Everyone has a true story about how they are unable to find good workers or employees or how they pay far more than what they get. This is what each one sees and believes. But the ground reality is not based on anecdotes. Then how do we know the ground reality? By looking for statistics which goes beyond the individual experiences. Summary statistics do not reveal the truth. Only when you drill down the data, cut and dice the data in creative ways, the truth starts to emerge in bits and pieces.
A good analogy is the elephant and the blind-men story. Each one feels and believes based on what they feel in their mind. Most often what they see on youth unemployment is the tail of the elephant. What we don’t see is the bulk of the ground reality. That is why unemployment is the real elephant in the room in India and is a ticking time bomb.
Unemployment in India in 2023 was 5%. This is very good compared with Greece where the unemployment is over 12% or in Nepal where it is 11%. Is this the true picture? This is the tail of the elephant. Let me explain. Unemployment is the percentage of people in the working age of 15-64 who are unable to get a job. So, India is doing far better on employment than many countries and we must pat ourselves on the back. This is the current narrative. However, the reality is exactly the opposite.
Harsh Reality
Here are the 15 data points which tell you the harsh reality faced by the youth of India. If you have an unemployed son or a daughter, you will understand the pain of the unemployed.
Supply Side
- Youth (65% or 930 million) dominate our population, but the median age is going up rapidly from 18 in 1970 to 28 in 2023. India won’t stay young for long
- 60% (16 million per year) of our children drop out before class 10. 70% study in government-run/supported schools. Result: very poor skills of youth
- 17 million people are added to the non-farm sector supply every year. At best, India is creating 3-5 million jobs per year, in the non-farm sector. Supply is 400% more than demand
- In India, idling is a huge reality – 50% (475 million) can work but are idling though officially unemployed are only 35 million. For every one person working, there’s one person idling
- Over 5 million Graduates/Diploma/ITI pass out every year but we are creating less than 0.5 million (10%) graduate jobs. However, the government wants to increase graduate intake in universities! We are creating a nation of idling youth and idling graduates
- Rural female workforce participation rate has declined from 33.9% to 20.1% in 2018 except during the pandemic. Poor women in rural India are dropping out of work
Demand Side
- GDP growth is not creating jobs (Employment co-efficient = -0.11 meaning, for every unit increase in the variable, employment is expected to decrease by 0.11 units.) while developing countries have far better employment co-efficient (average 0.3). GDP growth is not leading to employment
- Only 5% of the jobs are formal, 25% are casual and 51% are unpaid or self-employed (2018). Very few get formal jobs but most are cursed to do any job they get
- Just three sectors — IT, BFSI and healthcare — generate exclusively graduate jobs
- Most formal jobs are dead-end jobs — not remunerative and not attractive. Quality is a big issue
The Consequence
- Average self-employment earning was Rs 12,089 per month while casual labour wage was Rs 7,856 and regular wage was Rs 19,456 in 2022 rupee value. Many people earn less than the average. Self-employment is a curse as it does not give a regular income.
- Salary in entry-level jobs for graduates has been stagnant for the last 5 years in the private sector. So youth lose when they migrate to a city
- There is no incentive to skill — In Maharashtra, the engineering industry pays a skill premium of only 5% or Rs 19 per day (Rs 500 per month). This is on top of low wages. Why would anyone get skilled?
- Unemployment is rampant for graduates — 42% for young (<25 years), 23% for 25-29 to less than 5% (>35 years). This is understated because this does not include graduates who are not seeking work and are idling. In Telangana, 24.1% is the graduate unemployment which is 34 times the unemployment percentage of ‘class 5 dropouts’. This indicates that graduates wait for Government jobs but eventually take any unskilled job
- There are only 3 lakh State government cadre jobs though sanctioned strength is 4.9 lakh (1.4% of population). So government jobs are a drop in the ocean
There are serious consequences due to this huge imbalance between supply and demand. The top three are:
- We are not creating enough jobs in India and adding a huge number of people to the idling list
- Graduate youth don’t want to join the private sector and wait and try repeatedly for a government job till they reach 35. By that time, they are already unemployable
- The compensation for new entrants is minimum wages specified by law and entry-level wages for graduates. Both stagnant at net of inflation over the last 10 years. Demographics is working against the youth of India
Solutions, though not easy
India cannot create enough jobs for our youth. We must export experienced manpower with global certification and global language certification, and replace them with skill-certified fresh manpower.
Only MSMEs can provide employment to the masses. Help MSMEs grow by creating a separate Ministry of MSME and Employment (like Tamil Nadu) and by creating exclusive policies for Small and Micro enterprises. Today, the government invites and supports large enterprises that can help in gross State domestic product (GSDP) growth but not in employment.
Revise minimum wages for semi-skilled significantly to increase skill premium. Set up skill hostels at job centres so that the graduates and youth can stay at minimum cost and thus do not go ‘out-of-pocket’ while migrating for their first job.
Provide Skill Wage Incentive to MSMEs to compensate up to 25% of the salary for all new employees hired, or the first three years. Help MSME access central government schemes like Mudra loans, Apprentice schemes and loan guarantee schemes through the MSME Ministry.
Most of these are at the policy level. It is not enough. We have to get very serious. It is imperative that each of us ask one question: what can I do as an individual to stop the time bomb?
I have decided to do two things at my level and encourage you to do the same
- Don’t bargain with the street vendor. These micro and small entrepreneurs provide the largest employment and I think that I am paying a ‘youth tax’ when I pay a little more to them
- Don’t exploit the youth by paying low salaries for entry-level roles because supply is more than the demand. Pay them more but extract more by increasing their productivity. Normally, we do the other way around — want productivity to improve first before increasing the pay
Why graduates are not looking for work
Young graduates are idling much more than non-graduates. We need to understand the problem from the standpoint of the idling graduate.
I am not like my father
First, I am not like my father who worked very hard on the construction site. He earned very little, spent more and never had any savings. He had no PF or healthcare. Why would I work to lose money? If I cannot save when I work, I better stay idle.
Jobs are not where people are. This story is far worse for graduates who prefer formal jobs, which are only in big cities. Let me tell you about various elements of the cost of living in large cities. Cheaper rentals are so far away that we need to travel for 1-2 hours, either way, to work and so the conveyance cost is high. If you add the cost of rent, conveyance, clothes, weekend expenses, travel to home town and food, you will find that the cost is close to the salary, after deductions. We are asked to pay rental deposits when we have not even got our first salary. We are forced to borrow from our father or friends to meet the gap. So why are we working if we cannot save a rupee? This is the question my father asks whenever I ask for his help. What should I tell him?
Most employers look at salary but do not look at the savings. Whatever savings are there, they are wiped out after one health incident or when I have to travel home. In the end, I go out-of-pocket.
Another problem faced by graduates is even more serious. First, we are treated on a par with non-graduates. The employer does not see any reason to treat us differently or pay a salary premium. Why? Three or four years at college are not useful to the employer. Graduates end up competing with 12 class pass-outs who are more realistic and accept the job role. On the other hand, we find the job unattractive and not as per our expectations.
We face an even bigger problem, after we join. The odds are against us to stay and succeed. The role induction training that the employer provides is limited. The work environment is not in favour of the new entrants. Bosses and targets favour the older employees. So many young graduates get fired in the first job which is supposed to be the foundation of their career. This results in many graduates becoming choosy. They stop searching for “any type” of work and end up looking for only “my type” of work.
Preference for Govt Jobs
Why are many graduates looking for a government job? Simple. The government is a fair and the highest paying employer. The salaries are almost twice the salary in the private sector. Training is over several months and is extensive. Graduates and non-graduates are treated differently. There are no difficult targets in the beginning. There is job security and medical benefits. I get leave and other benefits. I can settle into the job over a period of time. What else can a fresher look for? It is another matter when I cross five years and suddenly the private sector becomes very attractive with high salaries and quick promotions while the government jobs stagnate. By that time it is too late to switch.
Even the government is not serious about the private sector jobs. The State governments give a lot of concessions to large corporates to invest in their States and track the investments. But the new jobs promised are not tracked seriously. It is a mystery to me as to why the government does not fix targets for graduate employment and track them transparently.
Why do I prefer to idle when I am waiting for a government job?
On the other hand, earning and saving opportunities are improving at home. We get an unemployment stipend from some State governments. My parents get direct transfer payments. When I want to work, there is MGNREGA. We get subsidised groceries and our cost of living at home is far lower than in cities. So, we are better off staying at home and looking for the “right type” of job. There is no shame in waiting for the right job. A lot of my friends are also waiting, and my parents don’t mind. Why should you?
Stark Statistics
- Unemployment is the percentage of people in the working age of 15-64 who are unable to get a job
- Youth (65% or 930 million) dominate our population
- 50% or 475 million are idling when they can work, ie, for every one person working, there’s one person idling
- Only 5% of the jobs are formal, 25% are casual and 51% are unpaid or self-employed
- Over 5 million Graduates/Diploma/ITI pass out every year but we are creating less than 0.5 million (10%) graduate jobs
- 17 million people are added to non-farm sector supply every year. At best, India is creating 3-5 million jobs per year in the sector
- In Maharashtra, engineering industry pays skill premium of only 5% or Rs 19 per day (Rs 500 per month)
- Most formal jobs are dead-end jobs — not remunerative, and not-attractive
