India's economy boosts jobs, but for unskilled and semi-skilled workers

It is not really a case of jobless growth, just that job creation is more for the low-skilled

The growing Indian economy is creating jobs, but mainly for the unskilled and semi-skilled workers. Graduates and those having higher qualifications, even with technical degrees and diplomas, are witnessing employment generation at a slow pace.  

The unemployment rate (UR) fell for all education classes from the year 2000 to 2011-12, except for those having below primary level qualification. The UR, however, rose sharply for all education classes — below primary level, primary to middle level, secondary to higher secondary, graduation and above — from 2011-12 to 2017-18. The UR has been falling since then, barring below primary level for 2018-19 year-on-year.

It was particularly the graduates and those having higher qualifications who saw a huge increase in the UR from 19.9 per cent during 2011-12 to 35.4 per cent during 2017-18, according to data compiled by the Institute for Human Development (IHD) on the basis of the periodic labour force surveys (PLFS) and earlier employment and unemployment surveys (EUS). 

The figures are census-adjusted.

 

PLFS vs EUS
 

While two important economic developments happened between2011-12 to 2017-18 — demonetisation and introduction of the goods and services tax (GST) — experts say the job data for this period is not comparable. This was so because the data for 2011-12 was from the EUS and 2017-18 was from the PLFS.  
 

The PLFS was conducted for the first time in 2017-18. It has problems of comparability with the 2011-12 EUS which was linked to the household consumption expenditure survey, says Amitabh Kundu, economist and professor emeritus at Ahmedabad-based L J University.

The government had come out with the EUS for 2017-18 too, but instead of releasing it with certain caveats, the government decided to junk the results. Many researchers working on employment statistics mentioned at the meetings called by the NITI Aayog that it was better to release the data so that researchers could analyse their comparability, Kundu recalls.
 

Since 2017-18 (July-June), the UR for graduates and those having higher qualifications has been declining, along with that for lower qualified people (with one exception for a year as cited above) but the rate of decline is faster in case of the latter. Also, graduates and higher-qualified people saw a decline in the UR at a slow pace till 2019-20, as a third of those willing to work were still jobless that year. After that the fall accelerated. The UR in this category fell from 35.4 per cent in 2017-18 to 28 per cent during 2022-23.  
 

The rate of decline of unemployment in those having lower qualifications than this category was faster during this period. For instance, those below the primary level of education saw the unemployment rate fall from 6.7 per cent to 1.7 per cent during this period, while those having primary- to middle-level education saw it decline from 12.4 per cent to 3.9 per cent.
 

Those having secondary to higher secondary levels of education faced 8.7 per cent UR during 2022-23, compared to 19.4 per cent in 2017-18.
 

As such, the UR in the case of graduates and those having higher qualifications declined by around 21 per cent during the five-year period. The rate of fall was around 75 per cent in the case of those having below primary level of education, 68.5 per cent for those having primary to middle level of education, and 55 per cent in the case of those having secondary to higher secondary qualifications.  

Still, more than one-fourth of the graduates willing to work did not get the required jobs during 2022-23, while joblessness was almost extinct for those having below primary level of education. Having said that, one should note that PLFS does not capture disguised unemployment or underemployment.

 

Too poor to be unemployed
 

Kundu says the UR has been coming down since 2017-18, but poor-quality jobs have been rising, including household unpaid work or low-pay work. “While the unemployment rate at graduate and above level declined during the period, the biggest decline came for those at below primary level. The unemployment rate of those at primary to middle level education and those at secondary level declined faster than for those who graduated or had higher qualifications,” he points out.
 

In other words, the UR for the poor has declined at a faster rate. The decent employment has not risen so fast, Kundu explains further.
 

He sees a relationship between education and unemployment. “If you are an illiterate person, chances that you are poor are higher. The poor cannot remain unemployed. Unemployment is a luxury that the poor cannot afford. The higher the education level, the higher the income, and higher is the rate of unemployment,” Kundu points out.
 

Bank of Baroda chief economist Madan Sabnavis says the data shows that unemployment has come down for all education classes, and therefore is not specific to graduates only. This shows that more jobs have been created, he points out.

 

Technical challenge
 

Though technical education is supposed to make the youth employable, the recent India Employment Report, 2024, prepared by the International Labour Organisation (ILO) and IHD, reveals that graduates with such skills have higher unemployment rate than merely bachelor degree holders in India during 2022 and the pace of joblessness in this category has increased over a period of 17 years. However, the former got better 

quality jobs than the latter.  
 

The unemployment rate among youths with a technical training degree or a graduate diploma was even higher than among general graduates, shows the report. In 2022, the unemployment rate among youths with a graduate diploma was the highest at 31.1 per cent, closely followed by those with a technical training degree at 29.4 per cent (see charts).
 

This indicates the challenges faced by youths with technical qualifications in finding suitable employment opportunities, the report says. Besides, the unemployment rate among youths with formal vocational training was significantly higher than among youths with informal vocational training, underscoring that informal training is acquired on the job.
 

However, higher education and technical skills helped the higher proportion of youth to get regular employment, the report reveals. Only 12.5 per cent of those with no technical qualification could get regular jobs in 2022, while the proportion was higher at 18.2 per cent for those with technical degrees. Nearly 30 per cent of those holding technical diplomas without graduate degree had regular jobs and the proportion was even higher, at around 58 per cent, for those having diploma and graduate or higher degree.
 

The issue here is that a third of those having technical degrees had casual jobs, though less than the 44 per cent in the case of those with no technical education. The number declined significantly, at 18.5 per cent, for those with a diploma but not having a graduate degree and just 3.4 per cent for those with diploma and graduate or higher degree.  

 

Qualification-demand mismatch
 

To a query whether there is a mismatch between technical qualification and demand of the economy, Kundu says this is quite possible. There could be a mismatch between technical education and industry demands or supply-demand mismatch. That should get corrected in the long run, he says.
 

“There is no proper planning for the supply of required skills. There has to be proper planning. What may happen is that Bihar produces more carpenters, but demand is very low there. However, there may be a huge demand for carpenters in Kerala and the rate of migration is not very high. So, there is a mismatch — supply is somewhere and demand is somewhere else,” he says.
 

Besides, the economy is changing very fast but skill formation takes time. For example, the airline industry expanded so rapidly and we did not have enough pilots and crew members. "So, we brought them from Bulgaria, also from Russia, to fly our aircraft and serve. But then, once we realise that we are flying more aircraft, we train them. Now, the situation is not that bad," Kundu explains.
 

Sabvnavis says the fact that those with technical education are finding it hard to get jobs is a serious concern. "We do have a state where the youths do not have the necessary skills to get jobs that keep them out of the workforce. However, when unemployment is high among those with technical education, it means the sectors that should be employing them are not growing at the desired rate," he points out.
 

The other point is that those with such qualifications may not be from the top institutes, which companies want, Sabnavis says. He points out that several such certificates are given by the smaller institutes (not engineering colleges) whose acceptability is limited. Overall, growth of industry is the clue here to absorbing this large set of graduates, he says.
 

The oft-repeated theory of the K-shaped recovery since the Covid-hit year of 2020-21 could still be true, but with the caveat that the unevenness of growth in job markets is skewed in favour of the poor, though these are low-paid. It should be noted that employment generation did not fall even during 2020-21.