Mint Explainer: The crisis of educated unemployed youth

Thousands of educated young men and women are unable to find jobs that match their skills and education, and are unable to contribute to the economic growth of the country meaningfully. Most of the jobs created are those that require unskilled and low-skilled workers, concluded a recently published report on youth employment by the Institute of Human Development in collaboration with the International Labour Organization.

It is a problem that the next government needs to consider as India looks to become a $5 trillion economy by 2027. The ILO suggests that the policy agenda should involve making production and growth more employment-intensive, improving the quality of jobs, and making skills-training and active labour market policies more effective. 

In the past, the government’s advisers have spoken about the need to focus on labour-intensive export-oriented manufacturing such as apparel and footwear to create jobs. That remains an unfinished agenda.

Mint explains how deep is the job crisis for the vast number of young people who join the labour force every year.

What is the situation for youth employment in the country?

India experienced mostly jobless growth in the first 19 years of the current century, a period when India had seen stable governments under three different prime ministers. At the national level, employment grew at an annual rate of 1.6% between 2000 and 2012 and then stagnated with a 0.01% rise till 2019, even as the economy grew at 6-7% on average during those years. Growth in job creation picked up after the pandemic, and that can be attributed to a rise in employment in agriculture. However, that surge in agriculture jobs was due to a lack of opportunities outside the farm sector.

What is the contribution of manufacturing sector in employment generation?

The manufacturing sector, which can absorb a lot of skilled and educated workers, lagged in employment creation even though the output of the sector as measured by gross-value added rose. China with its mega production lines provided millions of jobs, and when manufacturing moved to lower-cost centres such as Vietnam, those countries experienced growth in factory jobs. However, in India, employment in the manufacturing sector rose just 1.7% even as its gross value added grew 7.5% per year in 2009-19. 

Manufacturing sector job growth gained pace only following the reopening of the economy after a harsh lockdown enforced to contain the spread of the covid-19 pandemic. Yet, job growth at 3% lagged the relatively muted gross value-added growth of 3.5%.

Is services sector better? 

Job growth in the services sector, which despite absorbing millions including the young and educated, too lagged the growth in gross value-added, according to the IHD-ILO report. But it certainly performed better than the manufacturing sector. Against a rise of 7.5% in gross value-added per year in 2000-19, employment in the services sector grew by 2.9%. Between 2019 and 2022, when gross value-added growth slowed to 2%, mostly due to a slowdown in software services, employment grew 1.1%.

Construction was the only sector that consistently created employment, though most of it was low-paid informal jobs.

How severe is the level of unemployment among educated youth?

An estimated 7-8 million youths are added to the labour force every year. That is equivalent to the population of a state such as Himachal Pradesh. Given the profile of India’s demography, similar numbers will continue to join the labour force for some more years. 

About 27% of India’s 2021 population of 1.36 billion were in the age group of 15-29 years, that is about 367.2 million people. By 2036, the share of youth in India’s projected population of 1.52 billion is expected to decline to 23%, but their numbers will still be very large at 349.6 million. While most of the younger ones would be in education, those who cannot find appropriate work will be forced to sit out or take up jobs that won’t make use of their qualifications.

Youth unemployment continues to be in double digits, even though it has declined from 17.5% in 2019 to 12.1% in 2022. The IHD-ILO report notes that the incidence of unemployment was much higher among young people in urban areas than in rural areas and among younger youth than older youth.

Since 2000, the youth unemployment rate has risen by more than four percentage points with an increase in the level of education. The unemployment rate in 2022 among youths with a graduate degree was 28.7% compared to 3.2% for those with less than a primary education. 

“This indicates a problem of unemployment for highly educated youths, who accounted for nearly half of the total unemployed non-student youths in 2022," the report stated. 

Underemployment is another problem, and that was seen to be higher among less-educated and poor youths.

What is scene youth with technical education and vocational training?

Technical education and vocational training also did not ensure employment for the young workers. Analysis by the IHD-ILO team found that in 2022 the unemployment rate among youths with a graduate diploma was 31.1% and those with technical training degree at 29.4%.

What is the state of unemployment among women?

Overall, young women are not only less likely to be employed, but they also have lower participation rates in education and training. 

In 2022, over 48% of young women, equivalent to 84.9 million, were not engaged in employment, education or training against 9.8%, or 18.5 million, young men. Encouragingly, that proportion for women fell below 50% for the first time since 2000. 

The overall unemployment rate for young women is more or less similar to that for young men in most of the recent years, even though fewer females sought work. However, the unemployment rate for educated women tended to be higher at 21.4% compared to 17.5% for men, and even higher at 34.5% for female graduates compared to 26.4% for men with similar qualifications.