Author(s) :

Abhiraj Bhushan.

Volume/Issue :

Abstract :

Rural public employment schemes are among the most ambitious labour market interventions in the developing world, yet whether they generate durable improvements in worker employability, beyond income stabilisation, remains contested. This paper addresses that question through two complementary approaches. First, it reviews empirical evidence on rural employment schemes in India, Ethiopia, Argentina, and South Africa, including India’s skill-oriented Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY), to assess what the evidence shows about skill formation outcomes. Second, it builds a single-firm constrained optimisation model in which a representative firm, operating under a binding capacity constraint, allocates its workforce between unskilled production and training toward higher-skilled managerial roles. The model identifies three parametric regimes, full specialisation in training, a mixed allocation, and no training, governed by the marginal cost gap between skilled and unskilled labour relative to the demand premium for skilled output and the scale of the programme, and connects these conditions to structural features of programmes such as MGNREGA. Comparative statics show how training subsidies, market premia, and programme scale shift the boundaries between regimes. Read together, the empirical and theoretical results indicate that sustained employability gains require rural employment schemes to be paired with certified training, public-private coordination, and labour markets able to absorb newly skilled workers; absent these conditions, employment guarantees remain valuable safety nets but structurally limited instruments of human capital formation.