Context

The report from the Periodic Labour Force Survey (PLFS) is finally out. In particular, the staggering increase in the unemployment rate, from 1.7% in 2011-12 to 5.8% in 2017-18 for rural men and from 3.0% to 7.1% for urban men, has generated wide ranging hand-wringing.

Three-pointers

• First, while the unemployment rate is a frequently used measure of poor performance of the economy, under conditions of rising school and college enrolment, it paints an inaccurate picture.

• Second, the reported unemployment rate is dominated by the experience of younger Indians who face higher employment challenges and exhibit greater willingness to wait for the right job than their older peers.

• Third, the unemployment challenge is greatest for people with secondary or higher education, and rising education levels inflate unemployment challenges.

• These three conditions, taken together, suggest that part of India’s unemployment challenge lies in its success in expanding education while not expanding formal sector jobs.

Unemployment rate data

• Change in education enrollment-  India has seen massive changes in proportion of individuals enrolled in an educational institution over the past decade.

• For 15-19-year-old rural men, the proportion primarily engaged in studying increased from 64% to 72% between 2011-12 and 2017-18. As a result, while the proportion of the population aged 15-19 that is unemployed doubled from 3% to 6.9%, the unemployment rate tripled from 9% to 27%.

Reasons for high unemployment in this age group –

Contribution from family – Much of the increase in male unemployment is located among ages 15-29. It is important to recognise that in a country dominated by informal sector work, remaining unemployed is possible only for individuals whose families can survive without their immediate contributions.

High for people with higher education – Finally, the unemployment rate has been traditionally high for men with secondary or higher level of education and this is the segment in which most of the increase in unemployment is located.

Educational expansion without employment expansion –

• Educational expansion affects the unemployment debate by skewing the unemployment statistics and by creating greater competition for well-paid jobs among a rising population of educated youth.

• Rising prosperity allows young graduates to wait for well-paying jobs, creating an army of educated unemployed, before being forced to accept any work, frequently returning to family farms or starting small shops.

Meeting aspirations

• After decades of economic stagnation, the 21st century has seen massive growth in aspirations.

• Parents invest their hearts and souls along with their rising incomes in educating their children.

• Children hope to make rapid economic progress well beyond the modest gains achieved by their parents’ generation.

• The unemployment statistics based on PLFS data document the challenges these young people are likely to face.

CONCLUSION

Creating jobs for an increasingly educated workforce and ensuring that the new workers are well equipped to enter the labour force are twin challenges that deserve greatest priority. One hopes that leaders of the present government who made their political debut during the student movement in the 1970s will meet this challenge head-on.