Indian youth employment needs close rather than casual analysis
The ILO-IHD job report should be read without an ideological slant to understand India’s labour market transformations
is a former chief statistician of India.
The International Labour Organization (ILO) in partnership with the Institute for Human Development (IHD) recently released the India Employment Report 2024, which has a special focus on youth employment. The report, a careful analysis of the job situation in India, created its usual set of headlines. Unfortunately, many of these headlines were mischievous, detracting from many important characteristics of India’s improving labour market. In fact, chief economic advisor V. Anantha Nageswaran noted in a recent Mint column that it “attracted attention for the concerns more than confidence... expressed.”
These concerns reflect a combination of misreading and misunderstanding of the challenges of youth unemployment, partly facilitated by a curious choice of data points used by the ILO-IHD team to report their analysis. The main report focuses on the Indian employment picture between 2000 and 2022, drawing National Sample Survey (NSS) data of 1999-00, 2011-12 and Periodic Labour Force Survey (PLFS) reports of 2018-19 and 2021-22. In an annexure, the report also summarizes key findings of PLFS 2022-23.
With regard to the issue of youth employment, the report on the whole notes “the rising trend in youth unemployment was partially reversed between 2019 and 2022.” It points out that youth unemployment increased from 5.7% in 2000 to 17.5% in 2019, before decreasing to 12.4% in 2022 (and to 10% in 2023). Across various chapters, the report brings out clearly the improvements that have taken place in India’s employment indicators, including youth employment numbers between 2019 and 2023. This brings us to the curious choice of dates used by the authors in presenting their arguments. Not only has the NSS office conducted employment surveys in 2004-05 and 2009-10, the PLFS annual reports begin from 2017-18. The ILOIHD report clearly notes the continuity in data between the older employment/ unemployment surveys (EUS) and the more recent annual PLFS reports. Had this entire set been considered, we would have observed—as I have pointed out in an earlier Mint column—a striking trend. The employment picture improved between 2000 and 2005, deteriorated from 2005 onwards, and starts improving again from 2017-18, after which it shows steady improvement. In my column, I had noted that in the absence of data between 2011-12 and 2017-18, it is a matter of speculation when the trend changed. While it could be as late as 2017-18, it could also be earlier—maybe 2014-15.
Had this been a political column, we could have put governance related labels to these time periods. As this is a column focused on statistical issues, we shall refrain.
The IHD-ILO report notes the changing educational profile of youth and the increasing share of higher education levels. It brings out an interesting and important facet, which is that “the youth unemployment rate increased with the level of education, with the highest among graduates.” Even here, the authors note that this unemployment rate has seen a decline since 2019 (actually since 2018).
They further point out that “unemployment in India was predominantly a problem among youth, especially youths with a secondary education level or higher.” The report then goes on to note its most cited and misunderstood statement: “In 2022, the share of unemployed youth in the total unemployed population was 82.9%,” which some political commentators have chosen to read as 82.9% of our educated youth are unemployed. When we recognize that aggregate unemployment affects a small proportion of the labour force, the mis-reading seems to be a deliberate case of ‘none so blind as those who will not see.’
In discussing youth unemployment, we note a second curious feature in their otherwise detailed analysis. The ILO-IHD report observes that the “incidence of unemployment was much greater… among younger youth than older ones.” It notes that in 2022, the unemployment rate was 13.2% for the age group 15-19, compared with 8.6% for the 25-29 age group. However, if we refer to its appendix table A4.2a, we would note that the age group 20-24 has the highest unemployment rate of 16.9%. Noting this difference is important because it highlights the transient character of youth unemployment. If we were to look at the next age band 30-34 (as is available in the PLFS report), we would see that the unemployment rate has further reduced, and is now close to the all-age group average. Even as the report’s authors include relevant data in annexures, the main report does not bring out that in each age group, the unemployment rate has seen consistent declines from 2019 onwards. Further, the gap between the unemployment rate in the age group 20-24 and 25-29 has also narrowed, suggesting that fewer people are staying unemployed, and for shorter periods of time. It is a pity that the authors of the report did not try to assess how long it takes people to get a job and the magnitude of improvement in this over the years.
The report also brings out that educated youth typically get better jobs. The econometric model used shows that higher levels of education yield better returns, and that there has been “increasing importance of higher levels of educational qualifications among youth in accessing higher paying jobs in the labour markets.” They also note that in 2022, there was a rise in the returns to youth with both informal and formal vocational training, indicating that the “government’s intensive efforts to expand skill training might have led to better returns for youth with vocational training.” These findings, when combined with the rising share of educated youth, bring out a key element of the country’s improving labour-market conditions seen over the last six years.
The ILO-IHD report deserves to be read without ideological blinkers to understand the transformations which have taken place in recent years in the Indian labour market.