4. Youth Employment

The discussions in the previous two chapters indicate overall positive trends of employment generation in India, but they also emphasize concerns over the lack of quality and productive jobs. This challenge of decent employment generation has been accentuated by the economic slowdown, the advancement of digital technologies and the disruptions caused by the COVID-19 pandemic. Additionally, a series of overlapping crises – the conflict in Ukraine, the energy crisis and rising inflation – have slowed the pace of the post-pandemic recovery in the labour market, particularly in developing countries (ILO 2022b). Young people (aged 15–29) are particularly vulnerable to these economic disruptions due to their lack of experience and limited resources, at least when compared with adults (aged 30 and older) (ILO 2023; Verick 2023; ILO 2022b). These challenges have been even greater in India, which has the world's largest youth population (Sharma 2022; Mitra and Verick 2013).

This chapter examines labour market outcomes for young people in India, including activity status, labour force participation, quality and conditions of employment, unemployment, underemployment, and regional differences. The analysis is based on secondary data from the Employment and Unemployment Surveys and the Annual Periodic Labour Force Surveys, with household- and individual-level survey data from 2000, 2012, 2019, 2021 and 2022.

A large proportion of India's population is of working age and is expected to remain in this potential demographic dividend zone for at least another decade. India's population is projected to increase from 1.36 billion in 2021 to 1.48 billion in 2031 and then to 1.52 billion by 2036.

Over the past two decades, India experienced continuous decline in its crude birth and death rates, resulting in its population growth rate reaching the lowest level since Independence. Between 2011 and 2021, the decadal growth rate was 12.5 per cent, with a projected decline to 8.4 per cent in the 2021–31 decade. Despite the decline, the proportion of India's working-age population (aged 15–59) increased from 61 per cent in 2011 to 64 per cent in 2021 and is projected to reach 65 per cent in 2036, with projected stability thereafter.

Although the proportion of youths in India's total population has started to decline, at 371 million persons, it still accounts for a considerably large population size when compared with most other countries and will remain significant for at least the next decade. India is at an inflexion point in its demographic transition, where the proportion of youths, who constituted 27 per cent of the population in 2021, is projected to decline to 25 per cent in 2031 and to 23 per cent in 2036.

Each year, around 12 million persons are added to the working-age population, representing a vast pool of an available labour force, whose productive utilization could lead to India reaping a demographic dividend. This large number, in the context of its impact on the worker population ratio and the dependency ratio, has been called a "window of opportunity" for India's growth and development – an opportunity that must be seized before it closes (MSPI 2022).

The demographic advantage in India varies across states, with three distinct phases: In the first phase, states begin moving towards gaining the dividend; in the second phase, the window of opportunity opens and widens; and in the third phase, the dividend is still being realized but gradually falling, eventually closing (Srivastava et al. 2020; Kulkarni 2017). Most states are considered to be in phases II and III and are expected to remain in these stages for the next two to three decades, which presents a tremendous advantage.

4.3.1 Activity status #

Among youths, the students and unemployed persons dominate, while adults engage more in economic activities and domestic duties. Notably, the number of young people pursuing education has increased steadily over time, while their participation in economic activities has declined. The proportion of youths pursuing education has more than doubled, from 18 per cent in 2000 to 35 per cent in 2022. In contrast, the percentage of youths involved in economic activities decreased from 52 per cent to 37 per cent during the same period, although there was a bit of a reversal in the trend between 2019 and 2022.

Among the youth population, a considerable proportion of individuals aged 15–19 were pursuing education, whereas those aged 25–29 were significantly more engaged in economic activities. In 2022, approximately 72.4 per cent of youths aged 15–19 were pursuing education, while only 23.5 per cent in the age group of 20–24 and a mere 2.3 per cent in the age group of 25–29 were doing so. Conversely, only around 15.2 per cent of youths aged 15–19 engaged in economic activities, compared with 40.2 per cent of youths aged 20–24 and 58.6 per cent of those aged 25–29.

Young women mainly engaged in domestic duties, whereas male youths were more involved in economic activities and also pursuing education. In 2022, about 45.1 per cent of female youths engaged in domestic duties, whereas only 0.5 per cent of male youths were involved in domestic duties. In numbers, 79.1 million young women engaged in domestic duties, compared with only 1 million men. And 53.5 per cent of young men were involved in economic activities, compared with only 19.1 per cent of young women.

There was a reversal of youth participation in economic activities between 2019 and 2022, with a corresponding reduction in their unemployment and their involvement in education and domestic duties. The proportion of young women's engagement in domestic duties decreased from 51.5 per cent in 2019 to 45.1 per cent in 2022, while the proportion of men in education reduced from 38.8 per cent to 36.9 per cent. These trends were more pronounced in rural areas than in urban areas.

4.3.2 Labour force participation rate #

The LFPR is lower among young people than adults, especially for youths aged 15–19 than those aged 20–24 and 25–29. In 2022, the LFPR for youths was 42 per cent and 62.4 per cent for adults. Among the youths, the LFPR was only 17.5 per cent for those aged 15–19, but 48.4 per cent for those aged 20–24 and 64 per cent for the 25–29 age group.

Youths are now less likely to be in self-employment but more likely to be in unpaid employment. They are more likely to be employed in industry and services than adults, but also more likely to be informally employed and employed in the informal sector. As with overall employment, the trends in employment reversed during the pandemic period (up through 2022), with rising participation in self-employment, unpaid employment and in agriculture.

4.4.1 Status of employment #

Self-employed is the largest category of employment for both youths and adults. Young people were more likely to be in unpaid family work in the self-employment category than adults, which is considered an inferior form of work because it doesn't lead to independent income or increase women's participation in the public sphere. They were also less likely to be an own-account worker or an employer than adults under the self-employment category.

In 2022, 47.5 per cent of young people were self-employed, compared with 58.5 per cent of adults. Of them, 59.6 per cent of youths were unpaid family workers, while only 23.6 per cent of adults were. Conversely, 38.7 per cent of self-employed young people were own-account workers, compared with 71 per cent of adults. Between 2000 and 2022, the portion of young people in self-employment decreased, from 50 per cent to 47.5 per cent, while the portion of adults in self-employment increased, from 53.5 per cent to 58.5 per cent. Notably, there was a reversal in this trend of youths in self-employment between 2019 and 2022, with a sharp increase in unpaid family work.

4.4.2 Informal employment #

Informal employment is the dominant form of employment among youths, with 89.9 per cent of youths in informal employment in 2022. The informal sector constituted 79.1 per cent of youth employment. Regular formal employment was only 10.2 per cent among youths in 2022. Within the formal sector, 53.6 per cent of regular workers were informal (without written contracts or social security). Written contracts were held by only 30.7 per cent of regular workers, and long-term contracts (3+ years) by only 15.0 per cent.

4.5.1 Unemployment rate #

The incidence of unemployment was much greater among young people in urban areas than in rural areas and among younger youths than older ones. In 2022, the unemployment rate was 13.2 per cent for the 15–19 age group, compared with 8.6 per cent for the 25–29 age group. This disparity could be attributed to several factors, including differences in the level of education, work experience and relevant skills. The unemployment rate among youths in urban areas was 17.2 per cent, compared with 10.6 per cent in rural areas. Notably, even after a sharp decline between 2019 and 2022, the female youth unemployment rate in urban areas (at 21.6 per cent) remained higher than their male counterparts (at 15.8 per cent).

4.5.2 Unemployment rate among educated youths #

The youth unemployment rate increased with the level of education, with the highest among graduates and higher among women than men. The educated unemployment rate increased over the past 22 years, but with a sharp decline between 2019 and 2022. In 2022, the unemployment rate among youths was six times greater for those who had completed secondary education or higher (18.4 per cent) and nine times higher for graduates (29.1 per cent) than for persons who could not read or write (3.4 per cent). This was relatively higher among educated young women (21.4 per cent) than men (17.5 per cent), especially among female graduates (34.5 per cent), compared to men (26.4 per cent) with similar qualifications. The unemployment rate among educated youths grew from 23.9 per cent in 2000 to 30.8 per cent in 2019 but fell sharply to 18.4 per cent in 2022. Unemployment in India was predominantly a problem among youths, especially youths with a higher education level.

The COVID-19 pandemic brought about a reversing of the youth labour market trends, with a rise in the LFPR and the worker population ratio and a fall in the unemployment and underemployment rates between 2019 and 2022. However, this addition in employment is largely of poor-quality unpaid household work in self-employment, informal low-paying or low-earning in regular salaried work and casual wage work, which is much more pronounced among women in rural areas and in subsistence agriculture.

Between 2019 and 2022, youth employment increased by 21.4 million (from 114.0 million to 135.4 million). The bulk of this increase was in self-employment, which rose by 16.4 million (from 48.1 million to 64.5 million), driven mainly by unpaid family workers (+13.9 million). Regular employment increased by only 1.9 million, while casual employment rose by 3.2 million.

The fast-paced and ever-evolving demand for skills resulting from rapid technological advancement and digitalization and the gig and platform economy are critical emerging issues affecting overall employment, including for youths. As discussed in Chapter 2, there is a gradual adoption of new technologies, such as Industry 4.0 technologies, across the medium-sized and large industries in India. These new technologies are likely to displace routine, low- and medium-skill jobs while increasing the demand for high-skill jobs (FICCI, NASSCOM and EY 2017). In this process, the adoption of these technologies will also generate a substantial number of new jobs for skilled young people in the future (Ghose and Mehta 2023; Kapoor 2022; Mehta and Awasthi 2019).

Low-skill and no-skill jobs dominated with a marginally larger proportion among adults than youths. Conversely, the proportion of high- and medium-skill jobs among youths was marginally larger than what it was for adults. In 2022, 89.4 per cent of adults were in low-skill or no-skill jobs, compared to 88.9 per cent of youths, while 11.1 per cent of youths were in high- or medium-skill jobs, compared with 10.6 per cent of adults.

Between 2000 and 2019 (before the pandemic), youths in high-, medium- and low-skill jobs increased at a consistent rate, while their involvement in no-skill jobs declined. But this trend reversed between 2019 and 2022 for high-skill jobs, with a consistent increase in the low-skill job category. The proportion of youths in high- and medium-skill jobs in 2022 had increased by approximately 7 percentage points, rising from 3.4 per cent in 2000 to 10.4 per cent in 2019, although it decreased to 8.9 per cent in 2022. In contrast, the proportion of youths in no-skill jobs consistently declined by 10 percentage points, falling from 36.1 per cent in 2000 to approximately 26 per cent in 2022. But it increased in low-skill jobs by 4.3 percentage points, rising from 60.5 per cent to 64.8 per cent during the same period. This consistent increase in low-skill jobs may indicate economic compulsion and a lack of sufficient high-skill, high-paying job opportunities, which leads young people to increasingly participate in low-paying, low-skill positions.

Digital platforms are also revolutionizing the world of work through the implementation of algorithmic management practices. These practices are transforming the hiring, monitoring, evaluation and compensation processes for workers. Performance assessments are now conducted through ratings, which serves as a new method of exerting control over workers. If their ratings are low, workers are automatically removed from the platform without any explanation. Algorithms are not neutral; they follow specific objectives and instructions. If biased inputs are introduced into the system, it can result in discriminatory practices. It is crucial to ensure transparency and accountability in the management of algorithms for gig and platform workers.

The demographic advantage in India varies across states. To understand the regional differences in youth employment and unemployment situations, a composite index was created for this report's analysis using four broad parameters that link to labour market access: (a) a measure of labour market access: unemployment among educated youths (secondary level and higher); (b) a measure of work quality: regular formal employment; (c) a measure of inactivity: youths not in employment, education or training; and (d) a measure of skill acquisition: educated youths (secondary level and higher).

There is considerable regional disparity in the youth employment situation. Many large states in the eastern and central regions of India are characterized by a youth bulge, relative underdevelopment and low per capita income. Additionally, these states have a small proportion of highly educated youths, a low incidence of formal regular employment and a large proportion of youth not in employment, education or training. This emphasizes the necessity of regional policies that reflect the regional differences in the employment situation for the youths and thus promote more balanced opportunities.

The Indian economy has so far failed to create enough remunerative or productive jobs in the non-farm sector for educated youths. Technological changes are making labour markets increasingly complex. New employment patterns, labour market issues and job opportunities are constantly evolving. The demand for highly skilled youths has been increasing, particularly in modern services, such as communications, software, consultancy, financial and business, administration, health and education services. These sectors have great potential for generating new productive employment opportunities for young people and need further encouragement through tax benefits and other incentives.

The demand for low-skilled youths is increasing in various low-wage services sectors, including trade (including retail), hotels, restaurants, transportation services and gig and platform work. Additionally, there is growing demand for young workers in micro and small manufacturing enterprises. Particularly after the COVID-19 pandemic, the demand for youths in these job categories has risen rapidly. One significant change brought about by digital platforms is the blurring of the traditional distinction between employees and self-employed individuals. This transformation has created new challenges regarding the well-being and working conditions of workers. The employment opportunities in the gig and platform economy primarily offer low-paying and non-standard work, which can be seen as an extension of informal work. This type of work often fails to meet the high aspirations of educated youths.

India faces a significant challenge of a high rate of youths not in employment, education or training, which is much greater among young women than young men. The majority of those women are also out of the labour force, while the young men who are not in employment, education or training are unemployed. These two heterogenous groups require different targeted strategies to address the challenge of not in employment, education or training.