Unemployment and demographic dividend - Hindustan Times

Unemployment and demographic dividend

Apr 02, 2024 01:31 AM IST

The unemployment problem in India is becoming centred around educated youth, a longer-term trend evident for some decades

India remains poised to take advantage of its demographic dividend with strong improvements in education levels, which are a key determinant of accessing better quality jobs. At the same time, youth’s aspirations are evolving, which needs to be matched with the type of employment available in the labour market. These are among the key findings of the “India Employment Report 2024: Youth education, employment and skills” by the Institute for Human Development (IHD) and International Labour Organization (ILO), which examines the challenge of youth employment in the context of the emerging economic, labour market, educational, and skills scenarios in India, and the changes over the past two decades. It is primarily based on data from the National Sample Surveys and the Periodic Labour Force Surveys.

New Delhi, India - Feb. 16, 2018: Candidates apply for jobs at 'Job Fair' organized by Directorate of Employment, Delhi Government at Tyagraj Sports Complex in New Delhi, India, on Friday, February 16, 2018. (Photo by Sanchit Khanna/ Hindustan Times) (Sanchit Khanna/HT PHOTO) PREMIUM
New Delhi, India - Feb. 16, 2018: Candidates apply for jobs at 'Job Fair' organized by Directorate of Employment, Delhi Government at Tyagraj Sports Complex in New Delhi, India, on Friday, February 16, 2018. (Photo by Sanchit Khanna/ Hindustan Times) (Sanchit Khanna/HT PHOTO)

With a large proportion of the working-age population, India is expected to be in the potential demographic dividend zone for at least another decade. Although the youth population, at 27% of the total population in 2021, is expected to decline to 23% by 2036, around 7–8 million youths are added to the labour force each year. Youth participation in the labour market is on a declining trend, mainly due to greater participation in education. Education levels have improved among the youth, and this is indeed a welcome development as education is a key determinant of accessing better jobs.

With higher levels of education, youths are much more likely to be employed in formal and regular salaried jobs and tend to more actively engage in the high-productivity sectors, primarily the tertiary sector, such as business, telecom, finance and information technology, compared to the less educated. The latter are more likely to be employed in the primary (agriculture) and secondary sectors (manufacturing and construction). Youth with technical degrees and graduate diplomas are involved more in the tertiary sector. While the report points out that although access to education had increased significantly between 2000 and 2023, differences persist across socio-economic classes, with the implication for access to better quality jobs.

The rate of employment diversification, access to regular jobs and shift towards medium/high-skill jobs was higher among the youth though the shift towards skilled jobs did not fully meet the growing demand for such jobs. Technological change and digitalisation are having a profound impact on the demand for skills and certain types of employment. Young people are also better represented in the gig economy, although this has led to new challenges in terms of job quality and security.

Overall, the youth unemployment rate declined after 2017-18 dropping to 12.4% in 2021-22 and further to 10% in 2022-23. The rates of unemployment rose with levels of education, and since more and more youth were accessing education, the percentage of unemployed youth with secondary and above education among the total unemployed has increased from 35.2% in 1999-00 to 65.7% in 2021-22. It is evident that the nature of the unemployment problem becoming centred around educated youth. It should be noted that this is a longer-term trend evident for some decades, reflecting the rising level of education amongst youth.

Beyond a narrow view of the unemployed, there is a large proportion of youth, particularly young women, “not in employment, education or training (NEET)”, which has also fallen since 2018-19 but remains significantly higher for young women (48.4% versus 9.8% for young men). As highlighted in the report, it is important to distinguish the two main types of NEET categories, those unemployed and those out of the labour force, for both analytical and policy purposes. The second group, young people out of the labour force, is a much larger majority group and dominated by females (accounting for 95% of this group).

While focusing on the challenges of youth employment, the report also highlights broader trends in the Indian labour market, which indicate improvements in outcomes along with persisting and new challenges, including those generated by the Covid-19 pandemic. The labour force participation rate, especially for women, and the unemployment rate experienced improvement post-2019. The share of agriculture in employment increased from 42.4% in 2019 to 46.4% in 2021 as agriculture and self-employment emerged as the employer of last reserve during the pandemic. However, this reversal of structural transformation appears to have stalled in recent times. In 2022, the share of employment in agriculture declined to 45.4%. Concomitantly, employment in the manufacturing sector is now increasing. The growth of employment in the manufacturing sector stood at 3% between 2019 and 2022, higher than in the previous period between 2000 and 2019. The significance of the manufacturing sector becomes evident when considering that most of the additional employment generated in this sector was regular and self-employment types, with much higher earnings and productivity compared to construction, agriculture and some services, like trade.

The Make in India and Production Linked Incentive schemes can play a critical role in making India a manufacturing hub, thus inserting the country into global value chains and fostering industrial growth, which will support the creation of jobs for young people. With rapid technological change, there are many opportunities for young people. However, harnessing these opportunities requires rapid uptake of new skills.

The skills landscape in India has also undergone a transformation with the impetus of filling supply-demand gaps and skill mismatches. The Indian skills training scenario has changed significantly over the past 25 years with the setting up of a national skills mission and formulation of two national skills policies to guide skills development. To increase the proportion of youth with technical skills, the next-generation skills and apprenticeship eco-system needs to be based on a stronger partnership with the private sector.

To realise the demographic dividend that India stands ready to seize, five key policy areas, which apply more generally and specifically for youth in India, must remain the focus: One, promoting job creation/making production and growth more employment-intensive; two, improving employment quality; three, addressing labour market inequalities; four, strengthening skills and active labour market policies; and five, bridging the knowledge deficits on labour market patterns and youth employment.

Alakh N Sharma and Ravi Srivastava are with the Institute for Human Development, Delhi, and team leaders of the India Employment Report 2024. The views expressed are personal

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