Despite being home to the world’s largest youth population, India is experiencing a concerning trend. An analysis of the data from CMIE’s (Centre for Monitoring Indian Economy) Economic Outlook reveals that India’s workforce is ageing rapidly. This means that the proportion of young individuals in the total employed population is diminishing, while the share of those nearing retirement age is increasing.
Key Findings of the Workforce Analysis
Examining the workforce data, three clear groups of ages are identified to understand the changing trends:
– Young Workers (15-29 years): This group’s representation in the total workforce slid down from 25% in 2016-17 to 17% in 2022-23.
– Middle-Aged Workers (30-44 years): The share of individuals in this group decreased from 38% to 33% during the same period.
– Older Workers (45 years and above): Their share has seen significant growth, rising from 37% to 49%.
The Declining Youth Employment
Simultaneous to the youth population’s growth by 2.64 crore (from 35.49 crore in 2016-17 to 38.13 crore in 2022-23), there was an alarming fall of 3.24 crore in the number of employed individuals in this group. This imbalance led to a dramatic drop in the employment rate for this group, sinking from 29% to 19% over seven years.
Differing Impact on Age Groups
While the reduction in employment rates is most visible among the youth, it extends to other age groups as well, albeit to a lesser extent. Notably, the oldest age group experienced only a minor decline in employment rates with a distinct increase in the absolute number of employed individuals.
Factors Fuelling the Ageing Workforce
The ageing workforce trend can be attributed to several factors:
– Lack of Enough Jobs: The rapid growth of the youth population has not been matched by a similar increase in job opportunities, causing fierce competition for limited positions.
– Skill Mismatch: There exists a mismatch between job market-required skills and those possessed by the youth, leading to high unemployment rates.
– Dominance of Informal Sector: A large part of India’s workforce falls into the informal sector which often lacks stable employment opportunities and social security benefits.
– Educational Aspirations: Rising educational attainment might make the youth wait for suitable positions, contributing to declining youth employment.
Implications and Concerns Related to India’s Ageing Workforce
The shift towards an ageing workforce could have serious implications:
– Productivity: Elderly employees’ productivity might decline due to health issues and decreased physical ability, affecting the total economic output.
– Innovation: Young workers usually drive innovation, something that an ageing workforce may lack.
– Economic Growth: A declining workforce can throttle economic growth as a smaller working population leads to reduced production and consumption.
– Skills shortage: An aging workforce can lead to skill shortages, particularly in industries requiring specialized knowledge.
Future Directions
To deal with these challenges, implementing policies discouraging early retirement and incentivizing older individuals to stay in the workforce longer can be helpful. Companies can adopt age-inclusive workplace strategies that cater to the needs of older workers.
Indeed, tackling the challenges and harnessing the advantages of an ageing workforce will require immediate and comprehensive policy and corporate interventions.
