Data | How much employment generation does the economy need?

If policymakers talk of creating work for 5 million-8 million young in India, that will barely scratch India’s unemployment problem

July 03, 2023 01:40 pm | Updated July 04, 2023 11:32 am IST

Around 27,513,718 people would potentially join the workforce in 2022, far from the  5 million - 8 million annual job growth predicted.

Around 27,513,718 people would potentially join the workforce in 2022, far from the  5 million - 8 million annual job growth predicted.

Economists associated with the government have been arguing that there is not much unemployment since enough employment is being generated. Further, they argue that the employment required to be generated annually is not too much. Bibek Debroy, Chairperson of the Prime Minister’s Economic Advisory Council, wrote in an article in The Indian Express that analysts are ignoring the drop in the population growth rate from 1.5% earlier to (possibly) 0.8% now. He asks “…how many jobs India needs to create every year.” He says, “When one encounters figures like 10 million or 12 million, one often doesn’t realise these are dated figures…circa 2003-04”. He suggests, “A rough range might be 5 [million]-8 million.”

Labour force

His statements reflect the thinking of the government and need to be analysed. First, how is the current population growth rate relevant to the present increase in the labour force? The labour force comprises those in the age group of 15-64 (International Labour Organization definition) who are looking for work. The current population increase will impact the labour force 15 years later when those born this year will potentially join the labour force. So, even though Mr. Debroy discounts circa 2003-04, children born then are precisely the ones who have been entering the labour force since 2018-19 after obtaining a high school degree. In 2020-21, those obtaining an intermediate degree could have joined. And so on.

Further, even after obtaining a degree, people may not join the labour force as they may prepare for various exams. But eventually, all of them will. The children of the lower-income class can’t afford to remain unemployed for long. Middle-class children also have to start working as they face increasing social pressures. Very few of the young become entrepreneurs. This is because few possess the capital and skills required for this.

Second, it is the birth rate and not the rate of population increase that is relevant. Population increase equals births minus deaths. Life expectancy in India is above 70 years. Children also have higher mortality. So, we can subtract from the number of births in a given year the deaths among the under-five years. Assume a negligible number will die at ages 5-50. So, for the number of people entering the labour force, the death rate is not really crucial.

Applying the birth rate for a given year to the population gives the number of births in that year. Subtract from that the deaths among children below five years of age. That gives an increase in the potential number of young who can join the labour force 15 years later (at age 15). So, in 2000, the increase comes to 28,061,890, in 2002 the figure was 27,990,015, in 2005 it was 27,783,231, in 2007 it was 27,456,018, and in 2022 the increase was 24,167,206 (Table 1).

Table 1 | Historical birth rate, death rate and potential labour force of India (2000-2022)

Notes: Column 2 is based on projections for intervening years | Column 4 is based on projection from 2000 to 2022 | Column 7 is based on data in Table 2 below

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Why are these years selectively picked? They indicate that the potential young is increasing at the rate between 24 million to 28 million in the period 2000 to 2022. Further, these years are relevant because it is in those years that children in 2022 would have obtained high school, intermediate, under-graduate and graduate degrees and possibly looked for work. They potentially enter the labour force. Education data tells us what per cent of the relevant age group enrols for each of these degrees. So, those not enrolling would potentially join the labour force. Calculated this way (Table 2), the numbers potentially joining the labour force in 2022 would be 17,928,780 from those born in 2007; 2,583,841 from 2005; 5,598,003 from 2002; and 1,403,095 from 2000. The total is 27,513,718.

Fewer women are likely to join the labour force for social reasons, so the above numbers have to be segregated between women and men. In 2022, there were 1,068 men for every 1,000 women. This means that 48.35% of the total number would be women (13,304,506). Assume 25% of them will not be able to work for social reasons. This yields 24,187,591 potential young people who could enter the labour force in 2022. Some of them would prepare for exams. But those from earlier years who have already spent years preparing for exams would join the labour force. Actually, if enough work was available, most of them would not appear repeatedly for many of these exams. Some of the young will go abroad for work and/or studies but their number is small compared to the total. Many of them may also not go abroad if work was available.

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Unorganised sector

The organised sector is mechanised and automated and generates few jobs. That is why 94% of the labour force is in the unorganised sector, largely working at low wages. On the e-Shram portal, 28 crore were registered in November 2022 and 94% reported earning less than Rs. 10,000 per month. The growth of the organised sector at the expense of the unorganised sector results in rising unemployment. Unemployment has been characterised as unemployment; under-employment; disguised unemployment; and those who have stopped looking for work. Simplified assumptions give the figure of those needing proper work at 286 million — all of them from the unorganised sector. Only 332 million have proper work and most of them also work in the unorganised sector. This data makes it clear that if policymakers talk of creating work for 5 million-8 million young, that will barely scratch India’s unemployment problem

Source: Report of ‘People’s Commission on Employment and Unemployment’ set up by Desh Bachao Abhiyan and launched on October 11, 2022. Arun Kumar, retired Professor of Economics, JNU, was Chairperson. India birth rate 1950 - 2022 wa accessed from macrotrends on October 25, 2022.

Also read | The era of an unemployed India

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