PurposeIn the process of school-to-work transition, the role of general education and vocational education and training (VET) remains quite central. Based on the human capital theory, we estimate whether investment in VET brings additional returns for workers across the age cohorts.Design/methodology/approachThe focus of our study being the labour market in India, the data from the Periodic Labour Force Survey 2018–19, conducted by the National Statistical Office, has been used for analysis. We have applied the ordinary least square method with sample selection correction, the quasi-experimental technique of propensity score matching and heteroskedasticity based instrumental variable approach to estimate the returns with respect to no VET, formal VET and informal VET.FindingsOur study shows that workers with formal VET earn higher wages than workers with no VET or informal VET. The study finds that workers with informal VET do not earn higher wages than workers with no VET. Moreover, from the age cohort analysis, we have deduced that wage advantage of workers with formal VET persists across all age cohorts and, in fact, accentuates with an increase in age.Originality/valueWe have estimated that VET being complemented with basic general education fetches higher returns in the labour market, especially when provided through formal channels. Moreover, to the best of our knowledge, in the case of developing countries where informal VET is widely provided, this is one of the first studies that captures the return to informal VET. Lastly, complementing the existing studies on the developed countries, we have estimated the returns to VET over the life cycle of the workers.

This article examines the intertwining relationship between informality and educationoccupation mismatch (EOM) and the consequent impact on the workers' wages. In particular, we discuss two issues -first, the relative importance of informality and education-occupation mismatch in determining the wages; and second, the relevance of EOM for formal and informal workers. The analysis reveals that although both informality and EOM are significant determinants of wages, the former is more crucial for a developing country like India. Further, we find that EOM is one of the crucial determinants of wages for formal workers, but it is not critical for informal workers. The study highlights the need for considering the bifurcation of formal-informal workers to understand the complete dynamics of EOM especially for developing countries where informality is predominant.

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Section A1Sensitivity check: Effect of changing the threshold for measurement of required education for an occupationWe have measured the sensitivity of EOM by using different thresholds over and below required years of education (measured by mean years of education). Please refer to Table A11 for detailed numbers.Using the threshold of one standard deviation over and below the mean years of education for the occupation categories, it is found that among the migrants, the match (adequate) was around 70 percent and the incidence of over and under educated individuals is 15 percent each.A change of threshold to 0.9 standard deviation reduces the adequately educated (match) to 63 percent for migrants. Also, the under and overeducated proportion increases to 17 and 20 percent, respectively. Now, changing the threshold to 1.1 standard deviation increases the incidence of adequately educated (match) to 78 percent, the undereducated to 11 percent, and the overeducated to 11 percent of the migrants.Lastly, using one standard deviation from median, we have found that the incidence of adequately educated (match) is 67 percent of migrants, the undereducated are 19 percent, and the overeducated are 14 percent.