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Insights into Editorial: India won’t benefit from demographic dividend



Insights into Editorial: India won’t benefit from demographic dividend: Mass unemployment, unrest looms ahead


In four years, India will have the world’s largest population of working people. When nations reach a high ratio of such people, they are expected to earn something called a demographic dividend. This simply means that because most citizens are working, economic growth goes up. The expectation and anticipation is that India is approaching such a position soon. However, there is a second view on this. A few months ago, a report by IndiaSpend, looked at the issue of employment and made six observations.


These were as follows:


• In 2015, India added the fewest organised-sector jobs — in large companies and factories – in seven years across eight important industries.

• The proportion of jobs in the unorganised sector — without formal monthly payment or social security benefits – is set to rise to 93% in 2017.

• Rural wages are at a decadal low, as agriculture — which accounts for 47% of jobs — contracted 0.2% in 2014-15, growing 1% in 2015-16.

• As many as 60% of those with jobs do not find employment for the entire year, indicating widespread ‘under-employment’ and temporary jobs.

• The formation of companies has slowed to 2009 levels, and existing companies are growing at 2%, the lowest in five years.

• With large corporations and public-sector banks financially stressed, the average size of companies in India is reducing, at a time when well-organised large companies are central to creating jobs.” This indicates that a very large labour force is moving into an environment which does not have the ability to absorb them.


What is Demographic Dividend?


Demographic dividend, as defined by the United Nations Population Fund (UNFPA) means, “the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older).”

• In other words, it is “a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents.”




Technological change is making labour partially or wholly redundant in a number of sectors, across the world. Even where labour is still necessary, increasing complexity of production requires labourers to have a minimum skill level that is much higher than the skill level required during the labour-intensive output boom in China and South-East Asia in the past decades. Also, an alarming aspect of the current employment situation is that a large proportion of employees are not in a very happy situation. According to a study, nearly 40% of employed people are not satisfied with their job profiles.

The major reasons for dissatisfaction cited are unsecure jobs, low salaries, stressful environment, and mismatch between job and qualification. Another appalling concern is that a significant proportion of qualified women drop out of the workforce for reasons ranging from no suitable jobs in the locality—particularly in rural areas—to family responsibilities and marriage.

This is not only a huge loss of valuable human resource, but also has a deleterious impact on family incomes. The government of India had launched an initiative called Skill India to equip millions of people with basic blue collar skills. Even here the results will take time because the quality of primary schooling in India is very poor.

The more one thinks about it, the more difficult it is to see how India will be able to reap the benefits of a demographic dividend. A period of mass unemployment and social unrest is looming unless there is a shift, both internal and external, that at the moment is nowhere to be seen.


What needs to be done?


To be able to harness the potential of this large working population, which is growing by leaps and bounds, new job generation is a must. The nation needs to create ten million jobs per year to absorb the addition of young people into the workforce.

• Improved infrastructure, skill development, access to easy finance, reducing barriers to entrepreneurship and forums for mentorship of emerging entrepreneurs in partnership with corporates are some of measures.

• The current situation calls for more and better schools, especially in rural areas. It also calls for better transportation links between rural areas and regional urban hubs.

• The government must also ensure better quality of jobs with a focus on matching skill-sets and job opportunities.

• There is a need to look into these qualitative issues of job satisfaction, job profile and skill matching, and the creation of opportunities for entrepreneurship in order to be able to harness the vast potential of human resources.




It is imperative that policy-makers deal with the situation on multiple fronts. Universal education, value-added skills accretion and massive growth in employment in the formal sectors should be the key focus areas. Unfulfilled aspirations of the youth can quickly turn to frustration, leading to violent outbursts. There is also a need to engage with the youth and create an enabling environment for entrepreneurship. Failure to do so would not just mean a missed opportunity in terms of harnessing the demographic dividend, but the ensuing rise in unemployment and poverty could undermine the advances made on the economic front and foment societal upheaval.