ExplainSpeaking: How India is becoming a young country but with an ageing workforce

He said: “Today, while the countries around the world are witnessing an age structure that is growing old, India is moving energetically towards its youthful age structure. It is a period of great pride because today India has the highest population under the age of 30. This is what we have in my country, the youth below the age of 30 years; my country has crores of hands, crores of brains, crores of dreams, crores of resolutions! So, my brothers and sisters, my family members, we can get the desired results.”

A little later in the speech he also said: “Today I would like to tell the youth of my country, to the sons and daughters of my country, you are fortunate. People hardly get the kind of opportunity that our youngsters are getting now, and so we don’t want to lose it. I have utmost faith in our youth power. There is huge potential/capability in our youth power and our policies as well as our ways provide an enabling environment to strengthen it.”

However, an analysis of India’s workforce, sourced from CMIE’s Economic Outlook data, shows that while India may be the country with the most youthful population, its workforce is rapidly ageing. In other words, the young are increasingly getting driven out of the job market.

India’s workforce is ageing: What does it mean?

An ageing workforce basically means that if one looks at all the employed people in India, the share of young people is going down while the share of those closer to 60 years of age is going up.

In CMIE’s data, youth is defined as those belonging to ages above 15 years and below 25 years. However, since the PM has talked about those under 30 years as the youth, we have divided the workforce into three groups:

1> Those aged 15 years or more but less than 30 years,

2> Those aged 30 years or more but less than 45 years, and

3> Those aged 45 years and older.

Table 1 shows the shares of these three age groups in India’s total workforce.

Table 1

Essentially what Table 1 shows is that the share of India’s youth (as defined by PM Modi) has fallen from 25% in 2016-17 to just 17% at the end of the last financial year in March. Even the share of those in the middle group has fallen from 38% to 33% over the same period.

The oldest age category however has grown its share from 37% to 49%.

In other words, just in the past seven years, the workforce has aged so much that the share of people 45 years and older has gone from one-third to almost one-half.

Table 2 presents the same data in absolute numbers.

Table 2

It shows that while the total number of people with jobs has fallen from 41.27 crore to 40.58 crore, the biggest decline has happened in the involvement of India’s youth.

In 2016-17, there were 10.34 crore people under the age of 30 years in the workforce. By the end of 2022-23, this number had fallen by over 3 crores to just 7.1 crore.

At the same time, those aged 45 and above grew in numbers even though the overall employment levels fell.

Why is India’s workforce ageing?

Simply put, even though its numbers are swelling up, the youth is getting driven out of the job market.

A good way to track this is to look at the metric called “Employment Rate”. The Employment Rate (ER) for any population or age group tells us what proportion of that age group or population is employed. So, if there are 100 people in the ages 15 to 29 and only 10 are employed then the ER would be 10%.

Tables 3, 4 and 5 show the number of the people employed in each of the above mentioned age categories as well as the resultant employment rates.

Table 3

Table 3 shows that the population belonging to the youth category described by PM Modi grew in size from 35.49 crore in 2016-17 to 38.13 crore in 2022-23. Yet the total number of people in this age group that had a job shows a secular decline. So while this “young” population grew by 2.64 crore, the number of employed youth fell by 3.24 crore. In other words, far from keeping pace, the youth of India actually experienced a fall in employment of a whopping 31% in the past seven years.

This is reflected in the sharp fall in the Employment Rate for this age-group. It fell from 29% to just 19%. In other words, while seven years ago, 29 of every 100 youth (15 to 30 ages) used to have a job, today that number has fallen to 19 out of every 100.

Table 4 shows that the employment rate has also fallen for the next age category as well, albeit to a lesser extent. Moreover, the employment rates in this age group were much higher to begin with.

Table 4

Table 5 shows that the employment rates have declined the least for the oldest age group. Moreover, it is noteworthy that this is the only age group where the absolute number of people with jobs has actually grown. It is another matter that the overall population of this cohort grew by even more and that is why the ER has fallen to some extent.

Table 5

In fact, as Table 6 shows, among the 45 years and above category, the age group of 55-59 years is the one that stands out. Not only is this cohort one of those rare ones that saw an increase in employment rate but is also the one which has registered the maximum increase in the ER over the past 7 years.

Table 6

Lastly, if one considers cohorts of 5 years, then the age group of 25 to 29 years shows a rising employment rate (see Table 7) over the past 7 years. But a look at the absolute numbers explains that the reason for this rise in ER is not that more people in this age group got a job, rather a sharp fall in the total population of this cohort. It is for this very reason that despite a better ER, this cohort is not able to pull up the numbers for the youth (15 to 29 years) category.

Table 7

Upshot

The data clearly shows that even though India has a fast-growing youth population, that by itself does not guarantee more jobs for the youth. In fact, India’s workforce is rapidly ageing. That’s because the young are failing to make their mark in the job market and it appears they are increasingly getting elbowed out by the not-so-young Indians.

Even if one accounts for the possibility that a lot of young people may be pursuing higher studies, the trend is still stark enough to merit a look by policymakers.

Moreover, even if one moves away from the CMIE database and looks at other so-called official surveys, there is evidence to suggest that in India’s unemployment is highest for the youth, and often rises with educational attainment.

Unless these trends are reversed, India may continue to experience the rather counterintuitive phenomenon of being a youthful country with an ageing workforce.

What can be done to improve the job prospects of India’s youth? Share your views and queries at udit.misra@expressindia.com

Until next time,

Udit