India’s workforce paradox

The India Employment Report 2024 has revealed a soaring unemployment rate over the past two decades. The rate increased from 2.1 per cent in 2012 to 5.8 per cent in 2019, with a marginal decline to 4.1 per cent in 2022. From 2000 to 2022, the labour force participation came down from 61.6 per cent to 55.2 per cent. Similar trends were observed in the workforce participation rates. Consequently, the number of unemployed persons aged 15 or above, both in rural and urban areas, increased from 92 lakh in 2000 to 2.9 crore in 2019. A decadal comparison (2012 to 2022) shows that there was a rise of 1.25 crore unemployed people — from 1.04 crore in 2012 to 2.29 crore in 2022. On an annual basis, 70-80 lakh youth are added to the workforce; their productive engagement could help India reap the demographic dividend.

The share of unemployed youth in the total unemployed population was 82.9 per cent in 2022. The proportion of educated unemployed youth among all jobless people increased from 54.2 per cent in 2000 to 65.7 per cent in 2022. Among the educated youth, the share of women with secondary education or above was 14.5 percentage points higher than that of the men. The level of education and unemployment rates are highly correlated — as the level of education increases, the rate of unemployment rises. This is usually described as a mismatch in terms of the skills that are required by the employer but the workforce does not possess. Even the Skill India Mission has not been able to address this burgeoning skill gap due to its focus on the supply side while ignoring the demand side. The employment composition of the workforce in three categories — self-employed, regular and casual employment — shows that the self-employed ones account for a large proportion of the employed workers. When we compare youth with adult workforce in self-employment, the former was of the order of 50 per cent in 2000 and declined marginally to 48 per cent in 2022. However, this went up from 54 per cent in 2000 to 58 per cent in 2022 in the case of the adult workforce. Young persons are more likely to be employed for unpaid family work in the self-employment category than adults. This is considered an inferior form of work because it does not lead to an independent income or an increase in participation, especially of women, in the public sphere. Since the preference of the youth is to be employed in regular work, this does not necessarily mean an improvement in the quality of the job because of the absence of written contracts and non-availability of social security benefits.

The labour market discrimination, as indicated by the differences in the average monthly income of male and female workers (self-employed and casual work), shows that women are paid less than their male counterparts. However, in the category of self-employment (regular work), women are receiving higher monthly wages than men.

An important feature of the structure of the workforce across sectors — agriculture, industry and services — has been the shift from agriculture to mainly services and somewhat in the industrial sector. These trends have been halted, as indicated by the 8.9 per cent growth of employment in the agriculture sector during 2019-22. This reversal, compared with the earlier trend, has been attributed to the distress reflected in the mass movements that originated in the countryside. A recent rise in participation of the female workforce in the countryside shows that distress has forced the workforce to take up low-quality, low-wage and low-productivity jobs.

Despite the affirmative policy measures by the Union and state governments, there is scope for reconsideration of the public employment policy to tackle the grim employment situation. The 2024 report has proposed five sets of policy suggestions. First and foremost is the strategy to revive the manufacturing growth momentum while integrating macroeconomic and other policies to boost productive non-farm employment opportunities. Greater attention should be paid to MSMEs (micro, small and medium enterprises), especially by providing more support while following a decentralised approach. The second set of policies should focus on improving the quality of employment. For this, investment and regulation are required in the emerging employment-providing sectors such as the care sector and digital economy that employ young people. The third set should concentrate on boosting female participation in the workforce to reduce inequality, along with an improved quality of work and social safety net. The fourth set of policies is required to overcome skill mismatch. Public policy should tackle both demand and supply sides. Finally, it is suggested that the deficit in knowledge on labour market patterns and youth employment be bridged. There is a need to revamp the statistical system to provide reliable figures related to emerging forms of employment to shape effective policy measures. Thus, the government has to avoid adverse public policy measures and choose alternatives for ensuring sustainable growth.

Views expressed are personal