Youth Employment In The New Millennium: A Story of Some Hits, Many Misses

The report, considered authoritative among studies in employment trends in the country, showed that most of the new jobs have come up in subsistence agriculture, construction and low-skilled services, while fewer youth are able to grab better-paid manufacturing and services jobs. 

More importantly, real wages of young workers, especially those in regular employment, have steadily fallen over the past decade, despite a secular improvement in labour productivity.

The India Employment Report 2024 lays special emphasis on youth employment, education and skills, given the growing concerns over jobless growth in recent years. The report, mostly based on data from the National Sample Surveys and the Periodic Labour Force Surveys by the government, offers valuable insights for policy makers. 

The report also leans on the Annual Survey of Industries, the National Accounts Statistics and the Reserve Bank of India’s data on sectoral productivity and performance (the KLEMS database). Youth refers to the age group of 15-29 years.

In the seven charts that follow, The Secretariat presents key findings of the report relating to youth employment.

Employment Pace Finally Catching Up With Output Growth?

India’s economy has consistently stayed among the world’s fastest-growing major economies over the past two decades, averaging an annual GDP growth of nearly 6.5 per cent. The rapid growth, however, didn’t translate into similar expansion in employment opportunities, prompting critics to label it as jobless growth. 

As the chart shows, from 2019 onward, there has been a sharp rise in employment growth, which is almost in line with the economy’s expansion. While Gross Value Added (GVA) – the broadest measure of a country’s economic activities – grew 6.9 per cent annually between 2019 and 2022, employment growth averaged around 5.3 per cent.

That should have been news to cheer, but a closer scrutiny of the data reveals that most of the jobs came from agriculture and construction, where employment grew 8.9 per cent and 6.4 per cent respectively. In comparison, GVA for agriculture during this period grew 4.6 per cent, while the same for construction was estimated at an annual clip of 3.2 per cent.

On the other hand, employment growth in services has steadily lost steam, decelerating from an annual average of 3 per cent between 2000 and 2012 to 2.7 per cent during 2012-2019 and 1.1 per cent during 2019-2022. 

In the case of manufacturing, which saw a contraction in jobs during the period 2012-19, the post-covid trend of 3 per cent annual growth in employment, which is similar to the trend seen in the earlier years of 2000-2012, is encouraging.

India, however, needs to create more jobs in manufacturing, as these would not only mean the youth getting engaged in better quality and better paid jobs, but also create conditions for more employment opportunities in high-skilled services as well, said Prof Deepak Nayar, chairman of IHD. 

Responding to the findings of the report, the government’s chief economic advisor, Anantha Nageswaran, said the onus for creating more jobs in manufacturing and services rested on the private sector. “Creation of new jobs is not the sole responsibility of the government. Private sector is the principal provider of jobs, particularly in manufacturing and services," he said.

Real Wages Fall Despite Rise in Labour Productivity:

Though there has been an overall improvement in working conditions over the past two decades, real wages and earnings remained either stagnant or depressed across sectors. What is worrying is that real wages have fallen despite rising labour productivity.

Labour productivity in manufacturing grew nearly three-fold, while the same for the services sector rose more than 250 per cent. However, these are not reflected in the changes in average real wages, because most employment growth happened in agriculture and construction, where productivity continues to be low.

The report also noted that 41 per cent of regular workers and 52 per cent of casual workers did not receive the average daily minimum wage stipulated for unskilled workers.

Where Is The Youth Finding Employment

The young population, looking for jobs during the period between 2000 and 2019, found opportunities mainly in construction and services such as software service, financial services, retail trade, transport, education and health.

Industry added 11.4 million jobs and services created 12.5 million jobs for the youth of the country during 2000-2019. This period also witnessed a sharp decline (36.4 million) in agricultural employment for the youth, which was definitely a positive development. 

However, the trend reversed after the pandemic. During 2019-2022, agriculture provided the bulk of the jobs to youth (14.4 million), while industry could provide 5.6 million and services only 1.8 million jobs to the youth.

Steady Deterioration In Employment Quality

Compared to the adult (30 years and above) working population, the young workers increased their share proportionately more in formal and regular employment opportunities till 2019. Regular employment increased from 12.9 per cent in 2000 to 31.6 per cent in 2019.

Another important and heartening feature in youth employment during this period was reduction in casual employment, which declined from 37.1 per cent in 2000 to 26.2 per cent in 2019.

There was an intriguing trend in informal employment within the formal sector during this period. It jumped to 72.8 per cent in 2019, from 55.5 per cent in 2012.

All these trends reversed in the wake of the pandemic. Formal and regular employment opportunities for the youth shrunk. Even informal employment within the formal sector declined to 51.6 per cent in 2023.

Skill Composition of Young Workers In Non-Farm Employment

Medium and high skilled jobs for the youth increased nearly three-fold from 4 million in 2000 to 11.4 million in 2019, but the share of such jobs in total non-farm employment still remains low, 14.8 per cent. 

The shares of low skilled and unskilled jobs remain high – 55 percent and 30 per cent respectively. The quality of jobs created for the youth in the country in little more than two decades, therefore, falls short of the millennial expectations.

“Though there are existing problems like lack of skills on the supply side, there is a demand side deficiency as well. Job creators, particularly the private sector, do not come up with enough high-skilled opportunities in the labour market,” said Rana Hasan, Regional Lead Economist at the Asian Development Bank.

Unemployment More Severe Among Educated Youth:

While an overwhelming proportion of the unemployed in the country, about 83 per cent, are below 30 years of age, the India Employment Report brought out an alarming trend of a relatively sharper rise in unemployment among educated youth. 

The share of youth with secondary and of higher levels of education in total unemployed youth increased from 35.2 per cent in 2000 to 65.7 per cent in 2022. The more educated the youth, the less are the chances of finding suitable employment. 

Ravi Srivastava, Professor at the Institute for Human Development and one of the editors of the Employment Report, pointed out: “It is worth noting that employment surveys record only those individuals as unemployed, who are actively looking for jobs. So, the youth unemployment data does not include the students, who are not looking for a job”. 

“India’s demographic dividend in terms of a larger youth population will hold for another decade or so. Therefore, the next decade is the only window of opportunity we have to fix the problem,” Srivastava said.

Educated Youth Are Increasingly Taking Up Blue Collar Jobs

Highly educated young people, with graduation and higher degrees, are increasingly taking up blue collar jobs in the government sector – a trend that underscores both desperation among job seekers and the lure of economic security associated with a government job.

Around 53 per cent of graduates and 27 per cent of post-graduates were engaged in blue collar jobs in 2022. Even among the technically qualified youth, nearly two-fifth were engaged in vocations that fell short of their qualifications, the report said.

Summing Up

The big picture emerging from the voluminous data in the India Employment Report is that there isn't much to cheer for an aspirational India even though employment growth has accelerated in recent years. That is because the accelerated growth is more on account of a sharp increase in dependence on agricuture, construction and low skilled services, especially in the aftermath of the pandemic.

Jobs growth in medium and high skilled manufacturing and services have either been sluggish or missing for most part of the past two decades, a period during which many of India's peers in the Asian region, experiencing similarly high economic growth, have succeeded creating more and better jobs for their youth.

In India's case, we see a tradeoff between quality and quantity. Growth in employment is coming from sectors where the quality of jobs is poor and the sectors that home to quality jobs are not hiring enough, said Professor Nayar.

There are no easy fixes, and as the chief economic advisor, Nageswaran, pointed out, creating quality jobs should be as much an aim of the private sector as a priority of the government. That said, acknowledging India has a jobs problem could be a good start.