New government must focus on ‘decent work’ for India’s youth

No longer are economic issues on the backburner of India’s elections. Dismal labour market conditions, a constant feature of the Indian economy for several years, have remained in focus during much of the ongoing general election cycle, even as official statistics report consistent improvement in some of the key indicators like unemployment rate and labour force participation.

A detailed reading of these numbers, and a closer look at the functioning of some important segments of the labour market show that India’s labour market faces at least three imponderables.

Firstly, India’s youth (15-29 years) face the most difficult prospects on the job front, with the official statistics showing that the unemployment rate of this cohort has been consistently higher than the average for the working-age population (15 years and above). This aspect of the labour market has major implications for the economy.

For several decades, India has been expecting to reap significant benefits from the ‘demographic dividend’ by utilising the relatively young workforce, thus stealing a march over its major competitors, especially China.

Secondly, gender inequity in the labour market continues to be at unacceptable levels as employment opportunities for women have not shown any signs of improvement. Thirdly, the spread of the gig economy has posed a series of challenges, not least the arduous work conditions faced by the workers in this sector, a large majority of whom are young.

Data on the labour market conditions during the first quarter of 2024, released earlier this month, showed that joblessness among the youth remained stubbornly high. The youth unemployment rate was 17 per cent, two and a half times more than the corresponding figure for the working-age population. The unemployment rate for young female workers was even worse at 22.7 per cent, or almost 50 per cent higher than that of their male counterparts. These figures yet again indicate that despite the Indian economy registering an impressive growth rate of 7.6 per cent in the previous fiscal, its capacity to absorb India’s youth, and young females in particular, into the workforce has been quite inadequate.

For several years now, the rapid expansion of the gig and the platform economy has been seen as the solution to India’s youth unemployment. According to the NITI Aayog, the workforce in this segment has increased from 2.5 million in 2011-2012 to nearly 13 million during the current fiscal, and should expand to 23 million by the end of this decade. A study on the gig and platform economy conducted by the National Council for Applied Economic Research emphasised the potential of this sector to create employment opportunities for India’s youth. But has the gig and platform economy created the work opportunities that is productive and delivers a fair income, security in the workplace, and social protection, which, according to the International Labour Organization (ILO), is ‘decent work’?

Evidence from the functioning of the gig economy points to the dismal conditions of work in what is a largely unregulated sector. A sizeable share of workers in this sector are young who are forced to work for exceedingly long hours, well above stipulated by the ILO, and that too, without adequate earnings to meet their expenses. In short, the working conditions of these workers can best be described as precarious.

A combination of high levels of youth unemployment and precarious working conditions of those finding employment opportunities in the expanding gig and platform economy, indicates that the possibility of reaping the ‘demographic dividend’ is well-nigh impossible.

Until now, the government’s response to addressing the stress in the labour market has been to encourage the private sector to create jobs by providing a series of fiscal and other incentives. In 2019, the government provided substantial tax cuts arguing that this measure would stimulate private investment and create additional jobs which would, in turn, stimulate demand and reverse the demand contraction plaguing the economy.

In the aftermath of the Covid-19 downturn, the government increased the liquidity in the system hoping that the private sector would dip into this pot to increase investments, thus contributing to additional job creation. Alongside, a major initiative was taken through the PLI scheme for incentivising the private sector to strengthen the several ‘labour-intensive’ manufacturing industries, creating conditions for labour absorption. However, the continued high levels of youth unemployment indicate that these indirect interventions for job creation have been inadequate.

The new government, the contours of which will be clear on June 4, urgently needs to make direct interventions to create jobs. The starting point of such a process must be the adoption of a National Employment Policy through which the government can take proactive measures for job-creation. One such measure could be to recalibrate the incentives extended to the private sector, linking these to their ability to create jobs. Of course, these jobs must meet ‘decent work’ standards of the ILO.

(This article is the fifth and last in a series of articles on the challenges and opportunities before the next Union government.)

(Biswajit Dhar is former professor of economics, Jawaharlal Nehru University, and is Distinguished Professor, Council for Social Development, New Delhi.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.

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