The State of Youth Employment in India | 20 Aug 2024

India's anticipated demographic dividend has deteriorated into a severe demographic disaster as the country faces an unprecedented youth employment crisis. Despite higher educational attainment among the youth, job opportunities remain scarce, resulting in high unemployment rates, particularly among urban youth and young women.

Recent data from the Periodic Labour Force Survey reveals that the employment scenario for youth remains dire, with a worker-population rate for youth 40% lower and an unemployment rate nearly three times that of older age groups.

The situation is worsened by a notable mismatch between educational qualifications and available job opportunities, with highly educated individuals, particularly women, experiencing the highest unemployment rates. Addressing this issue necessitates a thorough investigation to develop effective solutions. 

What are the Current Trends of Youth Employment in India?

• Youth Unemployment Crisis: 
  • High Youth Unemployment Rates: Unemployment rates among youth (ages 15-29) remain significantly higher than those for the general population. In 2022, the unemployment rate for urban youth was 17.2%, compared to 10.6% in rural areas.  
    • The situation is particularly severe for young women, with an unemployment rate of 21.6% versus 15.8% for young men. 
  • Education Impact: Higher educational attainment among youth is paradoxically linked to higher unemployment rates. For instance, in 2022, the unemployment rate was 18.4% for those with secondary education or higher, and 29.1% for graduates, compared to just 3.4% for illiterate individuals. 
  • NEET (Not in Employment, Education, or Training) Rates: A significant proportion of young people are neither employed, nor in education, nor in training.  
    • According to the India Employment Report 2024, one in every three youngsters falls under the NEET category as on 2022. 
      • The women in the NEET category are almost five times more than their male counterparts. 
•  Gender Disparity: 
  • Work Participation Rates: Urban male youth have work participation rates more than three times higher than their female counterparts.  
  • Unemployment Rates for Women: Young women face consistently higher unemployment rates than young men, averaging around 50% higher. For example, 34.5% of female graduates were unemployed in 2022, compared to 26.4% of their male peers. 
    • Educated young women experience the highest unemployment rates, with 34.5% of female graduates unemployed. 

• Regional Variations 
  • Disparities Across States: Employment conditions vary significantly across different states. High unemployment rates and low work participation are particularly prevalent in states such as Bihar, Uttar Pradesh, Jammu and Kashmir, Uttarakhand, Rajasthan, Odisha, Kerala, Himachal Pradesh, and Assam. 
    • Moreover, there is a clear positive relation, indicating an increase in unemployment rates in highly urbanised States. This explains the high degree of unemployment in States like Goa and Kerala — both highly urbanised — and low unemployment in States like U.P., Jharkhand and Madhya Pradesh.  
      • Urbanised States have smaller agrarian and agrarian-dependent sectors and hence have a relatively smaller source of informal jobs available.  

What is the Potential of India’s Demographic Dividend? 

• Youth Population: India has a significant demographic advantage, with over 50% of its population under the age of 25 and more than 65% below 35 years old. This creates a large pool of potential workers who can contribute to economic growth and productivity. 
  • Workforce Growth: The working-age population in India is expected to increase by about 200 million people by 2030, adding to the economic potential of the country. 
• Innovation and Entrepreneurship: According to the Global Entrepreneurship Monitor (GEM) 2023, India has a robust startup ecosystem, with over 70,000 startups recognized, many of which are led by young entrepreneurs. 
  • Startup Growth: Government initiatives like Startup India have supported the creation of over 80,000 startups since its launch in 2016, fostering a culture of innovation among the youth. 
• Digital Economy: The IT and digital services sector in India contributes about 8% to the GDP, employing over 4.5 million people. The rise of digital platforms has created numerous job opportunities in IT, e-commerce, and digital content creation. 
• Internet Penetration: As of 2024, India has over 800 million internet users, indicating a vast digital market and potential job opportunities for the tech-savvy youth. 
• Global Competitiveness: India ranks 43rd out of 63 countries in the World Economic Forum’s Global Competitiveness Index 2023, reflecting the growing skills and potential of its workforce to enhance global competitiveness. 
  • IT Outsourcing: India remains a leading global hub for IT outsourcing, contributing around 55% of the global market share in IT services, largely due to its skilled and young workforce. 

What are the Implications of Youth Unemployment?

• Economic Implications: 
  • Inefficiency in Resource Utilization: High youth unemployment represents a significant loss of potential economic output. Educated and skilled young individuals who remain unemployed or underemployed do not contribute to the economy, leading to inefficiencies in resource utilization. 
  • Lower Economic Growth: Persistent unemployment hampers economic growth. With a substantial segment of the population not contributing productively, the economy faces slower growth rates and reduced overall productivity. 
  • Increased Dependency Ratios: Prolonged unemployment can result in a higher dependency on family resources, increasing the financial burden on households and potentially leading to greater poverty levels. 
  • Decreased Purchasing Power: Unemployed youth have lower disposable income, which reduces their spending power and affects overall consumer demand. This reduction in consumption can impact businesses and economic growth. 
• Social Implications: 
  • Social Unrest and Instability: High levels of youth unemployment can lead to social unrest and instability. Frustration over a lack of job opportunities can manifest in protests, strikes, and other forms of civil unrest. 
• Long-Term Implications: 
  • Skills Mismatch and Skills Erosion: Prolonged unemployment can lead to skills erosion as the workforce's abilities become outdated. This skills mismatch makes it harder for unemployed youth to re-enter the job market. 
  • Reduced Employability: A lack of relevant experience and skills development during periods of unemployment can further reduce employability and career prospects for young individuals. 

What Steps Should Be Taken to Improve Youth Employment? 

• Expansion of Public Employment Opportunities: Develop urban-specific public employment schemes similar to MGNREGA (as it is limited to rural areas only), targeting infrastructure and service sectors. Consider strategies to revive and expand public sector job opportunities, ensuring better job security. 
• Remote Work Opportunities: Encourage companies to leverage technology and offer remote work arrangements. This expands job opportunities for individuals living outside major cities and promotes a better work-life balance. 
• Inclusion Growth and Gender Equality: Implement policies promoting gender equality and empowerment, ensuring equal access to education and employment. 
  • According to International Labour Organization estimates, only 24% of women were participating in the workforce in 2022, so getting more women to enter the workforce will be pivotal for future growth. 
• Enhanced Skill Matching: Revise educational curricula and vocational training programs to better match industry needs. Foster collaborations between educational institutions and industry to ensure training programs are relevant. 
• Promotion of Entrepreneurship and Infrastructure Investment: Provide tax breaks, subsidies, and access to funding for young entrepreneurs. 
• Youth Outreach Programs: Develop specialized outreach programs to inspire and support young entrepreneurs. These should include mentorship, access to capital, and business development services tailored to the needs of young entrepreneurs. 
• Capacity Building: Implement effective programs to build entrepreneurial capacity among youth, including training in business management, financial literacy, and innovation.
  • Youth-Focused Social Security: Develop social security safety nets specifically for young people to ensure financial stability during job transitions. 
  • Digital and Gig Economy Integration: Develop policies to provide job security, social security benefits, and fair wages for gig workers. Expand training in digital skills to prepare youth for the growing tech sector. 
• Improved Policy Implementation: Strengthen mechanisms for monitoring the effectiveness of employment schemes and policies. Establish feedback mechanisms to continually adapt and improve policies based on real-world outcomes. 
  • Make in India, Digital India, and Skill India: Continue to support and scale up successful initiatives like Make in India, Digital India, and Skill India, which are aimed at boosting employment and skill development among youth.

Conclusion 

India has the largest youth population in the world which is poised to increase further in the coming decade. More than 65% of India's population is below the age of 35 years. It is indeed vital to utilise this demographic dividend and channel the youth and their creative energies for nation-building. For this it is essential that the economy supports the increase in the labour force and the youth have the appropriate education, skills, health awareness and other enablers to productively contribute to the economy and Nation building.