22 May
The most discussed and debated topic in India today is about the status and level of unemployment in the country. There are forceful views being expressed on both sides of the issues during the election campaigns and also it is a hot topic of disagreement between economists. Experts are quoting data to show that there is growth without employment in India while there are an equal number shelling out statistics to show that the problem of unemployment is being over stated and in fact there is an increase in both employment and labour force participation rate. 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 which is likely to last for another thirty years. We have 27% of our population which can be categorized as youth with the median age of the country being 29. One has to come out of the data analysis to see for oneself the anxious faces of the educated youth to realise that their major concern is whether they will get employment and will the quality of employment they get be commensurate with their level of qualifications? Only if the youth is able to get the desired quality of jobs will it realise the demographic dividend and propel India on the path of rapid economic growth so that it occupies its deserving position amongst the developed nations and not gets snared in the middle income trap. India is the cynosure of all eyes because of its dramatic growth rate of 7% which is amongst the highest in the world and we are on the path of becoming the third largest nation in terms of GDP in the next 4 to 5 years. If we have to become a developed nation within the next 25 years we have to grow at an even faster growth rate of about 8% or more per annum and this would only be possible if we can devise a strategy to see that this growth is accompanied with growth in employment so that the aspirations of the youth find expression and their energy and higher productivity makes 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 which was primarily based on an analysis of the data from the national sample surveys and the periodic labour force surveys between 2000 and 2022. They arrived at some paradoxical inferences. They find that the key labour market indicators like labour force participation rate, the work force participation rate and the unemployment rate so long term deterioration between 2000 and 2019 but thereafter it has shown improvement. The female labour market participation rate has surprisingly shown an upward trend from 2019 onwards particularly in rural areas despite the impact of the covid-19 pandemic. However, this is explained by the fact that after 2019 the trend in the Indian labour market to transit from agriculture into non- farm sectors has been halted and even reversed. There is a discernible rise in share of agriculture employment as well as an increase in the absolute size of the agricultural work force. The matter of concern is that nearly two-thirds of the incremental employment after 2019 comprised of self employed workers amongst whom unpaid woman family workers predominate. The share of regular work has been declining. This has been further reflected in the fact that the real wages and earnings of regular workers has remained stagnant or declined.
The report also finds that the employment in India is of a predominantly casual and self employed nature with more than 82% of the work force engaged in the informal sector. This implies that employment and India is of a poor quality and it is for this reason that the employment condition index remains on the lower side. Due to increasing mechanisation and capital use the employment generation in India has become more and more capital intensive which is contrary to the labour market needs of the country. Digitalization and introduction of new technology are changing the structure of industrial employment further. This has also been accompanied by a rise in the number of gig workers who have hardly any social security. The increase in capital intensity of industry 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. The employment in manufacturing has expanded by only 1.7% between 2000 and 2019.
The services sector has been the prime mover of India’s growth since 2000 and this sector has contributed 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 persons are joining the labour force and if they can be productively employed then it will give a huge boost to the Indian growth story. The worry according to survey has been 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 and to provide them jobs accordingly is the challenge before the policy makers. The report shockingly found that in 2022 the unemployment rate among the youth with secondary level education was six times higher than the average and for graduates this figures was found to be 9 times greater at 29.1%. It is a fact that youths with higher level of education look for regular salaried jobs and those with little education are engaged more in casual or informal work. Youths 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 boys and girls are seeking a higher level of education. The fact is that educational attainment among the youth has improved significantly in the past two decades. A disturbing thing is that the level and quality of employment has shown a lot of disparities. States like Bihar, Jharkhand, Uttar Pradesh, Odisha found that the youth are not able to fully take advantage of demographic factor 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 have to be handled so that the entire country is able to 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 would be created and the education system and skilling ecosystem will have to tailor their inputs in a manner that the students are equipped with the skills that would 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. The policies regarding industrialization and other sectors will have to make 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.
