The Crisis of Youth Unemployment

India’s much-anticipated demographic dividend has turned into a severe demographic challenge as the country faces a growing youth unemployment crisis. Despite higher levels of educational attainment among young people, job opportunities remain limited, leading to high unemployment rates, particularly among urban youth and young women.

According to recent data from the Periodic Labour Force Survey (PLFS), the employment outlook for youth remains bleak. The worker-population ratio for the youth is 40% lower, and the unemployment rate is nearly three times higher than that of older age groups.

The crisis is compounded by a significant mismatch between educational qualifications and available jobs, with the most educated individuals, especially women, facing the highest unemployment rates. Tackling this issue requires a detailed analysis to devise effective and sustainable solutions.

Current Trends of Youth Employment in India

India is grappling with a significant youth unemployment crisis, with jobless rates among individuals aged 15-29 considerably higher than the overall population. In 2022, the unemployment rate for urban youth reached 17.2%, while rural youth experienced a lower rate of 10.6%. The situation is particularly grim for young women, with 21.6% unemployed compared to 15.8% of young men.

Despite increased access to education, higher educational attainment is paradoxically linked to higher unemployment. In 2022, youth with secondary education or higher faced an unemployment rate of 18.4%, while graduates had an even higher rate of 29.1%. In stark contrast, unemployment among illiterate individuals stood at just 3.4%.

The NEET (Not in Employment, Education, or Training) category highlights another alarming trend, with one in every three young people falling into this category by 2022, according to the India Employment Report 2024. Women in the NEET category outnumber men nearly fivefold, reflecting the gender disparity in employment opportunities.

Gender Disparity:

• Urban male youth have work participation rates more than three times higher than their female counterparts.
• Young women consistently face higher unemployment rates, averaging about 50% more than young men. In 2022, 34.5% of female graduates were unemployed, compared to 26.4% of male graduates.

This persistent gender inequality, coupled with a lack of suitable job opportunities for educated youth, presents a major challenge for India’s labor market, requiring targeted interventions and reforms to address this growing crisis

Regional Variations 

Employment conditions for youth in India show significant regional disparities, with certain states facing higher unemployment rates and lower work participation. States such as Bihar, Uttar Pradesh, Jammu and Kashmir, Uttarakhand, Rajasthan, Odisha, Kerala, Himachal Pradesh, and Assam are particularly affected by these challenges.

There is also a noticeable correlation between urbanization and unemployment. Highly urbanized states tend to have higher unemployment rates. For instance, states like Goa and Kerala, which are highly urbanized, experience elevated unemployment rates compared to less urbanized states like Uttar Pradesh, Jharkhand, and Madhya Pradesh.

One contributing factor is the smaller agrarian sectors in urbanized states, which limits the availability of informal employment opportunities. In contrast, states with larger agrarian economies tend to offer more informal jobs, leading to lower unemployment rates. Addressing these regional variations requires tailored approaches that consider the unique economic and social dynamics of each state.

Potential of India’s Demographic Dividend

• Youth Demographic Advantage
  India holds a significant demographic advantage, with over 50% of its population under the age of 25 and more than 65% below 35. This large pool of potential workers presents immense opportunities for the nation’s economic growth and productivity.
• Workforce Expansion
  The working-age population in India is projected to increase by approximately 200 million people by 2030, further amplifying the country’s economic potential. This workforce growth is expected to drive innovation and enhance productivity across various sectors.
• Fostering Innovation and Entrepreneurship
  According to the Global Entrepreneurship Monitor (GEM) 2023, India has a thriving startup ecosystem with over 70,000 recognized startups, many of which are led by young entrepreneurs. Government initiatives, such as Startup India, have bolstered this growth, supporting the creation of over 80,000 startups since 2016 and encouraging a culture of innovation among the youth.
• Digital Economy Expansion
  India’s IT and digital services sector plays a significant role in the economy, contributing about 8% to the GDP and employing over 4.5 million people. The rise of digital platforms has generated numerous job opportunities in IT, e-commerce, and digital content creation. Additionally, as of 2024, over 800 million Indians have internet access, highlighting the vast potential for a tech-savvy youth to capitalize on digital job opportunities.
• Global Competitiveness
  India ranks 43rd out of 63 countries in the World Economic Forum’s Global Competitiveness Index 2023. This ranking reflects the growing skills and potential of the Indian workforce, particularly the youth, to compete globally.
• IT Outsourcing Hub
  India continues to dominate the global IT outsourcing market, accounting for about 55% of the global market share in IT services. This leadership is largely attributed to the country’s highly skilled and young workforce, reinforcing its position as a critical player in the global economy.

Implications of Youth Unemployment

Economic Implications

Inefficient Resource Utilization
High youth unemployment results in a significant waste of economic potential. Skilled and educated young individuals who remain unemployed or underemployed do not contribute to economic productivity, leading to inefficient use of the country’s human resources.

Slower Economic Growth
Persistent unemployment among the youth hampers overall economic growth. With a large portion of the population not engaged in productive work, the economy experiences slower growth and diminished productivity.

Increased Dependency Ratios
Prolonged youth unemployment increases dependency on family support, putting financial strain on households. This growing burden can push families deeper into poverty.

Reduced Purchasing Power
Unemployed youth have limited disposable income, which lowers their purchasing power and reduces overall consumer demand. This decline in consumption negatively impacts businesses and the economy’s growth.

Social Implications

Social Unrest and Instability
High youth unemployment can fuel social unrest and instability. Frustration over limited job opportunities may lead to protests, strikes, and other forms of civil discontent.

Long-Term Implications

Skills Mismatch and Erosion
Prolonged periods of unemployment can result in the erosion of skills, leaving young workers with outdated abilities. This mismatch between skills and job requirements makes it even harder for the unemployed to re-enter the labor market.

Decreased Employability
A lack of practical experience and skills development during unemployment further reduces young individuals’ employability and long-term career prospects.

 What Steps Should Be Taken to Improve Youth Employment

• Expansion of Public Employment Opportunities
  Introduce urban-specific public employment programs, similar to MGNREGA, which is currently limited to rural areas. These schemes should target the infrastructure and service sectors in cities. Additionally, efforts to revive and expand public sector job opportunities are essential to ensure better job security for the youth.
• Promoting Remote Work
  Encourage companies to adopt technology and offer remote work opportunities, expanding job access to individuals outside of major urban centers. This approach also promotes a healthier work-life balance.
• Inclusive Growth and Gender Equality
  Implement policies that advance gender equality by ensuring equal access to education and employment. With only 24% of women participating in the workforce in 2022, according to the International Labour Organization, increasing female workforce participation is crucial for sustained economic growth.
• Enhanced Skill Matching
  Revise educational curricula and vocational training programs to better align with industry demands. Building partnerships between educational institutions and the private sector will ensure that training programs meet the needs of the job market.
• Encouraging Entrepreneurship and Infrastructure Investment
  Provide tax incentives, subsidies, and easier access to funding for young entrepreneurs. Special outreach programs should be developed to inspire youth, offering mentorship, capital, and business development services tailored to their entrepreneurial needs.
• Capacity Building
  Create programs to enhance entrepreneurial capacity among youth, with a focus on business management, financial literacy, and innovation skills.
• Youth-Focused Social Security
  Develop social security safety nets specifically designed for young people, offering financial stability during periods of job transitions or unemployment.
• Digital and Gig Economy Integration
  Design policies that provide job security, social security benefits, and fair wages for gig workers. Expand digital skills training to prepare the youth for opportunities in the tech and gig economies.
• Improved Policy Implementation
  Strengthen monitoring mechanisms to evaluate the effectiveness of employment schemes and policies. Establish feedback loops to ensure continuous adaptation and improvement based on actual outcomes.
• Scaling Successful Initiatives
  Continue supporting and scaling initiatives like Make in India, Digital India, and Skill India, which aim to boost youth employment and skill development.

India boasts the largest youth population globally, which is expected to grow further in the coming decade. With over 65% of the population under the age of 35, it is crucial to harness this demographic dividend by channeling the energy and creativity of the youth toward nation-building. To achieve this, the economy must be prepared to absorb the increasing labor force. Additionally, the youth require access to quality education, relevant skills, health awareness, and other key enablers to contribute effectively to economic growth and the nation’s development.

The End of the Blog: The Crisis of Youth Unemployment