Youth employment remains the Achilles' heel in the Indian labour market

Conditions improving, but high unemployment rate in 15-29 age group a challenge for policymakers

It was a year when jobs remained a dominant theme – from private-sector layoffs to government policies that would impact the job market.

Come June and protests erupted across the country against the government’s Agnipath scheme for recruitment to the armed forces. Roads were blocked and trains were held up as the country’s youth descended on streets and rail tracks.

And in November, the Supreme Court upheld 10 per cent reservation in government jobs and education institutions for economically weaker sections – and said there was no illegality in breaching the 50 per cent quote.

The unemployment crisis earned some recognition and also drew some action from the government in 2022. Prime Minister Narendra Modi in October announced that one million people would be hired by 2023 through central government ministries and departments. At the Rozgar Mela held that month, he handed 75,000 appointment letters, reiterating the government's commitment to generate employment.

The start to the year, meanwhile, was grim.

After pandemic-induced lockdowns and restrictions over the past two years, just when the Indian labour markets were on track to recovery, the Omicron variant of Covid-19 disrupted it all. The fourth round of the Quarterly Employment Survey (QES) covering the Omicron-hit March quarter showed a 10 per cent decrease in new job creation. Only 350,299 new jobs were created in nine non-farm sectors, against 390,116 in the previous December quarter of FY22.

Data for subsequent quarters is yet to be released.

The latest quarterly Periodic Labour Force Survey (PLFS), available for the September quarter and released by the National Statistics Office (NSO) last month, however, showed urban unemployment rate declining for the fifth consecutive quarter. At 7.2 per cent, it is at its lowest level in over four years. A year earlier, it had stood at 9.8 per cent in the corresponding quarter. 

The government estimates that the formal sector, which constitutes around 10 per cent of the domestic labour market, added around 9.1 million new jobs in the first three quarters of 2022 compared to 7.5 million during the same period a year ago. This estimate is based on the subscription data from the Employees’ Provident Fund Organisation (EPFO), which has around 67 million regular contributors.

While the EPFO data depicts the employment scenario from the demand side of the labour market, the PLFS provides the supply-side picture. Both point towards improving labour market conditions in the post-pandemic period.  

However, the high unemployment rate for the youth (15-29 years) presents a challenge for policymakers. Earlier in August, an International Labour Organisation (ILO) report showed that the youth unemployment rate worldwide was three times that of adult unemployment rate. The latest PLFS data for the September quarter puts the youth unemployment rate at 18.5 per cent – down from 22.5 per cent in the corresponding quarter last year.

According to World Bank data, though youth employment for the 15-24 age group increased to 23.2 per cent in 2020 from 20.6 per cent in 2018, the ratio was much higher at 29.3 per cent in 2012 and 32.4 per cent in 2010. 

Himanshu, associate professor at the Jawaharlal Nehru University in Delhi (he uses only his first name), explains that though the PLFS data shows unemployment rate falling this year, job creation still remains a challenge for the Indian labour markets. That’s because the vast populace engaged in the informal sector is not covered by these surveys and is thus not reflected in the official figures.  

“Government initiatives to fill long-pending vacancies make for a miniscule number and have no effect when it comes to the employment situation, particularly youth employment,” he adds. “It is imperative that the government facilitates and kick-starts meaningful job creation in core sectors like manufacturing, construction, services etc.”

Labour protests and the way ahead

While the government finalised four labour codes in 2020, little progress has been made with trade unions continuing to protest against them. The proposed reforms aim to strengthen the protection available to workers, including unorganised workers, in terms of statutory minimum wages, social security and healthcare.

With several crucial states going to polls in the coming months and a general election only a year away, the fate of the four codes hangs in the balance. The labour conference organised by the Union labour ministry and held for the first time in over a decade at Tirupati (the last was in 2012) failed to make headway on the matter. 

The growing labour unrest in many large factories, including those of global manufacturers, hasn’t helped. Labour organisations have been voicing dissent against increased contractualisation and weakening of the remedial measures for the unorganised workers.

Earlier in March, workers affiliated to a dozen central trade unions went on a two-day strike against the government’s disinvestment policies and demanded that the four labour codes be scrapped. 

Then in June, workers at Ford India’s Chennai plant protested for over a month against the severance package offered by the company that is closing operations in India.

Meanwhile, in November, the All-India Bank Employees’ Association called for a strike against what it described as the targeted victimisation of bankers who are active in the union, but deferred it after meeting the chief labour commissioner.

The government claims its efforts to provide social security to unorganised workers has been successful. The e-Shram portal, the national database of unorganised workers, has so far had around 284 million registrations, which will make it easy to directly transfer benefits to them. That said, the New Year will bring challenges for the government to keep the labour markets thriving and to provide better job opportunities, especially to India’s youth.