India: a young country with an ageing workforce

India: a young country with an ageing workforce

Subject: Economy

Section: National Income

Key Points:

• India may continue to experience the rather counterintuitive phenomenon of being a youthful country with an ageing workforce.
• Analysis of India’s workforce, sourced from CMIE’s Economic Outlook data, shows that while India may be the country with the most youthful population, its workforce is rapidly ageing. In other words, the young are increasingly getting driven out of the job market.
• An ageing workforce basically means that if one looks at all the employed people in India, the share of young people is going down while the share of those closer to 60 years of age is going up.
• The table 1 below shows the changing composition of workforce by age group and table 2 shows Employment Rate (ER) change, over the last 7 years:

• Some concepts:
  • The labor force is the sum of the employed and unemployed workers of a country. Only those unemployed workers are included who are actively searching for a job.
  • Labour Force Participation Rate (LFPR): LFPR is defined as the percentage of persons in the labour force (i.e. working or seeking or available for work) in the population. It is an estimate of an economy’s active workforce.
  • Worker Population Ratio (WPR): WPR is defined as the percentage of employed persons in the population.
  • Unemployment Rate (UR): UR is defined as the percentage of persons unemployed among the persons in the labour force
  • The Employment Rate (ER) for any population or age group tells us what proportion of that age group or population is employed. So, if there are 100 people in the ages 15 to 29 and only 10 are employed then the ER would be 10%.
  • The unemployment rate is the number of people unemployed divided by the working population or people working under labour force. Unemployment rate = (Unemployed Workers / Total labour force) × 100.
• Some interesting observations from the analysis:
  • Employment rate has fallen for all age cohorts.
  • The greatest fall in the employment rate has been for the 15 to 30 age group.
  • Only the age group of 55-59 years saw an increase in employment rate from 50 to 54%.
  • If one considers cohorts of 5 years, then the age group of 25 to 29 years, it shows a rising employment rate over the past 7 years from 50 to 54%. But this is because of a sharp fall in the total population of this cohort, from 10 crore to 7.5 crore. It is for this very reason that despite a better ER, this cohort is not able to pull up the numbers for the youth (15 to 29 years) category.
  • The official surveys (non CMIE) also show that there is evidence to suggest that in India’s unemployment is highest for the youth, and often rises with educational attainment.