregate number of vacancies used to be derived from the number of vacancies which had been notified to the employment exchange (EE) by firms who contacted employment exchange for job seekers. Due to lack of data on vacancies in particular to low human development and highly populated countries such as India seem limit the scope of research on vacancies of management graduates. This paper uses data from a sample survey of 102 firms in India undertaken in 2012 to investigate the determinants of vacancies at the firm level, with focus on how these forces impact vacancies in Indian labor market.

Theory & Previous Evidence

It appears that there is very little previous research which focuses on the determinants of vacancies, particularly in the context of large developing countries such as India. In part, this is undoubtedly due to the paucity of data on vacancies. The literature on matching function and estimates of the Beveridge curve (2) typically take the number of vacancies, or the vacancy rate, autonomous of explanations that are grounded in the context of firm. In this paper, our core objective is to investigate the determinants of vacancies at the firm level. Interestingly, two decades ago, Devine & Kiefer (1991) abridged their research on labor market search as "On balance, the supply side of the labor market is well studied if not perfectly understood. The demand side is wide open ... they must be supplemented by additional studies before the findings can be considered solid". Moreover, DeVaro (2005) argues that "labor economists, sociologists, psychologists, and human resource management specialists have spent the last half-century exploiting the inadequate existing data sets in an effort to learn firm's recruitment behavior".

Holzer, et al., (2006) analyze employers' hiring behavior during the tight United States (U.S.) labor markets in the 1990s. This study centers on the hiring of disadvantaged workers, like groups with criminal records, welfare recipients and short-term employed. Moreover, some of the previous studies which are similar to this paper include Haskel & Martin (2001) (3), Holzer (1994) (4), and Morissette & Zhang (2001) (5). The forthcoming analysis is most closely related to that of Holzer (1994). However, a comparison between this paper and literature seems to be difficult because of discernible differences in the contexts-demography, business environment and so on. In particular, we focus on management graduates vacancy and firms who hire management graduates in Indian labor market.

Data Sources & Methodology

While this research describes determinants of vacancy, using uni-variate and bi-variates patterns, we fit a regression model that specifies vacancy as a function of the year of existence, per cent of management graduates, organization type, skill gap and off the job training. The unit of analysis is the firm that operates in India who hires management graduates at both global and local levels. First, we draw the list of firms using Captiline Database (6). We found that firms in India are distributed unevenly across locations, concentrated in a few geographical units such as major urban agglomerations, in particular global cities (Sassen, 2001) like Mumbai, Delhi, Bangalore and Hyderabad. We chose three global cities Mumbai, Bangalore and Hyderabad. We dropped Delhi since we found having both Mumbai and Delhi may lead to saturation in the pattern that emanates from discernible similarities in business systems and labor markets. On the other hand, Hyderabad brings heterogeneity in the sample. The three cities were seen as different groups to allow proportional representation of enterprises across. After grouping, random method was employed in selecting the companies to avoid researcher's biases in the selection. The statistically acceptable sample size was determined by employing Daniel (1999) (7) method to compute the sample size. We found that a sample size of 96 firms would suffice estimation with 10% margin of error. Following this, we randomly chose firms from the list. Then, we used two channels to collect data from firms: face-to-face interview and online web based tool (8). Subsequently 102 interview schedules (9) were completed, majority of which were administered by face-to-face interviews. A total of 76 (74.5%) were administered by face-to-face interviews while 26 (25.5%) were completed using online survey form.

Vacancy Incidence

Table 1 is split into eight panels that depict percentage distribution of vacancy incidence. While panel A shows aggregate vacancy incidence for vacancies, skill shortage vacancy and hard-to fill vacancy remaining panels convey disaggregation of vacancy incidence with respect to city (panel B), industry (panel C), total revenue (panel D), year of existence (panel E), number of employees (panel F), percentage of management graduates (panel G) and organization type (panel H).We define vacancy incidence as the ratio of percentage of responses that report there exists vacancies in the firm with respect to a unit of disaggregation (city, industry, total revenue, years of existence, number of employees, per cent of management graduates and organization type ([v.sub.i]/[x.sub.i]) to frequency of unit of disaggregation as a percentage of total sample size ([x.sub.i]/[[summation].sup.n.sub.i][x.sub.i])

[V.sub.i] =...

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