Rapid Ageing of India’s Workforce: Concerns Amidst Youthful Population |Ias Banenge

August 30, 2023 IAS BANENGE

Context:

India, despite having the world’s largest youth population, is experiencing a rapid aging of its workforce, as indicated by CMIE’s (Centre for Monitoring Indian Economy) Economic Outlook data. This trend is concerning as it signifies a decline in the proportion of young workers and an increase in those nearing 60 years of age among the employed population.

Relevance:

GS I: Population related issues

Dimensions of the Article:

Key Insights from the Analysis
Factors Influencing an Ageing Workforce
Concerns and Implications of an Ageing Indian Workforce

Key Insights from the Analysis

Workforce Composition Across Age Groups

Categorized into Three Age Groups: The analysis segments the workforce into distinct age groups to analyze the trend of an aging workforce.
Aged 15-29 Years: The percentage of workers in this age bracket within the total workforce has dwindled from 25% in 2016-17 to 17% in the financial year 2022-23.
Aged 30-44 Years: Individuals falling within this age range also witnessed a decline in their share, decreasing from 38% to 33% over the same period.
Aged 45 Years and Older: Notably, this category’s share has observed a significant growth, escalating from 37% to 49%.

Declining Employment Rates Among Youth

Youth Population Growth: Despite an increase of 2.64 crore in the youth population (from 35.49 crore in 2016-17 to 38.13 crore in 2022-23), the number of employed individuals within this group has plummeted by a substantial 3.24 crore.
Plummeting Employment Rate: Consequently, the employment rate for this age group has experienced a sharp drop from 29% to 19% over a span of seven years.

Varied Impact on Different Age Categories

Across Age Groups: The reduction in employment rates is most pronounced among the youth, yet the trend is also noticeable in other age groups, albeit to a lesser degree.
Oldest Age Group: Intriguingly, the oldest age segment (45 years and above) has faced a comparatively minor decline in employment rates and has even seen an upturn in the absolute number of employed individuals.

Factors Influencing an Ageing Workforce

Limited Job Opportunities

Insufficient Job Openings: A major driver of diminishing youth employment is the scarcity of available job opportunities.
Population Growth vs Job Growth: The rapid expansion of the youth population hasn’t been met with a proportional increase in job openings, resulting in intense competition for limited positions.

Skill Mismatch

Skills Gap: Disparity between the skills possessed by youth and those demanded by the job market can lead to elevated unemployment rates.
Education’s Role: The education system might not adequately prepare young individuals for the evolving job landscape, causing underemployment or joblessness.

Informal Sector Predominance

Informal Employment: A significant portion of India’s workforce engages in the informal sector, where stable employment and social security benefits are often lacking.
Lack of Formal Opportunities: Entering the job market, youth might struggle to secure steady formal employment, resulting in instability and underutilization of skills.

Educational Mismatch

Educational Attainment Increase: Although youth are achieving higher education levels, a discrepancy could exist between acquired education-based skills and those demanded by employers.
Aspirations and Waiting: A desire for higher-level positions might lead youth to wait for suitable jobs, contributing to a decline in their employment rates.

Concerns and Implications of an Ageing Indian Workforce

Reduced Productivity and Economic Impact

Health-related Issues: Older employees might experience decreased productivity due to health concerns and declining physical capabilities, affecting overall economic output.

Healthcare Demand and Strain

Healthcare Demand Increase: An ageing workforce could lead to heightened demand for healthcare services, potentially straining both public and private healthcare systems.

Lack of Innovation and Dynamism

Fresh Perspectives and Innovation: Younger workers often bring novel viewpoints and technological expertise, fostering innovation in various industries.
Aging Workforce Limitation: An ageing workforce may lack the dynamic qualities and innovation potential that younger employees offer.

Impact on Economic Growth

Declining Workforce Contribution: A shrinking working-age population contributes less to both production and consumption, affecting economic growth potential.

Labor Shortages in Certain Sectors

Labor Shortages: Industries relying on manual labor, like construction and manufacturing, might face shortages if younger workers are unavailable to replace older ones.

Skill Shortages and Impeded Progress

Skill Deficits: An ageing workforce can result in skill scarcities, particularly in sectors requiring specialized knowledge, potentially hindering technological advancement.

Altered Consumer Patterns and Demand

Different Consumption Patterns: Older individuals often prioritize savings and essential goods, influencing consumer demand and affecting industries catering to luxury goods.

-Source: Indian Express