Between 2012 and 2022, the share of population aged 15-29 years in the working age group will decline from 45.3% to 40%...
“The best time to plant a tree was 20 years ago. The second best time is now.” —Chinese proverb
The terms “demographic dividend” and “youth bulge” are widely used in India. However, neither the evidence nor its implications have been fully understood. Demographic dividend refers to the phase in time where the labour force age group (usually defined as those aged 15-59) grows faster than the general population. Youth bulge refers to a rising proportion of the population being in the youth age groups (typically 15-29). Both relate to the population composition effect resulting from declining mortality and fertility. The surge in labour force growth, along with other impacts of the age structure changes, is expected to lead to rapid expansion in output and incomes.
We have prepared a provisional set of population and labour force projections which extend from 2012 to 2026. I am less confident of the reliability of the labour force projections since participation rates are notoriously unreliable. They are not reported here.
The Indian population is projected to rise from 1,210.3 million in 2012 to 1,399.8 million in 2026, an increase of 189.5 million or 15.7% over a period of 14 years. The male population will rise from 626.6 million to 752.2 million and the female population from 583.7 to 674.7 million.
As the accompanying table shows, the proportion of the population of working age will grow from 62.6% to 66.3% between 2012 and 2026. The dependency ratio (conventionally defined as the proportion 0-14 plus 60 and over to the population aged 15-59) will diminish from 59.6% to 50.8%. This is the scenario that is widely discussed. However, we should also look at trends within the working age population. We find that the share of those aged 15-29 within the working population will decline from 45.8% to 41.4%, while that of the population aged 30-59 will increase from 54.2% to 58.6%. We may conclude that the youth bulge is beginning to shrink, while the bulge is shifting to the older age groups within the working age population.
The official projections tell a similar story. Between 2012 and 2022 (the last year of the official projection), the share of the population aged 15-29 in the population of working age will decline from 45.3% to 40%, while the corresponding shares of the 30-44 and 45-59 segments will increase from 32.7% to 35.5% and 22% to 24.5%, respectively. Astonishingly, the absolute size of the 15-29 population will increase by just 2.6 million.
At the all-India level, the much heralded “dividend” will now arrive in the form of growing numbers of older workers, many of whom would have missed out on education and training opportunities. According to our estimates, over three-quarters (about 133 million out of the 170 million) of the increase in the population of working age will be in the older ages, 30-59.
The pattern for the states reveals significant differences. Based on our estimates, the following pattern is observed among the 20 larger states.
l Ages 0-14: There will be a decline in all the states though it will be sharp in Bihar, Rajasthan and Jharkhand.
l Ages 15-59: It will increase in all states, except Tamil Nadu and Kerala, where it will decline slightly. Bihar, Rajasthan and Haryana will see fairly large relative increases.
l Ages 60 and over: It will rise generally, with sharp increases in Kerala, Tamil Nadu, Bihar, West Bengal and Karnataka.
The expected pattern of decline in the share of the population aged 0-14 and a rise in the population aged 60 and over is generally observed among the different states. However, a decline in the proportion of working age is projected for Tamil Nadu and Kerala.
Looking at the composition of the working age population, the following is observed.
l Ages 15-29: It will rise sharply in Bihar and Jharkhand and less sharply in Rajasthan but decline in many states. The sharp declines will be in Tamil Nadu, Kerala, Haryana, Punjab, Jammu & Kashmir and Himachal Pradesh.
l Ages 30-44: It will rise in general; increases will be sharp for Himachal Pradesh, Haryana, Punjab, Jammu & Kashmir and Uttarakhand.
l Ages 45-59: It rises generally, with sharp increases in Assam, Haryana, Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu and Kerala.
Focusing on the working ages, Bihar and Rajasthan stand out as states where the working age population will rise sharply in the younger age groups. A number of states, like India as a whole, will witness sharp increases in either the 30-44 or the 45-59 age groups or in both. Tamil Nadu and Kerala stand out as states where the increases will be of older persons and the elderly.
The poorly educated
We estimate under certain assumptions that there will be at least 223 million poorly educated persons (illiterates and those educated only up to primary) of working age in 2026. This implies that about a quarter of the population of working age will be poorly educated. The poorly educated would generally be aged above 29, having missed out on educational opportunities by 2012 while they were aged 15-29. They would find it difficult to access or benefit significantly from training and skill development programmes. They would probably end up in low wage employment.
A number of measures are needed which we briefly sketch in the rest of this paper.
Match education and training with emerging labour market needs: The most basic problem is matching education and training systems to emerging labour market needs. We need to think in terms of education providing the foundation upon which skills can be built and rebuilt. Education, especially vocational education, and some basic training may lead to better employment prospects, but more employer involvement is needed in training and retraining.