Education as disguised unemployment

India’s labour force is getting older and also less educated. This is not the composition that the famed phenomenon of demographic dividend had expected to deliver. The phenomenon was supposed to help India reap a once-in-a-lifetime benefit from a large contingent of young population. This was the bulge of young population in India’s age-gender population pyramid. The more educated this young population, the better. If employed, this large young population was expected to deliver higher growth and savings. But, if the composition of the labour force and of the employed population is getting increasingly older and less educated then the chances of reaping a demographic dividend fade away.

Estimates from CMIE’s Consumer Pyramids Household Survey (CPHS) suggest that in 2016-17, 17 per cent of the labour force was of the 15-24-year age. By 2021-22, this proportion had dropped to 13 per cent. This fall did not happen because the composition of India’s population changed to have fewer youngsters. On the contrary, the share of the 15-24 age group in the total population has increased from 26 per cent in 2016-17 to 28 per cent in 2021-22. But, this age group’s labour participation rate has fallen. This has happened because youngsters have delayed joining the labour market for one reason or the other.

Evidently, a mere increase in the share of youngsters in the total population does not assure a demographic dividend. They must be willing to join the labour force to be employed. Why has a large proportion of youngsters given the labour market a miss? Data suggests that an increasing proportion of people has chosen to continue to remain students even as they were well into the working-age group. The increase in the proportion of students in the total working-age population is large. Note that we consider only the working-age population, i.e. those who are of 15 years of age or more and not children who are not expected to be in the labour market.

In 2016-17, about 15 per cent of the working-age population declared that they were students. This proportion rose at the rate of one percentage point in each of the following three years to reach 18 per cent by 2019-20. Then, in the pandemic year of 2019-20, it shot up by three percentage points to 21 per cent and then by another two percentage points to 23 per cent in 2021-22. This is a big increase in students among the working-age population.

The working-age population increased by 121 million between 2016-17 and 2021-22. During the same period, the number of students increased by 104 million. Further, the labour force shrunk by 10 million during this period. This implies that the labour market could not absorb the additional labour that became available through the natural process of growth in population and on the contrary, it shed some of the labour that was already a part of the market.

It can be inferred then that people did not continue to remain students because they were attracted to higher education (or because they took longer to acquire education) but because there weren’t enough jobs for all of them to take up. Students are, therefore, turning out to be an increasing measure of disguised unemployment. This is heart-breaking.

As the labour market is unable to absorb new labour, the composition of the workforce (those who are employed) is increasingly ageing. In 2016-17, a quarter of the total employment in India was of people below the age of 30. This fell to 21 per cent by 2019-20 and then to 18 per cent by 2021-22. The proportion of the workforce in their thirties has also fallen from 25 per cent in 2016-17 to 21 per cent in 2021-22. As a result, what is left in the workforce is mostly people in their forties and fifties. In 2016-17, 42 per cent of the workforce was in their forties and fifties; by 2019-20, this had risen to 51 per cent. More than half the workforce comprised middle-aged people when the pandemic struck India. By 2021-22, their proportion had risen to 57 per cent. An ageing working population is not what a country that was poised to reap demographic dividends was supposed to deliver. This is also not what can help India leap forward to the growth rates it aspires for.

A related problem is that the educational qualification of the workforce is deteriorating. The share of graduates and post-graduates increased from 12.5 per cent in 2016-17 to 13.4 per cent by 2017-18. Then it fell to 13.2 per cent in 2018-19 and then to 11.8 per cent in 2019-20. It recovered but only partially to 12.2 per cent. This sudden fall in graduates among the employed and their incomplete recovery does not bode well for India’s competitiveness.

India’s workforce comprises mostly people whose maximum educational qualification is of secondary education (those who cleared their 10th – 12th examinations). They accounted for 28 per cent of the workforce in 2016-17 and in 2021-22, their share went up to 38 per cent. There is a similar increase in people whose maximum education was between 6th and 9th standards. Their share went up from 18 per cent in 2016-17 to 29 per cent in 2021-22.

It is odd that while the number of students has been increasing, the number of better qualified people in the workforce has not.

 

The writer is MD & CEO, CMIE P Ltd