Graduates face 17% unemployment rate

Education is positively associated with labour market participation. If a person gets education there is a greater chance that such a person will seek employment. And, the probability of a person seeking a job increases as the level of her education increases. This is logical and is generally expected. Education has an apparent end goal -- to get a job. An undergraduate degree makes a big difference.

We see this in the data. Over 62 per cent of the population that has an undergraduate degree or more, is in the labour force seeking a job. This proportion is way above the rest.

The gap between graduates+ and the rest in terms of labour force participation is very large. Those who completed their 10th grade or more but not their undergraduate degree pencilled a labour participation rate of only 43 per cent. The participation rate then drops to less than 40 per cent for those who had some education but had not completed their 10th grade. Those with no education had an LPR of only 31 per cent.

The LPR at the lower end of the education spectrum is also very volatile. This phenomenon of low and volatile labour force participation of the uneducated is worth a detailed study. The expectation was that people with no education would be the more vulnerable and would be loath to remain out of the labour force. But apparently, they keep getting in and out of labour markets month after month.

The volatility of monthly labour participation rates declines as education increases.

Graduates+ have the least volatility in this respect. They are also not only way ahead of the rest in terms of labour participation they are also recording a steady increase in their participation rate.

While the overall LPR for India was at an all-time low at 42.4 per cent in November 2019, the labour participation rate for graduates+ was at an all-time high of 62.9 per cent in October 2019. At 62.2 per cent in November, it was close to this peak.

India's labour force participation rate has fallen from nearly 47 per cent in 2016 to 43 per cent in 2019. This translates into a fall of over 7 million in the labour force over three years -- from 443 million to 436 million. However, during the same period, 2.5 million graduates+ joined the labour force. Evidently, it is people with less education who have quit the labour markets. In fact, it is those with no education that have exited the labour markets over the past three years.

As basic education is becoming increasingly universal, the labour market in India has seen a sharp fall in those who have no education. Correspondingly, the share of those that have some education has increased. The quality of human resources in the labour markets is improving. Yet, the share of graduates+ in Indian labour markets is very low.

Graduates+ accounted for only 13.5 per cent of the total employed in 2019. This is an improvement over the 12.7 per cent share it had in 2016. But, it is still very low.

Graduates+ account for only about 13 per cent of the population above the age of 25 years in India. In comparison, this ratio is over 40 per cent for developed countries. It is 45 per cent in South Korea and 17 per cent in China.

Evidently, India still has a lot of catching up to do on providing tertiary education to a vast majority of its population. Add to this, the woes of industry that has often complained about the low quality of labour in India.

While 62 per cent of graduates seek employment, only 51 per cent are employed. The remaining 11 per cent are unable to find a job although they are looking for one.

Are they unemployable or are the opportunities inadequate in number and poor in quality? Possibly, both are true. If this is indeed true then we have a vortex of problems in education and employment in India.

First, the proportion of graduate+ in the population is low at only 13 per cent. Second, these graduates face the highest unemployment rate. The unemployment rate among graduates is 17 per cent. Third, industry complains that the quality of graduates is not good enough for employment. Fourth, the rate in investments and therefore jobs creation is insufficient to absorb additions to the labour market.

This seems to be a vicious cycle in which vast numbers of educated are not considered employable and lack of investments leads to low job opportunities. This could discourage the young population from seeking higher education and also discourage educational institutions from producing employable labour. There can be a hope that in the long run, markets will sort out this problem. But, as has been well said, in the long run we are all dead.