India is a labour-abundant economy. This abundance is in low-skilled labour, given that almost 80% of its working-age population does not have even a higher secondary education, with only an eighth of the working-age population having studied beyond high school. While India adds 8-10 million people to its labour force annually, roughly 2 million are college-educated or beyond. There is also a wide variation in the quality of degree programmes across India, most of which cannot impart marketable skills. Thus, high-skilled workers are scarce.
There is “no alternative” for India to have growth led by labour-intensive manufacturing at least for the next 10 years to absorb seven-eight million youths who will join the labour force annually, a report jointly prepared by the International Labour Organization (ILO) and Institute for Human Development (IHD) has said.
Using official data, it highlighted the increasing uncertainties in the labour market due to fast-changing technologies, including artificial intelligence (AI). Titled “India Employment Report 2024” and released on Tuesday, it said: “Fast-changing technological advancements, particularly artificial intelligence, are going to be important disruptive factors in the labour market, with positive and negative consequences. Although on a good footing, India still needs to do more to prepare itself for the challenges posed by new technologies.”
The report calls for primacy to be given to labour-intensive manufacturing employment to absorb the abundant unskilled labour, along with the emerging employment-generating modern manufacturing and services sectors, with a direct and greater focus on micro, small and medium-sized enterprises by providing a more supportive and decentralised approach.
It also highlights investment in the green (environment-friendly) and blue (based on ocean resources) economies, developing rural infrastructure, and establishing an integrated market to revive employment in the farm and non-farm sectors in rural areas.
The report mentions outsourcing in India could be disrupted because some back-office tasks would be taken over by AI, but given that India has a lot of vibrant startups, tech developers, and a reasonably good digital infrastructure, it is possible to create jobs. AI offers immense opportunity to enhance labour productivity and incomes of even unskilled and semi-skilled workers, while cautioning that the disadvantaged states are less prepared for this, and active policies and programmes need to be formulated and implemented for training youths in those states.
India remains poised to reap a demographic dividend for at least another decade due to the youth population remaining at 23 per cent of the total in 2036 from 27 per cent in 2021. However, youth employment has by and large remained of poorer quality than employment for adults.
“Employed youths have been much more likely to be in more vulnerable occupations (informal) or in the informal sector. Youth wages and earnings have increased with age but are lower than what they are for adults for all categories of employment. Educated youths have experienced much higher levels of unemployment as the youth unemployment rate has increased with the level of education, with the highest rates among those with a graduate degree or higher and higher among women than men,” it notes.
