Expert Speak India Matters
Published on Apr 25, 2017
Will our demographic dividend be utilised or will it become a liability in the future?
Youth unemployment, a cause for concern

With the International Monetary Fund (IMF) forecasting India's growth rate at 7.2% for 2017-18, one wonders when Prime Minister Narendra Modi will turn his full attention to the most pressing problem of youth unemployment. Young people need jobs so that they can be launched on an income generating track for the rest of their working life. Unfortunately, youth unemployment problem has not been solved and there are many young people among the near one million job seekers every month in India.

Unless the youth is studying — there needs to be engagement in some form of economic activity — to prevent problems of drugs, crime and social unrest. According to the 5th Annual Employment-Unemployment Survey, about 13.2% of young people between the age of 18 to 29 years did not manage to find suitable jobs in 2015-16. Unemployment rate in India is higher than the national average of 5% though it is on par with global youth unemployment rate estimated by the International Labour Organization at 13%. In India, youth unemployment has increased in the last one year because in the previous Indian Labour Bureau Survey (2013-14), it was 12.9%.

There is an element of disguised unemployment in the statistics about India's general unemployment rate of 5%. Many people in agriculture are disguisedly unemployed and are working in the fields because of lack of alternative jobs. Similarly, people engaged in family owned businesses often declare themselves as employed whereas in reality they may be working only part time and their marginal product could be close to zero.

According to the 2011 census, 28% of the India's population were young (between 15 to 29 years) which is around 33 crore. Of the total population of young people, 38% were engaged in agriculture, forestry, fisheries. Around 19.4% were working in wholesale and retail business, motor repair, trade, transportation, storage, information and communications and food services. Only 13.2% were found to be working in the manufacturing sector. With the Make in India initiative, the government is hopeful that more youth will be employed in manufacturing.

Among urban youth, especially women, aged 20 to 24 years, are vulnerable to unemployment, which is high at 18.8% (ILO). In rural India, the unemployment rate among women is 8.9%.

The way to deal with the problem of youth unemployment is to impart training. In fact, there has already been such training in skills under the National Skill Development Mission. It was launched with fanfare in 2014 and has the capacity to train 30 crore people by 2022. So far, only a few lakhs have been trained and only 4.6% of the workforce undergoes training of any kind in India. This is poor when compared with 80% of youth being trained in Japan and 96% in South Korea.

Youth who are less educated seem to be finding jobs more easily than those with graduate degrees and more. Unemployment among educated youth was high at 10.5% and it was higher for those who had studied above the graduate level. Most of the better educated youth is unable to find suitable jobs because they are looking for better pay which is hard to find and so they remain unemployed.

Finance Minister Arun Jaitley talked about employment in his Union Budget (2017) speech, but nothing specific was mentioned about addressing the problem. Only the MSME sector, which has the maximum numbers joining it for jobs has been incentivised to facilitate its growth. The tax rate for MSME enterprises with turnovers below ₹50 crore has been reduced from 30 to 25%.

In the Economic Survey 2017, leather and textile industries have been mentioned as having the potential of creating jobs for the youth as they are labour intensive industries. For such jobs, however, workers need to be trained in these specialised industries. Other sectors in which the youth can be absorbed are e-commerce, retail trading, transportation, hospitality and tourism. Education and health sectors also offer job opportunities for trained young people. Health is a fast growing sector and has many openings for technicians, nurses and health aid workers. All these jobs require rigorous training before people can be absorbed. Construction has been a big employer of young workforce, but since the sector has been experiencing slow growth, employment opportunities have remained stagnant.

In education, there are many openings for teachers. There is a dearth of primary school teachers in the rural areas. Yet, few young graduates aspire to become school teachers.

In agriculture, there is an exodus of young people to towns because very few young people want to remain in farming, which has ceased to be a remunerative or a prestigious occupation. Farmers in many states have been committing suicide because of mounting debt. The rural youth who are working in farms are often doing so because of a shortage of labour, not because it isn't a viable occupation.

Non-farm activities can become attractive for young people. There is much scope to find jobs in fish culture, dairy farming and food processing. For establishing rural industries, there will have to be heavy investment in the required infrastructure by the state and central governments as Prime Minister Modi has emphasised in the recently held 3rd meeting of the Governing Council of Niti Ayog.

Unless the young are trained or educated, they will have to find jobs in the informal sector as drivers, cooks, maids; in repair shops, as restaurant waiters, cleaners, etc. But these jobs have no job security beside low paid. The organised sector, meanwhile, being unable to find properly trained personnel, will go more and more for automation.

According to Mohandas Pai, a former IT entrepreneur, 20 crore young Indians will be jobless in the next nine years. In any case, many organised sector jobs are becoming informal through contracts and casual hiring and do not provide access to employment benefits and social security. In such a scenario, the vital question is: Will our demographic dividend be utilised or will it become a liability in the future?

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David Rusnok

David Rusnok

David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany

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