Can Unicorns Solve India’s Youth Unemployment Problem?

Just looking at the comprehensive data, one can conclude that the Indian economy is back on track. The trouble is that these broad numbers hide two major issues.

The first is the fact that India’s labor participation rate has been falling over the years. It was 40.52% in August. In comparison, this rate was 40.96% in August 2020. It was 47.26% in August 2016.

what does this mean? The labor participation rate is the size of India’s labor force as a proportion of the population aged 15 years or more. According to the CMIE formula, the labor force consists of people who are 15 years of age or older and who are employed, or unemployed and actively looking for jobs. Therefore, to be counted as unemployed, simply being unemployed is not enough.

The falling labor participation rate basically tells us that many individuals have stopped looking for jobs and dropped out of the labor force after not being able to find one. So, if the unemployment rate does improve, it does so in the context of a labor force that is not as large as it could possibly be.

The second thing that is hidden in the wider numbers is that the country’s youth unemployment rate has risen sharply over the past four years, from 15.66% in 2016-17 to 28.26 percent in 2020-21. Individuals in the age group of 15-29 are classified as youth.

The employment situation has worsened this year. The unemployment rate was 32.03% in August 2021, which means that almost every third youth in the country is unemployed. If we look at the different age groups of 15-19, 20-24 and 25-29 years, their unemployment rate in August was 67.21%, 45.28% and 13.24% respectively. The rates for those aged 30–34 and 35–39 were 1.57% and 0.76%, respectively, which is as good as without unemployment.

So, what’s going on here? One answer is probably that Indian youth continue to look for government jobs. State enrollment pays much better than the private sector at the lower and middle levels. Also, these jobs come with other facilities like access to better health infrastructure, housing, schools for children, pension etc.

Take the case of Central Public Sector Enterprises (CPSEs). Per capita emoluments to their employees have jumped ₹From 5.89 lakh in 2009-10 ₹14.78 lakh in 2018-19. This is when their workforce has come down from around 15 lakhs to a few thousand above 10 lakhs. Of course, this is an average, but this figure tells a story.

As Abhijit Banerjee and Esther Duflo observe in their 2019 book, Good Economics for Hard Times: “In the poorest countries, public sector workers earn more than twice the average salary in the private sector … for everyone It is worthwhile to wait and queue. Those jobs. If in the process of queuing and screening, as is often the case, some exams have to be taken, then people can spend most of their working life studying for those exams. “

By the time individuals turn thirty and still do not have a public sector job, they may be ready for a private sector job, possibly in the informal sector. This is a possible explanation of the age-group phenomenon. Of course, the sad fact is that India’s youth are unemployed in large numbers.

Recently, it has been hoped that the rapid fundraising unicorns will be able to create some jobs in India. Most unicorns that are able to achieve some scale are in the business of moving things (humans, food, parcels, grocery, products, and so on). In view of this, they are in a position to create low-skilled and semi-skilled jobs which the country desperately needs.

So, this is good news, but it comes with a disclaimer. As marketing professor Scott Galloway writes in Post Corona: From Crisis to Opportunity: “The gig economy is attractive for the same reasons it exploits.” Hence, these jobs are not going anywhere to offer the same kind of salary as various weapon proposals of the government. But then, something is better than nothing, and to a large extent, the low-end jobs at Unicorn are self-selecting.

Also, we will continue to see news that tells us that PhD, MBA, Engineers and graduates are applying for jobs as Peons in Govt. They understand that they are likely to earn more money in government employment than in the private sector.

Most importantly, the CMIE data shows that the number of persons crossing the age of 15 years from 2016-17 to 2020-21 was on an average around 19.1 million per year. If this continues and assuming that not all persons entering the labor force will be looking for jobs, even if half of them do, it will be a demand for about 10 million jobs a year. And this is a huge number.

To make a long story short, unicorns can have some impact and reduce youth unemployment, especially in urban India, but they cannot solve the country’s job shortage problem.

Vivek Kaul is the author of ‘Bad Money’.