Relevance : GS Paper III
Rising unemployment must also be seen as a function of rising education and aspirations.
Why has this issue cropped up?
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.
Takeaways from the unemployment data
- 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.
How unemployment rate is calculated?
- The unemployment rate is calculated by dividing the number of unemployed by the number in the labour forces, that is, the sum of employed and unemployed.
- This statistic ignores people who are out of the labour force — students, homemakers and the disabled.
Analyzing the unemployment data
- As long as the proportion of the population out of the labour force is more or less stable, the unemployment rate is a good indicator of the changes in the employment situation.
- However, 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%.
- The proportion of the population that is unemployed has increased only slightly for population aged 30 and above but increased substantially for younger men.
- For rural men (30-34), the proportion of unemployed increased from 1% to 2.3% while that for men (20-24) increased from 4.6% to 16.1%. Much of the increase in male unemployment is located among ages 15-29.
- 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.
- The unemployment rate for illiterate rural men increased from 0.5 to 1.7 between 2011-12 and 2017-18 but the absolute increase was substantially larger, from 3.8 to 10.5 for rural men with at least secondary education. Similar trends are evident for urban men.
Roots of India’s present day unemployment challenge
- Part of India’s unemployment challenge lies in its success in expanding education while not expanding formal sector jobs.
- 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.
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.
