India’s most prized resource is wasting away. The potential of a younger population cannot be adequately realised as a substantial portion of youngsters are opting to stay out of the labour market, primarily to pursue higher studies, among other reasons.

Consequently, India’s labour force is getting older, even as education levels continue to deteriorate, casting a shadow over the prospective demographic dividends, the Centre for Monitoring Indian Economy (CMIE) states in a recent report.

The think tank’s Consumer Pyramids Household Survey (CPHS) shows that the proportion of participants aged 15-24 years in the labour force declined to 13% in 2021-22 from 17% in 2016-17. This decline in labour force participation in this age group was on the account of youngsters delaying their entry into the labour market, it adds.

“Evidently, a mere increase in the share of youngsters in the total population does not assure a demographic dividend. They must be willing to join the labour force to be employed. Why has a large proportion of youngsters given the labour market a miss? Data suggests that an increasing proportion of people have chosen to continue to be students even as they were well into the working-age group,” the CMIE report reads.

The portion of the working-age population that are students increased to 18% in 2019-20 from 15% in 2016-17, rising one percentage point each year during this period. The pandemic year of 2020-21 saw this level rise three percentage points to 21%, and another two percentage points to 23% in 2021-22.

Between 2016-17 and 2021-22, the working-age population increased by 121 million, while the number of students rose by 104 million. Meanwhile, the labour force shrunk by 10 million.

“This implies that the labour market could not absorb the additional labour that became available through the natural process of growth in population and on the contrary, it shed some of the labour that was already a part of the market,” CMIE notes.

“It can be inferred then that people did not continue to be students because they were attracted to higher education (or because they took longer to acquire education) but because there weren’t enough jobs for all of them to take up. Students are, therefore, turning out to be an increasing measure of disguised unemployment,” it further says.

With youngsters staying out of the labour market, the existing workforce is increasingly ageing. Presence of workers below 30 years in India’s labour force has progressively come down to 18% in 2021-22, from 21% in 2021-20, and around 25% in 2016-17. The proportion of workers in their thirties has also fallen to 21% in 2021-22 from 25% in 2016-17.

“As a result, what is left in the workforce is mostly people in their forties and fifties. In 2016-17, 42% of the workforce was in their forties and fifties; by 2019-20, this had risen to 51%. More than half the workforce comprised middle-aged people when the pandemic struck India. By 2021-22, their proportion had risen to 57%,” CMIE avers.

Even though the number of students has been on the rise, the number of better qualified people in the labour force has not. The share of graduates and post-graduates increased from 12.9% in 2017-18 to 13.4% by 2018-19. Then it fell to 13.2% in 2019-20 and then to 11.8% in 2020-21. It recovered but only partially to 12.2% in 2021-22.

“India’s workforce comprises mostly people whose maximum educational qualification is secondary education. They accounted for 28% of the workforce in 2016-17 and in 2021-22, their share went up to 38%. There is a similar increase in people whose maximum education was between 6th and 9th standards. Their share went up from 18% in 2016-17 to 29% in 2021-22,” the report says.

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