The Looming Crisis of World Unemployment

Why in news?

The World Bank warns 1.2 billion youth in the Global South will reach working age this decade, but only 400 million jobs may exist.

UPSC Relevance 

Mains GS3: Indian economy – mobilisation of resources, growth, development and employment; inclusive growth.

The global unemployment crisis

• World Bank : Over the next decade, about 1.2 billion young people in the Global South will be ready to work, while the world economy may create only around 400 million viable jobs. That leaves a gap of nearly 800 million.
• The old blueprint for growth is failing: East Asia turned its young population into growth through labour-intensive factories. That ladder is weaker today because automation and robotics have cut the number of workers needed in manufacturing.
• The warning for India: With a median age under 30, India must create jobs fast, or its demographic dividend could turn into a demographic disaster.

How the dividend leads to economic growth ? (Ideal case)

• United Nations Population Fund (UNFPA) defines the demographic dividend as the economic growth potential that comes from changes in a population’s age structure, mainly when the share of the working-age population (15-64) is larger than the share of dependants (children and the elderly).
• More workers, fewer dependants: Higher output per head and more household savings.
• Savings to investment: Higher savings fund capital formation and growth.
• Women’s entry into work: Smaller families free women to join the labour force.
• Example: Studies such as Bloom and Williamson (1998) estimated that the demographic dividend explained roughly one-third of East Asia’s ‘miracle’ growth. But it worked only because of mass education, health and export-oriented factory jobs.
• The dividend is not automatic. It is only an opportunity, and it needs jobs, skills and health to be realised.

India’s position

• Age profile: Median age is under 30; India is the most populous country. Total Fertility Rate has fallen to 2.0 (NFHS-5), below the replacement level of 2.1.
• Uneven window: Southern States like Kerala and Tamil Nadu are already ageing, while Bihar, Uttar Pradesh and Madhya Pradesh will have young populations for longer. So the dividend is region-specific.
• Ageing ahead: The India Ageing Report 2023 (UNFPA) projects that about one-fifth of Indians will be 60+ by 2050. Thus,  India risks ‘growing old before growing rich’.

Why the dividend is not turning into jobs? (Reality)

• Weak structural transformation: Workers left farms but mostly went to construction and low-paid informal services, not factories. Manufacturing employs only around 11-12% of the workforce.
• Automation and capital-intensive growth: New factories need fewer workers. Even labour-intensive sectors like garments and footwear face competition from Bangladesh and Vietnam.
• Educated unemployment: The ILO-IHD India Employment Report 2024 found that youth made up about 83% of the unemployed, and the share of educated youth among them rose sharply over two decades.
• Skills mismatch: The Economic Survey 2023-24 noted that only about half of graduates are readily employable. Formal vocational training reaches a small share of the workforce.
• Informality: Close to 90% of workers are in the informal sector, with no written contract or social security.
• Women left out: Despite recent gains, much of women’s work is unpaid or low-productivity. Safety, mobility, care burden and social norms keep them out of better jobs.
• MSME constraints: Small firms, which create most jobs, face costly credit, delayed payments and compliance burden. Many firms stay small to avoid regulation (the ‘missing middle’).
• Rise of gig work: NITI Aayog (2022) estimated 77 lakh gig workers in 2020-21, rising to about 2.35 crore by 2029-30. It gives flexibility but not security.

Drawbacks of rising unemployment 

• Social unrest: Large numbers of frustrated, educated youth can fuel crime, extremism and agitation. Protests for quotas in government jobs are one sign.
• Distress migration: Rural to urban, and from the Global South to the Global North, causing political tension abroad and pressure on Indian cities.
• Fiscal pressure: Fewer earners mean lower tax base and more spending on welfare and freebies.
• Lost window: If not used before 2040s, India will face ageing without the wealth to support it.

Way forward

• Labour-intensive manufacturing: Focus on apparel, footwear, toys, food processing and electronics assembly, not just capital-heavy sectors.
• Sector strategies (as the article suggests): Agri-value chains (cold chains, food processing), the care economy (nurses, elder care, childcare), tourism and culture, and green jobs (solar, EVs).
• Skills that match markets: Industry-linked apprenticeships, the NEP 2020 push to integrate vocational education in schools, and outcome-based funding for training.
• Help MSMEs grow: Easier credit, timely payments, and simpler compliance so firms can expand and hire.
• Bring women in: Crèches, safe transport, working women’s hostels and flexible work.
• Invest in health and education: A healthy, educated workforce is the base of any dividend.
• State-specific plans: Young States need jobs; ageing States need elder care and pension planning. Labour mobility between the two can help both.

India’s demographic dividend is a window, not a permanent gift. If the next 15 years are spent creating decent jobs at scale, India can follow East Asia. If not, the same young population could become its biggest challenge.

Practice MCQ

Q1. Consider the following statements:

1. The Periodic Labour Force Survey (PLFS) is conducted by the National Statistics Office under the Ministry of Statistics and Programme Implementation.
2. Under the Current Weekly Status approach, a person is treated as employed if he or she worked for at least one hour on any day of the reference week.
3. A demographic dividend arises when the Total Fertility Rate rises above the replacement level.

How many of the above statements are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Answer: (b). Statement 3 is incorrect. The dividend arises when fertility falls, which raises the share of working-age people relative to dependants.

Q2. Consider the following statements:

Statement-I: Manufacturing in India has not absorbed surplus farm labour on the scale seen in East Asian economies.

Statement-II: Automation and capital-intensive production have reduced the labour intensity of modern manufacturing.

Which one of the following is correct in respect of the above statements?

(a) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I

(b) Both Statement-I and Statement-II are correct, but Statement-II does not explain Statement-I

(c) Statement-I is correct, but Statement-II is incorrect

(d) Statement-I is incorrect, but Statement-II is correct

Answer: (a). Falling labour intensity of manufacturing is a key reason behind ‘premature deindustrialisation’, which explains why factories have not absorbed farm workers as they did in East Asia.

Mains Practice Question

Q. “India’s demographic dividend is a time-bound opportunity that can turn into a demographic burden without job-rich growth.” Examine the reasons for the weak link between economic growth and employment in India, and suggest sector-specific measures to address it. (15 marks, 250 words)