POSTED: UPDATE – 12:53 AM, SAT – NOV 19 22
Jayjan Jose Thomas
There is a new sense of urgency in India to create jobs for the rapidly growing number of young people who will enter the workforce in the next two decades.
India will account for 20% of the growth in the global working-age population in the two decades from 2020. India’s population aged 15 to 59 is expected to increase by 134.6 million between 2020 and 2040, while China is likely to decline by about the same amount over the same period, World Bank projections show. A large pool of potential workers is a boon for India’s economic growth, but also a challenge for policymakers – creating new decent jobs for growing numbers of young people.
India’s economy and workforce are undergoing a structural transformation, heightening the urgency to create new jobs. As recently as 2017-18, agriculture-related jobs were the source of livelihood for 41.8% of India’s workforce (457.6 million). Agriculture has undergone a major transformation since the mid-2000s, a process that is likely to accelerate in the coming years. This will cause millions of workers to leave their rural homes for off-farm jobs in cities and towns.
In 2018, India had 350.4 million students, a quarter of the country’s total population of 1,316.3 million, and more than 75% of its current workforce. This huge wave of students will enter the workforce in the coming years, and their job aspirations will be much greater than those of their parents. Those aged 15 to 59 who are neither employed in agriculture nor educated constitute the potential labor supply in the industry, construction and services sectors.
Between 2012 and 2018, India’s potential worker supply in industry, construction and services grew by 17.5 million annually. But the actual number of people who flow into these industries every year is only 4.5 million people. Employment growth in rural construction in India slowed after 2012. From 2012 to 2018, the employment scale of India’s manufacturing industry shrank, and the unemployment rate of women and small and micro enterprise workers remained high.
supply and actual demand
The mismatch between potential supply and actual demand for non-farm sector workers has been at the heart of the employment crisis India faces today. Unemployment has skyrocketed, especially among young people. Unemployment among Indian males aged 15 to 29 soared from 5.9% in 2012 to 17.7% in 2018.
Growth in off-farm employment opportunities for women has been particularly slow over the past two decades. As a result, more and more women are leaving the workforce. The percentage of women ages 15 to 29 reporting their status as domestic rather than labor force increased from 46.3% in 2005 to 51.7% in 2018.
India’s employment challenges have distinct regional characteristics. India is a union of 28 states and 8 union territories. Uttar Pradesh and Bihar are the two most populous states and have significantly younger populations. From 2021 to 2036, these two states together account for 41.9% of the total increase in India’s working-age population, and are also the poorest two states in India. Per capita income is less than half of the Indian average and even lower than that of sub-Saharan Africa.
To be able to seize the opportunities presented by the influx of young people in India’s northern and eastern states, especially Uttar Pradesh and Bihar, India needs to focus on its economic and industrial policies. With more jobs and income, and the higher levels of demand they create, these countries are likely to be among the most dynamic centers of future economic growth.
However, the industrial and economic growth strategies of different Indian states must be tailored to their specific economic opportunities and challenges. The demographics of some southern and western states are quite different, especially in Kerala and Tamil Nadu. The two states are well ahead of the rest of the country in achievements, including falling fertility rates, but now face a new set of challenges due to rapidly aging populations.
There are other obstacles to pursuing a state-by-state industrial policy in India. States rely on central funding and have limited fiscal autonomy. With public investment falling, state governments have no choice but to compete with each other to attract private funding. This has led to a “race to the bottom,” with states offering tax breaks and deregulating labor and the environment to attract new capital.
Increasing government spending on health, education and other social sectors is crucial to realizing the potential dividends of India’s youthful population. This is even more important post-pandemic.
In 2018, India’s health expenditure accounted for only 0.95% of GDP, compared with 3% in China and 8.5% in the United States. It is below the average for low- and middle-income countries (2.8%) and sub-Saharan Africa (1.9%). India has only 7.8 doctors per 10,000 people, compared with 17.9 in China and 81.9 in Cuba.
Investments are especially helpful in states such as Bihar, Uttar Pradesh, Rajasthan, Madhya Pradesh and Chhattisgarh, which have growing young populations but lagging human development. These investments will lead to improved living standards and future economic growth, as well as new jobs, such as teachers and health professionals. More than half of all workers (5.2 million out of 9.2 million) who found work in India’s education and health sectors between 2012 and 2018 were women—suggesting that these sectors have the potential to create new jobs for women.
There is no doubt that the energy of India’s young men and women can be harnessed to improve the prospects of the entire country. But this can only be achieved through strategic government investments and interventions, as well as targeted social, employment and industrial policies.
(The author is a professor of economics at the Indian Institute of Technology, Delhi. 360 Information)