India’s Job Market Challenges

If there’s one thing I’ve learned through my internship at  Leap Skills this summer, it’s that the Indian job market–like most things in India–is really, really complicated. Some of its (many) challenges for the coming years, in no particular order, include:

  1. Massive Informal Sector 

In India, asking someone if they have kaam (work) or a naukri (job) means two very different things. Around 80% of India’s employed workers are in the informal economy (with kaam), usually either self-employed or working in small enterprises with low levels of technology, low productivity, and low wages. Moreover, due to its low productivity, the informal sector makes little impact to the GDP/overall economy. 

2. Rising Unemployment and a Rapidly Growing Workforce 

Unemployment is especially prevalent among educated youth, and is bound to increase with 1 million workers joining the workforce each month. 

3. Decreasing Labor Force Participation of Women (Despite Increasing Women’s Education)

In fact, labor force participation among women decreases as their education increases until higher levels of graduate education. The phenomenon is known as the “U-Curve” and is often attributed to cultural norms around marriage. An educated woman will marry an educated man with a larger income, and then not need to work outside of the home to support the household (i.e. paying for your daughter’s education is an investment to get her a better husband.)

4. The Skills Gap

India’s workforce is actually larger (and growing), younger, and holds more degrees than ever before. Despite these qualities, employers in India struggle to find quality employees with the relevant skills. While many Indians have the qualifications for open jobs, only 48% of India’s workforce has the skills necessary to be considered employable.

5. Underemployment 

Hand-in-hand with the Skills Gap is India’s underemployment problem. India’s workforce not only lacks the skills necessary to get the jobs they want, but they also lack access to the jobs they want. 370 government openings for a “peon” job in UP received millions of applicants, including 175,000 graduates and postgraduates and 250 PHDs. Simply put, there are not enough aspirational jobs to meet the demand. One economist estimates that by 2025, 200 million Indians will be stuck in ‘bad jobs’ far below their qualifications (or if possible, stay unemployed). 

6. Jobless Growth & the Rise of Automation

Manufacturing jobs are key to a country’s development by absorbing large numbers of low skilled workers at higher wages, creating an engine of growth, and at the same time, giving the country time for its workforce to become more skilled. However, in today’s day and age, India is unable to create job growth through manufacturing (despite government initiatives like Make in India) since machines and computers cut down on the number of workers needed in the first place. This leaves millions of Indians stuck in the informal sector (with low wages and low productivity for their labor). 

More aspirational middle and high-skilled jobs are also being cut due to automation and globalization, making it harder for India to generate the jobs it needs to keep up with its growing workforce. Telecalling jobs are being replaced with bots (and many have moved to the Philippines–globalization!); and even IT requires less engineers. (And these tech-intensive changes mean that even more of the future jobs in India will require skilling and upskilling–only expanding the Skills Gap). 

7. Just Determining How to Calculate Unemployment with an Economy that is 80%+ Informal

“True” calculations of unemployment are hotly contested in Indian politics, with the government allegedly trying to suppress and deny the validity of its unemployment numbers prior to the elections earlier this year. 

Is PM Modi correct that a “youth selling pakora outside…and earning Rs. 200 a day” is employed? Is a seasonal worker–one with different jobs in different cities throughout the year–considered employed? How do you track informal workers? Does non-productive work–for example, a son joining his father’s farm but not increasing the output of that farm–count as employment? 

This is by no means a complete report of the state of India’s job market. Honestly, this barely scratches the surface. Consider, for instance, legal barriers that make it hard for small businesses to grow, recent policies like demonetization that hurt India’s cash-based informal sector, and even India’s huge range of cultural and linguistic diversity that makes it even harder to match the people looking for jobs with open ones.

Both India’s public and private sector will undoubtedly have to work together to tackle these challenges in the years to come, and I feel incredibly fortunate to have had the opportunity to learn and work at Leap, which is bringing employers (the private sector) into their scalable solution for skilling. 

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About riajain25

I'm Ria, a rising sophomore in Wharton from Louisville, KY. This summer (2019), I'll be working at LEAP Skills in Delhi. I love being outside, sketching, and all things comedy.