Youth unemployment is the principal challenge and is the focus of the report.
The India Employment Report 2024, brought out by the Institute for Human Development (IHD) and the International Labour Organisation (ILO), has attracted widespread attention. However, some of its findings have been misunderstood or misinterpreted.
The report is based on official data, largely the Employment and Unemployment Surveys (EUS) and Periodic Labour Force Surveys (PLFS), conducted by NSSO. Despite certain changes in the sample design of the PLFS, its estimates are comparable with EUS due to the high level of precision of the all-India and state-level estimates. The analysis compares four years — 2000, 2012, 2019, and 2022 — which capture the changes over the past 22 years, including during the Covid period.
The report highlights some major positive developments in the labour market. The employment quality, as shown by a robust Employment Condition Index, has improved in all states, albeit differently. This is also corroborated by the increase in the share of non-farm employment (and decline in agriculture employment) between 2000 and 2019, as happens with the increasing prosperity of a country, and implies a movement towards the structural transformation of the economy. This trend was accompanied by a steady increase in regular employment and a decline in unorganised sector employment, which was halted only during the Covid period.
The increase in the female workforce participation (FWFP) rate from 24.5 per cent in 2019 to 37.0 in 2023 is quite remarkable, notwithstanding it being overwhelmingly in the agricultural sector, and of the own-account and unpaid family work kind.
The labour market bounced back quite well amidst the Covid-induced global slowdown. In comparison to the wages of regular workers, the wages of casual workers increased even during 2019-22. In fact, the increase was more in the case of the bottom groups. Along with several social safety measures, this must have played an important role in reducing extreme poverty and deprivation. It is also worth mentioning that even though there was a massive increase in farm jobs during the pandemic (almost 9 per cent per year), overall non-farm jobs also went up by more than 2.6 per cent, a rate higher than that achieved from 2012 to 2019.
Unemployment and underemployment rates increased till 2018 but declined thereafter. The unemployment rate has declined from 6 per cent 2018 to 3.2 per cent in 2023. This also holds for the youth unemployment rate, which also decreased from 17.8 per cent to 10 per cent over this period.
The report also outlines major emerging employment challenges in the wake of developments during the last two decades as well as distortions caused by the pandemic.
The employment pattern remains skewed towards agriculture, which employs around 46.6 per cent workers (compared to 42.4 per cent in 2019). This calls for active steps to accelerate the creation of non-farm employment. The production process has been increasingly becoming capital and skill-intensive, leading to distortions in the labour market, where despite an increase in educational attainments, unskilled and semi-skilled workers abound. This calls for a greater focus on labour-intensive manufacturing.
Women’s participation is still low and they remain largely engaged in somewhat less remunerative jobs in agriculture, unpaid family work and as own-account workers. This requires the creation of other non-farm employment opportunities with further investments in rural areas, including transport and connectivity and access to childcare.
Youth unemployment is the principal challenge and is the focus of the report. With the massive increase in educational attainment, the unemployment problem in India is becoming centred around educated youth, who account for nearly two-thirds of total unemployment. This process has been continuing for the last several decades. The unemployment rate rises with a rise in education levels — 28 per cent among graduates and above (the proportion of women being higher). This has declined from 35.4 per cent in 2018. The report notes the qualifications and skills mismatches, particularly at higher levels of education.
Improving the quality of education and imparting appropriate skills in active partnership with the private sector will continue to be a priority in coming years. Paradoxically, the proportion of youth not in employment, education and training (NEET) is quite high at around 28 per cent in 2022, with the share of females being around five times more than males. This group requires more policy focus.
Despite an improvement in employment conditions over time, jobs largely remain informal and of lower productivity. Over 90 per cent employment is informal, and 83 per cent are in the informal sector — it was close to 90 per cent in 2000. Robust wage growth, particularly of casual and lower strata of regular workers, strengthening of social protection, active policies for formalisation and boosting labour productivity will go a long way in improving the quality of employment.
India is likely to have a demographic advantage for at least another decade. With robust economic growth likely to be witnessed in the coming years, the country can reap this advantage. The report has recommended some policy measures such as (a) making production and growth more employment-intensive with emphasis on labour-based manufacturing and appropriate focus on employment-generating services and agriculture; (b) improving the quality of jobs; (c) overcoming labour market inequalities, particularly by boosting women’s employment and effective policies to tackle NEET; (d) making systems for skills training and active labour market policies more effective, particularly by bridging the supply-demand gap in jobs and active involvement of the private sector; and (e) generating reliable statistics so as to better capture the complexities of the changing pattern of labour market due to rapid technological change.
The writers are team leaders of the India Employment Report 2024 and are with Institute for Human Development
