With unemployment rise, number of young people looking for job is on the decline; Here is why

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Published: October 1, 2017 1:38:25 AM

In the Economic Survey of India 2017 report released by the Organisation of Economic Cooperation and Development (OECD), an inter-governmental economic organisation with 35 member countries, over 30% of youth aged 15-29 years in India are NEETs (not in education, employment or training).

unemployment, unemployment in india, unemployment rise, unemployment rise in india, Voluntary unemployment, CMIE figures, people looking for jobs, jobs in india, unemployment post demonetisation, CMIE survey, Skill gap, Skill gap in india, employability, startups, startups in indiaUnemployment is on the rise in India, but the number of young people looking for jobs is
surprisingly on the decline. (Image: Reuters)

Chandigarh-based Jyoti Arora was looking for a job but was in no mood to compromise. She had spent close to a decade-and-a-half working in the hospitality sector in Kolkata and Chandigarh. She knew well what her skills were and the pay cheque that she should take home. She was on a break after quitting her last job in 2016, which was as a front desk manager at a private school—which she was forced to take up, as she was unable to find anything worthwhile in the hospitality sector. But the bleak job market made her reassess her career path. She came up with the idea of starting her own business. In May, she opened Khokha, a hole-in-the-wall café in Chandigarh that caters to office-goers. “I wasn’t keen to take up a job that didn’t suit my profile or paid me less. With my own venture, even if it is pint-sized, I can be assured of getting returns as per my hard work,” the 35-year-old says. “It’s been four months and I have no regrets. I don’t think I will ever work for anyone any more,” she adds. Last month, she opened her second outlet at a leading media organisation in Chandigarh.

Arora isn’t alone. Joining her are hordes of unemployed young people in India who aren’t looking for jobs any more—at least for now. “This is the most wired generation of our times, but this is a generation that won’t enjoy working without a sense of purpose,” says Mohit Gendecha, co-founder and CEO, Jombay, an online platform for talent assessment and performance management. This is supported by several surveys covering different demographics. Take a look, for instance, at the recent report published by New Delhi-based economic thinktank, Centre for Monitoring Indian Economy (CMIE). It suggests that while the number of people employed has fallen down, the number of people seeking jobs, too, has dipped: in January, there were 408.4 million employed people in the country, while 25.9 million were unemployed and seeking jobs. By the end of July, the number of employed had fallen to 405.4 million, which meant unemployment figures have increased. But surprisingly, the count of those looking for jobs declined to 13.7 million. This is the total employment in the country, including organised and unorganised sectors, and agricultural and non-agricultural sectors. These estimates are based on consecutive ‘waves’ (successive surveys every four months) of CMIE’s Consumer Pyramids Household Surveys, which are all-India household surveys over a sample size of over 1.61 lakh households, including more than 5.19 lakh adults—the sample size was extrapolated to cover the entire population.

Clearly, there seems to be an imbalance. India’s rate of employment has declined and job creation, too, has not kept pace with the growing working-age population. In the Economic Survey of India 2017 report released by the Organisation of Economic Cooperation and Development (OECD), an inter-governmental economic organisation with 35 member countries, over 30% of youth aged 15-29 years in India are NEETs (not in education, employment or training). This is more than double the OECD global average of 14% and almost three times that of China (9%).
There are a couple of factors that might explain the missing workforce. Lack of well-paying jobs, the desire to start their own venture, affluence and skill gap are some key factors.

Voluntary unemployment
As the figures above suggest, a large fraction of people have fallen off the employment wagon. It’s the young who are losing jobs and it’s the young again who have stopped looking for jobs despite being unemployed. The figures have been showing a disparity since last year. The number of people who declared themselves to be unemployed and were actively looking for jobs was 39 million in January 2016. In October 2016, the number of unemployed dropped sharply to 30 million, but there was no corresponding increase in the number of people employed.

With more than 65% of the population under 35 years of age, it seems that more young people, especially in urban areas, are not looking at being employed. As is evident with the CMIE figures, there has been a persistent fall in the number of unemployed people seeking jobs to nearly a third of its level a year ago. “One of the reasons why I think youngsters are not looking for jobs is based on a parallel finding in CMIE’s CapEx survey that shows a sharp fall in the rate of creation of new capacities. This survey and also government statistics point to a significant slowing of the investments rate,” says Mahesh Vyas, CEO, CMIE. “If investments are falling, it’s obvious that the rate of creation of new jobs is also falling. After sustained fall in the rate of creation of new jobs, it can become so difficult to find jobs that people postpone actively looking for jobs. They don’t pro-actively make enquiries,” he says. However, Vyas adds: “We can only conjecture what the reasons for this fall could be because we don’t ask respondents the reasons why they have stopped looking for jobs.”

New Delhi-based travel professional Srijith Nair can vouch for what Vyas says. Nair, who was working with a travel agency till November last year, lost his job post demonetisation. The next five months were spent in updating his resume, meeting consultants and in placing cold calls to prospective employers. “But I wasn’t able to secure a job that fit the bill. Eventually, in March, I decided not to look for a job any more,” says the 23-year-old. He enrolled himself in an online course related to his trade. Nair has now adopted a ‘wait-and-watch’ policy—waiting for the right job profile and remuneration—something many youngsters seem to be doing today in the face of a bleak job market.

“One of the defining characteristics of Gen Y, or the millennial generation, is its affinity with the digital world. They seek variety in learning or on-job exposure and are not satisfied with the classical sales stint,” explains V Krishnan, executive director, human resources, Dabur India. “They seek more from their jobs. They want to expand their perspective or world view and want the company to invest in them. So the key to talent retention in the future would be to meet the expectations of this generation. Companies need to become Gen Y-ready to cater to their needs and aspirations,” he adds.
Economists also point out that affluence has created new aspirations. Not everyone has to follow the template and be employed. “Another reason for the declining number of job seekers is that affluence in upper-middle-class households has increased sufficiently. So youngsters prefer to wait it out to find a better-paying job than take up a low-paying one,” Vyas of CMIE says.

So while there may or may not be jobs, it’s for sure that ‘compromise’ is not an option for the young urban workforce. The CMIE survey defines the ‘young’ as persons between 15 and 24 years of age. “Awareness has increased and so have the expectations of youngsters,” concurs Rashmil Mishra, deputy general manager, corporate relations and placements, Indraprastha Institute of Information Technology, Delhi (IIIT-D), an autonomous university in the capital. The institute has repeatedly seen a dip in students opting for campus placements in the past two years. “Only 10% take whatever is offered to them. The rest would rather wait or pursue further studies unless something gainful comes their way,” says Alok Nikhil, incubation cell head, IIIT-D.

It’s not just one report that puts a question mark on the missing workforce. As per a McKinsey Global Institute (MGI) report released in June, declining labour participation indicates that more young people have stayed in education and/or that more women (from households that were once in extreme poverty, but have now entered the middle class) no longer need to work in low-productivity jobs. “The mismatch is higher than it ever was, but that’s only natural, as the Indian market matures, reflecting global business models,” says Francis Padamadan, country director, KellyOCG India, a workforce solutions provider. “The impact of market forces on the job market has also hit an all-time high. For instance, global oil prices have affected employment in many sectors in India like never before (as falling crude oil prices lead to job losses in the energy sector),” he adds.

Skill gap
As per the MGI report, rapid advances in automation technologies are affecting India’s information technology and business process outsourcing sectors. These sectors have remained net job creators and, as per the report, these companies could hire up to 2.5 to 3 million more workers by 2025, provided they can acquire the skills to meet the changing needs. So even where jobs are available, the workers are missing in action due to the existing skill gap. “There’s a mismatch between the technical and soft skills, and the education system in general. Companies hiring end up putting candidates through a reorientation programme, entailing additional expenditure. This doesn’t bode well for the industry,” says Ashish Bansal, VP, human resources, MobiKwik, a digital wallet firm. “Millennials need to be managed and assessed differently than other generations. At MobiKwik, as we work with 75% of millennials, we have learned those skills,” he adds.

In the current context, companies are looking for employees who don’t focus only on one skill, but possess an entire skillset required by a particular industry along with the mandatory soft skills. These new patterns have changed the hiring scene. “Technology and socio-economic trends are constantly changing business models and how work is organised,” says Shailesh Singh, business head, recruitment process outsourcing, PeopleStrong, an HR technology solutions provider. More and more recruiters are now looking at social media profiles of candidates.

Jobs that earlier required a graduate now need additional qualifications. Mostly, employers prefer that an employee should hold a postgraduation degree as well. “While B-schools are focusing on two of the three ‘Es’—education and employment—there’s an equally important need to focus on the third E: employability,” argues Krishnan of Dabur.

Hiring is clearly no longer only about going to campuses or poaching lateral talent from competition. “Specialisation is good, but employers are demanding a portfolio of skills. For instance, full-stack developers are the most sought after,” points out Padamadan of KellyOCG. “Employers have also taken it upon themselves to create such a talent pipeline through faculty development programmes, hiring talent at an early stage, thereby skilling students while they are still in college,” he adds.

Employers may complain of lack of skills, but youngsters believe their creativity is stifled by corporates. “Many of our students who do internships in large companies feel dissatisfied with the work culture. They complain that they are asked to align their feelings as per the employer’s desire,” Nikhil of IIIT-D says. So with no desire or compulsion to work, quitting a job has become easier.

On your own
Another key factor that has led to a dip in people looking for jobs has to do with the rise of independent work and entrepreneurship. Start-ups in the country have come a long way. India is now the third-largest hub for start-ups after the US and the UK, with close to 5,000 entities. That’s not all. As per industry body Nasscom, India will be home to over 10,500 start-ups by 2020, employing over two lakh people, with tech start-ups growing at 10-12% per year. The growth is not surprising, as funding in Internet companies increased in 2017 compared to a bleak 2016. In June 2016, the funding was at $453 million, while for the same period in the following year, it increased to $1,790 million.

So it’s not without reason that surveys, too, show people’s inclination towards quitting jobs and starting their own ventures. The annual Workmonitor Survey, released by global recruitment firm Randstad in August, noted that entrepreneurial ambition among the workforce is highest in India, with 56% of overall survey respondents in India indicating that they are considering leaving their current jobs to start their own businesses. This is the highest globally in a survey held across 33 countries. As many as 67% of Indian respondents said in case they lose their current jobs, they would like to start their own companies and 86% said the ecosystem to run a start-up was favourable in India.

The availability of funding from angel, venture capital and private equity investors, as well as state and central governments, initiatives like Startup India and Skill India are also creating interest in entrepreneurship among the youth. The year started with the launch of Startup India, an action plan to provide entrepreneurs with various subsidies for starting up businesses in India. The government body, Niti Aayog, has also announced $2 million in support for those setting up and modernising existing start-up incubators across the country.

Recent surveys have shown that millennials are starting twice as many businesses as the baby boomers. More specifically, millennials are less afraid of failure. They also have more supportive parents. “In the past one year, we have seen the launch of 29 start-ups by our students and alumni. Earlier, it was only five or six start-ups in a year,” says Nikhil. The other difference is the choice of sector in which businesses are being started. The focus is on technology, e-commerce and financial technology rather than traditional businesses.

Randstand’s online survey of 400 Indian employees aged 18-65 years and working a minimum of 24 hours a week in a paid job (not self-employed) saw 83% saying they would “love to be an entrepreneur”—much higher than the global average of 53%. The inclination is highest among those aged 25-34 years, with 72% of respondents in this age group favouring it.

In a nutshell
With changing times, aspirations, too, have undergone a sea change. “The aspiration level of millennials is far higher than the previous generation’s and they want to quickly move up their perceived life value chain,” Krishnan points out. Companies can now no longer take their employees for granted. “Organisations are required to treat their employees as internal customers to retain existing talent and attract new talent,” Gundecha of Jombay says.

CMIE’s Vyas, who has written extensively on the workforce market, believes a fall in the labour force should be a cause for concern for a growing economy like India. “This subject is critically important and research should drive discussions on employment and unemployment. The external condition leading to a shrinking labour force is lack of sufficient investments. The internal condition is the rising affluence of households that discourage multiple members of a household taking up jobs in a market that offers less then expected wages,” he says.

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