The most discussed and debated topic in India today is the status and level of unemployment in the country. Forceful views are being expressed on both sides of the issue during election campaigns, and it is also a hot topic of disagreement among economists. Experts are quoting data to show that there is growth without employment in India, while an equal number are presenting statistics to show that the problem of unemployment is being overstated and that there is, in fact, an increase in both employment and labour force participation rates. The beauty of statistics is that you can selectively use it to argue in favour of increasing unemployment or the reverse.
India is enjoying a demographic advantage that is likely to last for another thirty years. We have 27 per cent of our population categorised as youth, with the median age of the country being 29. One has to look beyond data analysis to see the anxious faces of educated youth and realise their major concern: whether they will get employment and whether the quality of employment will be commensurate with their qualifications? Only if the youth are able to get the desired quality of jobs will India realise its demographic dividend and propel itself on the path of rapid economic growth, so that it occupies its deserving position among developed nations and avoids being snared in the middle-income trap. India is the cynosure of all eyes because of its dramatic growth rate of 7 per cent, which is among the highest in the world, and we are on the path to becoming the third-largest nation in terms of GDP in the next 4 to 5 years. To become a developed nation within the next 25 years, we must grow at an even faster rate of about 8 per cent or more per annum. This would only be possible if we devise a strategy to ensure that this growth is accompanied by growth in employment, so that the aspirations of the youth find expression and their energy and higher productivity make the dream of an inclusive and developed India possible in the near future.
Recently, the India Employment Report 2024 was published by the Institute for Human Development on labour and employment issues. This report was primarily based on an analysis of data from the National Sample Surveys and the Periodic Labour Force Surveys between 2000 and 2022. The report arrived at some paradoxical inferences. It found that key labour market indicators, such as the labour force participation rate, the workforce participation rate, and the unemployment rate, showed long-term deterioration between 2000 and 2019. However, these indicators have shown improvement since then. Surprisingly, the female labour market participation rate has shown an upward trend from 2019 onwards, particularly in rural areas, despite the impact of the COVID-19 pandemic. This is explained by the fact that after 2019, the trend in the Indian labour market to transition from agriculture into non-farm sectors has been halted and even reversed. There is a discernible rise in the share of agricultural employment as well as an increase in the absolute size of the agricultural workforce.
A matter of concern is that nearly two-thirds of the incremental employment after 2019 comprises self-employed workers, among whom unpaid female family workers predominate. The share of regular work has been declining. This is further reflected in the fact that the real wages and earnings of regular workers have remained stagnant or declined.
The report also finds that employment in India is predominantly of a casual and self-employed nature, with more than 82 per cent of the workforce engaged in the informal sector. This implies that employment in India is of poor quality, which is why the employment condition index remains low. Due to increasing mechanisation and capital use, employment generation in India has become more and more capital-intensive, which is contrary to the labour market needs of the country. Digitalisation and the introduction of new technology are further changing the structure of industrial employment. This has also been accompanied by a rise in the number of gig workers who have hardly any social security. The increase in the capital intensity of industry has led to an improvement in labour productivity, and the increasing growth rate has been closely linked to technological advancements that have favoured capital-intensive production. Employment in manufacturing has expanded by only 1.7 per cent between 2000 and 2019.
The services sector has been the prime mover of India’s growth since 2000, contributing significantly to the creation of more decent and productive employment. Consistently, areas like software, IT, and financial services have generated high-paid, regular formal job opportunities. Every year in India, 7-8 million people join the labour force, and if they can be productively employed, it will give a huge boost to the Indian growth story. The concern, according to surveys, is that youth employment is, by and large, of poorer quality than employment for adults. Educated youth are more likely to look for employment outside agriculture, presenting a challenge for policymakers to provide appropriate jobs.
The report shockingly found that in 2022, the unemployment rate among youth with secondary-level education was six times higher than the average, and for graduates, this figure was nine times greater at 29.1 per cent. It is a fact that youth with higher levels of education seek regular salaried jobs, while those with little education are more often engaged in casual or informal work. Youth with technical degrees are more likely to be employed in the tertiary sector. Returns to education are low at lower levels of education and highest for those with a graduate degree or technical education. More and more young people are seeking higher levels of education. Educational attainment among the youth has improved significantly in the past two decades.
A disturbing trend is the disparity in the level and quality of employment. States like Bihar, Jharkhand, Uttar Pradesh, and Odisha have found that youth are not able to fully take advantage of demographic factors, whereas the situation is much better in the southern and western states. It is also a fact that states are at different stages of demographic transition, which influences their employment outcomes. These regional disparities will need to be addressed so that the entire country can move forward on the path of growth with employment.
Some areas of employment will lose out to artificial intelligence and other technological disruptions. However, it is also true that new jobs will be created, and the education system and skilling ecosystem will have to tailor their inputs so that students are equipped with the skills that will make them employable in the future. The issue of employability of the youth is often raised by industry, though academicians tend to challenge this by saying that they provide education, which is different from training. It cannot be denied that there is a gap in perception between the two, which can only be bridged by both parties sitting together. The youth must get employment opportunities and high-quality employment. Policies regarding industrialisation and other sectors will have to make the provision of employment their cornerstone. Above all, as I have advocated before, India needs a national employment policy to enjoy the fruits of the demographic dividend.
The writer is an ex-Chief Secretary, Govt of Uttar Pradesh. Views expressed are personal