Hundreds of applicants. Just a handful of openings. Sights like this one have become commonplace in India. India is the world's fastest-growing major economy, but beyond the relatively strong figures lies a grim reality: the nation of 1.4 billion isn’t creating enough jobs for its expanding population. India's number of working-age population is very impressive. But if you dig down to what the labor market is composed of, it shows a lot of weakness. Some estimates even put the jobless rate as high as 8%, though the government claims it’s much lower. India is not producing enough high-quality jobs for its vast young workforce. If people do not get jobs, the per capita income will continue to remain depressed, and that will have its wider ramifications on global growth as well. So why is employment so broken in India? And what can be done to fix it? 29-year-old Chandan Kumar has been looking for a full-time job for almost 12 years.

Despite having a university degree, he hasn’t been able to find stable employment and makes a living delivering food. Kumar is not alone. More than half of the country’s population is under the age of 30, a key advantage it has over other major economies such as China, Japan, and Germany. Yet, many of them are struggling to find jobs. According to research, unemployment for those aged 20 to 24 has risen to over 42%. Unable to find employment in the formal sector, people like Kumar end up taking jobs in the informal sector, where they don’t get a regular salary or benefits. Essentially, it means that you’re really dependent on some sort of support from the government. This so-called “black economy” employs almost 90% of India’s workforce on farms, construction sites, and other unskilled roles. And it’s an issue the Indian government hasn’t been able to solve. Out of the 112 million jobs generated in India in the past decade,

only about 10% were in the formal sector. On top of that, India’s labor force participation rate, in other words, the proportion of the total population that’s working or looking for work, compares badly to some of its closest rivals. Private investments continue to be weak in India. And that's precisely the reason that we are seeing that India is unable to create the high-quality jobs or the jobs in general that it really needs for its vast young workforce. This is an issue in a country where more young people are seeking higher education and demanding better quality jobs. Just look at how the likelihood of being unemployed increases for young Indians the higher their levels of literacy and education are. The type and quality of education Indians are receiving is a confounding factor. You may have the degrees or diplomas, the certificates, but you’re not getting the skill set that you need to enter the workforce. A key problem is that young people are often drawn to colleges that employ teachers with little training and use outdated curriculums.

Discouraged job seekers either end up taking up higher studies or join their families in farming activities. Things are even worse for women. The enrollment in tertiary education between men and women is quite equal. It’s roughly 52% men, 48% women. Whereas when you look at the outcome in the labor market, it’s quite different. In fact, India’s female labor force participation is one of the lowest in the world. Women do not enter the workforce primarily because they are seen as caregivers in the family. And that is hurting India in a big way. According to some estimates, closing the gender work gap could expand India’s GDP by nearly a third by 2050. India’s employment challenge carries political implications too. At this year’s national elections, a failure to deliver on job creation promises played a part in Prime Minister Narendra Modi’s Bharatiya Janata Party losing its parliamentary majority for the first time in a decade. You can see that in states where I know Modi lost seats in Uttar Pradesh, for example,

very high ratios of tertiary enrollment in India. And there’s a general disappointment in what the reality looks like and the labor market. Modi’s ambition was to have manufacturing take up 25% of GDP. That hasn’t happened. A lot of people work in the agriculture sector, and these people have moved straight from the agriculture sector to the services sector, leaving the manufacturing sector behind. While Apple and iPhone maker Foxconn have set up factories in India, other big companies aren’t attracted to invest. And small and medium businesses aren’t filling that gap either. They’ve struggled due to red tape and lack of capital. Bridging the labor market gap is key as India seeks to attract more foreign investments from companies that are looking to diversify their supply chain away from China. If India does not provide enough jobs, then it will have a very weak, depressed per capita income. It stands to lose out on its ambition of getting the country to a developed economy status by 2047.

And that per capita income, as you can see, is already over $10,000 lower than the world average. It will also mean that India stands to see the rich and poor divide widening in the country. India is home to some of the world’s richest people, and the country’s wealth gap is already big. Modi’s government is aware of the importance of overcoming this challenge and has introduced measures to address it in its latest government budget. The measures include incentivizing employment in the manufacturing sector and a five-year program to train 2 million people. Yet, there are questions about whether these policies are enough. These policies are very limited in their scope and nature. Yes, India needs to create more jobs. But for that, you also need big industries to come into India, set up shop, and be able to help the government in creating those jobs. Strengthening exports, expanding manufacturing incentives, and even filling the tens of thousands of government job vacancies

could all help someone like Kumar. Experts say simplifying labor laws could also make a huge difference and create new jobs. Unless we solve this, where the private sector feels like they want to employ more people and that there’s a broadening of labor demand, we will continue to have the mismatch of youth who are now upwardly mobile to the reality of the labor market.

How India Is Failing Its Educated Youth

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