What the labour report says about India’s youth
Talking to women in rural India or young people in cities, one hears a constant lament about the lack of suitable paid work appropriate to their skills or training, which is also accessible, i.e., does not involve commuting for hours. Talking to employers, the lament is the opposite. They find it difficult to find people good enough for the jobs they have.
How does one reconcile the “shortage of work” story of job-seekers to the “shortage of labour” story coming from employers?
The International Labour Organization (ILO)-Institute of Human Development (IHD) India Employment Report 2024 throws light on the complex nature of the Indian labour market, including its evolution over the years. The big-picture headline summary is that 90% of India’s workforce is in informal employment. Given that the education level has been rising over the years, these jobs would not be the most attractive ones for young people, who are looking for jobs more commensurate with their (paper) qualifications.
Of course, if informal work is the only type of work available, many will take it rather than remain completely unemployed. This is confirmed in my ongoing research with Mrinalini Jha, which indicates a mismatch between worker qualifications and skill requirements. Given the paucity of skill-appropriate jobs, workers are often overqualified (on paper) for the jobs where they work.
The second big picture highlight of the report is the structural shift in the sector of employment from agriculture to non-farm sectors. Historically, the process of development has typically involved workers moving away from agriculture towards manufacturing and services. In India, this process has been slow, and the employment share of manufacturing has stagnated for decades. The report highlights that this has somewhat reversed with the share of agriculture in total employment rising after 2019. In rural India, farming and allied work continue to be the main source of livelihood. Construction work comes next. While, on the whole, the share of the service sector is rising, these jobs are mainly concentrated in urban India. This is another factor behind the “shortage of work” story.
The third headline from the report is that since 2000, employment growth, especially “good” jobs, in India has been driven by the services sector. Software, information technology (IT), IT-enabled services, business, and financial services have consistently grown in terms of their contribution to gross value added (GVA) with a positive rate of growth for employment. These sectors have not only generated direct employment in well-paid regular salaried jobs in the formal sector but also stimulated job growth in other sectors via multiplier effects.
The fourth headline is that the rise in labour productivity up to 2019 has been due to the increasing use of capital and technology. This means that while economic growth over the last two decades has been accompanied by technological progress, it has not generated employment commensurately. This also means that employers in high-skill sectors are looking for welltrained employees. As most of the high-tech jobs are in the metros and surrounding districts, mobility constraints will prevent access for those not only in remote areas but also in tier-2 and tier-3 cities.
The report points to the many schisms that characterise India’s employment picture — rural-urban, interstate differences, male-female gaps, young and older workers, caste, tribe and religion gaps, to name a few. Educated young people have higher rates of open unemployment (looking for and available for work) and under-employment (nominally engaged in a very low-productivity survivalist activity).
Employers have legitimate concerns about the employability of job-seekers. There is evidence from independent surveys that years of education do not naturally transform into good quality education or skills needed for specific jobs. Hence the employers’ lament.
Women are particularly disadvantaged by the lack of decent paid work near their homes, whether in rural or urban India. My research with Jitendra Singh shows that the declining share of agriculture and allied activities in female employment over the last three decades has not been compensated by a (relatively smaller) increase in the share of services and construction in female employment.
The policy priorities from the report are spot on. While other countries around the world are worried about ageing and depletion in their workforce because of steadily falling fertility rates, India has a large and young workforce. Productive utilisation of our immense reservoir of human power can yield rich dividends. However, to achieve this we need to focus on employment-intensive growth, for example, by creating labour-intensive manufacturing in rural India.
Labour-intensive work need not mean informal or poor-quality jobs. In fact, we need to ensure an increase in the proportion of workers in regular salaried jobs, with written contracts and decent work conditions. A cursory glance at our East Asian neighbours’ recent history shows that this is possible. Government and non-government agencies are working to correct the skilling mismatch. Additionally, working with employers to set up systems of inclusion, for instance, making workspaces womenfriendly, to take just one example, can help alleviate the inequalities in the labour market.
Last but not least, one of the chief factors that constrains women from accessing paid work (when available) is the predominant responsibility for domestic chores. The gender gap in sharing this enormous daily load is among the highest in India. Investing in the care economy, which provides these services at affordable rates, will not only create jobs directly, it will also free up women’s time which they can use for paid work and leisure. The care economy jobs will be labour-intensive, green and near home.
Ashwini Deshpande is professor of economics, Ashoka University. The views expressed are personal