Impact of Economic Growth, Minimum Wage, and Human Development Index on Unemployment in India during the Post-Reform Era

Abstract

Analyzing the impact of Economic Growth, Minimum Wage, and Human Development Index on Unemployment in India during the Post-Reform Period (1990-2021), this study aims to examine the relationship between economic growth, minimum wage, and the Human Development Index (HDI) as independent variables, and the unemployment rate as the dependent variable in India. By employing quantitative techniques and utilizing secondary data, we investigate these variables' short- and long-term effects on unemployment. We employed the Vector Error Correction Model (VECM) as the analytical tool and focused on the post-reform period, spanning from 1990 to 2021. Economic growth, minimum wage, and HDI were identified as the key factors influencing the unemployment rate. The findings revealed a significant and positive impact of economic growth on the unemployment rate, both in the short and long term. On the other hand, the minimum wage variable exhibited a negative impact, albeit statistically insignificant, on the unemployment rate in the short term. Similarly, the HDI variable showed an insignificant impact on the unemployment rate in the long term. These results provide valuable insights for the government, suggesting that addressing the issue of unemployment in India requires a comprehensive approach that combines economic and social strategies. By leveraging the positive effects of economic growth and considering appropriate measures related to minimum wage and human development, policymakers can effectively tackle the challenge of unemployment in the country