Young Indians but Aging Workforce

Why in News? 

• While addressing the nation on Independence Day, the Prime Minister made a special mention to India being a youthful nation and highlighted the opportunities before India’s youth.
• However, an analysis of India’s workforce, sourced from CMIE’s Economic Outlook data, shows that while India may be the country with the most youthful population, its workforce is rapidly aging.  

 

Meaning of ‘India’s Workforce is Aging’: 

• An ageing workforce basically means that if one looks at all the employed people in India, the share of young people is going down while the share of those closer to 60 years of age is going up.

 

An Analysis of the Composition of Workforce by Age Group

• Data in Percentage
  • In CMIE’s data, youth is defined as those belonging to ages above 15 years and below 25 years.
  • However, since the PM has talked about those under 30 years as the youth, the composition can be divided into three groups:
    • Those aged 15 years or more but less than 30 years,
    • Those aged 30 years or more but less than 45 years, and
    • Those aged 45 years and older.
  • The share of India’s youth has fallen from 25% in 2016-17 to just 17% at the end of the last financial year in March.
  • Even the share of those in the middle group has fallen from 38% to 33% over the same period.
  • The oldest age category however has grown its share from 37% to 49%.
  • In other words, just in the past seven years, the workforce has aged so much that the share of people 45 years and older has gone from one-third to almost one-half.
• Data in Absolute Numbers
  • The data shows that while the total number of people with jobs has fallen from 41.27 crore to 40.58 crore, the biggest decline has happened in the involvement of India’s youth.
  • In 2016-17, there were 10.34 crore people under the age of 30 years in the workforce. By the end of 2022-23, this number had fallen by over 3 crores to just 7.1 crore.
  • At the same time, those aged 45 and above grew in numbers even though the overall employment levels fell.

 

Reason Behind Aging India’s Workforce: Youth is Out of the Job Market

• Despite the increasing numbers, the youth is getting driven out of the job market.
  • A good way to track this is to look at the metric called “Employment Rate.”
  • The Employment Rate (ER) for any population or age group tells us what proportion of that age group or population is employed.
  • So, if there are 100 people in the ages 15 to 29 and only 10 are employed then the ER would be 10%.

 

An Analysis of Employment Rate by the Age Group

• 15 to 30 Age Group
  • The population belonging to the youth category described by the PM grew in size from 35.49 crore in 2016-17 to 38.13 crore in 2022-23.
  • Yet the total number of people in this age group that had a job shows a decline.
  • So, while this young population grew by 2.64 crore, the number of employed youths fell by 3.24 crore.
  • In other words, far from keeping pace, the youth of India actually experienced a fall in employment of 31% in the past seven years.
  • This is reflected in the sharp fall in the Employment Rate for this age-group.
  • It fell from 29% to just 19%. In other words, while seven years ago, 29 of every 100 youth (15 to 30 ages) used to have a job, today that number has fallen to 19 out of every 100.
• 30 to 45 Age Group
  • The employment rate has also fallen for this age category as well, however to a lesser extent.
  • Moreover, the employment rates in this age group were much higher to begin with.
• 45 and Older
  • The employment rates have declined the least for the oldest age group. Moreover, this is the only age group where the absolute number of people with jobs has actually grown.
  • It is another matter that the overall population of this group grew by even more and that is why the ER has fallen to some extent.
  • Among the 45 years and above category, the age group of 55-59 years is the one that stands out.
  • Not only this group (55-59)saw an increase in employment rate but is also the one which has registered the maximum increase in the ER over the past 7 years.

 

Extrapolation Based on Analysis of Employment Rate

• India’s Workforce is Aging
  • Considering data of 5 years, the age group of 25 to 29 years shows a rising employment rate over the past 7 years.
  • But a look at the absolute numbers explains that the reason for this rise in ER is not that more people in this age group got a job, rather a sharp fall in the total population of this age group.
• Fast-Growing Youth Population Does Not have Jobs
  • The data clearly shows that even though India has a fast-growing youth population, that by itself does not guarantee more jobs for the youth.
  • That is because the young are failing to make their mark in the job market and it appears they are increasingly getting elbowed out by the not-so-young Indians.
• Unemployment is the Highest Among Youth
  • Even if accounting for the possibility that a lot of young people may be pursuing higher studies, the trend is still stark enough to merit a look by policymakers.
  • For example, official surveys other than CMIE suggests that India’s unemployment is highest for the youth.

 

Key Caveats for Policymakers

• Demography is Not Destiny: India will gain from its demographic opportunity only if policies and programmes are aligned to this demographic shift. Demography is not destiny.
• Provide Necessary Skills and Socio-Economic Facilities
  • The projected demographic dividend would turn into a demographic disaster if an unskilled, under-utilised, and frustrated young population undermines social harmony and economic growth.
  • Harnessing the demographic dividend will depend upon the employability of the working age population, their health, education, vocational training and skills, besides appropriate land, and labour policies, as well as good governance. 

 

Conclusion

• India has large youth population as compared to other developing nations, however, if India remains unable to give them employments can make the situation worse.
• Unless these trends are reversed, India may continue to experience the rather counterintuitive phenomenon of being a youthful country with an ageing workforce.

 

---

Q1) What is CMIE?

CMIE, or Centre for Monitoring Indian Economy, is a leading business information company. It was established in 1976, primarily as an independent think tank. Today, CMIE has a presence over the entire information food-chain - from large scale primary data collection and information product development through analytics and forecasting. It provides services to the entire spectrum of business information consumers including governments, academia, financial markets, business enterprises, professionals and media.

 

Q2) What is the demographic dividend?

Demographic Dividend meaning – It is the potential for economic gains when the share of the working-age population (15 years – 64 years) is higher than the non-working age group. Demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to growth of the economy.

 

---

Source: The Indian Express