Dipika Prasad

Reaping the Demographic Dividend: The Challenges in Creating Jobs for Young India

Editor’s Note: NextBillion is a media partner for the Sankalp 2012 Summit, which is taking place April 12 and 13 in Mumbai, India. Sankalp organizers are hosting a live Twitter Chat at 2 p.m. Wednesday India Standard Time focused on youth employment in India. Click here to find more. This article has been cross-posted from the Sankalp Forum blog.

Over 2.3 billion “Millennials” (individuals born between 1980-2000) constitute the world’s population today, and the jury’s out on whether they represent a huge economic opportunity and a potential demographic dividend, or whether they are the inheritors of loss, of broken and inequitable systems and are a looming economic nightmare. The International Labor Organization (ILO) estimated that 75 million young people around the world were unemployed in 2011. Juan Somavia, director-general of the ILO wrote: “Creating jobs for youth is not enough. Across the planet, youth are not only finding it difficult if not impossible to find jobs, but also they cannot find decent jobs… We are facing not only an economic challenge, but a security threat of monumental proportions.”

Since India is home to one of the largest populations of young people in the world – economic opportunity we stand to benefit from, and the risk, are both of great magnitude. Over 54 percent of India is below the age of 25. The TeamLease Indian Labor Report 2009 estimates that 300 million Indian youth will enter the labor force by 2025, and 25 percent of the global labor force will consist of Indians in the next three years. The numbers behind the demographic dividend are quite dramatic – Census of India states that the 15 to 34 segment of our population has grown from 174 million in 1970 to 354 million in 2000; it is expected to peak at 485 million in 2030. During a recent address at the 3rd Pan IIM Alumni Gulf Summit, KV Kamath, non-executive chairman at ICICI and Infosys, said: “Global competitiveness achieved by Indian industry and the power of India’s demographic dividend — will continue to drive growth in the decade ahead.”

However, the promise of this dividend is fast losing its sheen. At current growth rates, 19 to 37 million people will be unemployed in India this year alone. The promise of this dividend will not last long either – the United Nations Population Division’s analysis shows that the percentage of the 15 to 34 age group in our population will reach its peak (64.6 percent) in 2035, and start to taper off after that. The threats are not merely in terms of wasted educational investment and future contributions to the GDP, but also the burden on pension, insurance and social security schemes.

What are the challenges in employing India’s youth and reaping the demographic dividend?

As an economic term, dividend is the result of an investment – an investment which can best be described as ‘inadequate’ in India’s case, both in terms of quantity and strategy behind its channeling. The Economic Survey shows that in 2007-2008, 3.6 percent of GDP was spent on education and of this, only 0.4 percent was spent on higher education. According to a 2011 PwC report ‘India Higher Education Sector: Opportunities for Private Participation’ the resources allocated by the government to meet its own employment targets are inadequate. Even though the 11th five-year plan (2007-2012) increased budget allocation for technical and higher education to USD 18.8 billion from USD 2.1 billion in the 10th year plan, this is still a fraction of the estimated USD 50 Bn capital deployment needed.

The challenges of skilling young India for employment-readiness are also compounded by the problem of educational infrastructure and curriculum failures – 130 million register in primary school every year while only 12 million graduate from college. Employability of the skilled is a challenge as well. NASSCOM estimates that only one in four engineering graduates in India is employable based on their technical skills, fluency in English, teamwork abilities and presentation skills. This means that of the 400,000 engineering graduates each year, only about 20 percent are good enough for private sector employment.

Opportunities for public-private partnerships, and private sector engagement in skilling

Clearly, the dual challenge of skill-building and job opportunity creation is not one that the government can tackle alone. There is a need for collaboration with the private sector on both the supply and demand sides of the jobs equation. There is also a need for a facilitative and conducive environment for private sector interventions in this area. The National Skills Development Corporation, set up with the objective to “contribute significantly (about 30 percent) to the overall target of skilling/upskilling 500 million people in India by 2022, mainly by fostering private sector initiatives in skill development programs and providing funding” is one such partnership, but is it enough? Six million people are joining the workforce every year, while only 1 million jobs were created last year – what are the implications of such a trend?

These are some of the questions we will ask at a upcoming live Twitter Chat 2 p.m. Wednesday India Standard Time. Click here to know more and sign up. This is also an important conversation we will take up at the Sankalp Summit on April 12 and 13 in Mumbai this year. Dilip Chenoy, CEO of NSDC; Sanjay Behl, president of NIIT-Skill Building Solutions; and Manish Sabharwal, CEO of Teamlease, will join panel discussion on April 13 at Sankalp.

Education, Impact Assessment
skill development