Budget makes employment push as youth share in formal job additions falls

Share of people younger than 25 in formal employment, as defined by EPFO additions, fell to 50.2% in 2023-24, from 68.9% in 2018-19

Finance Minister Nirmala Sitharaman’s Budget proposals to encourage employment come amid a declining share of young people in net payroll additions, seen as a proxy for job additions.

Sitharaman on Tuesday announced three schemes for first-time employees, based on enrolment in the Employees’ Provident Fund Organisation (EPFO). As part of the ‘Employment Linked Incentive’, a month’s wage will be given to new entrants to the formal workforce in three instalments of up to Rs 15,000. The eligibility for this is to have a monthly salary of Rs 1 lakh.

The share of those younger than 25 has declined in formal employment as defined by additions to the EPFO, according to data. In 2018-19, they accounted for 68.9 per cent of net payroll additions. Their share fell to 50.2 per cent in 2023-24 (see chart).

In May 2024, the latest monthly available data, the share was 45.3 per cent. In the same month last year, it was 56.2 per cent.

Earlier this year, a joint report by the International Labour Organization and the Institute for Human Development said that one in three young people are not in education, employment or training. Young women are more likely to not be in any of these categories than young men, according to ‘India Employment Report 2024’.

Young people were likely to work in the unorganised sector and informal work, it said. The share of those working in the formal sector increased between 2000 and 2019 but declined in the next four years.

While the number of young people in regular employment increased, many of them “lacked a written contract, a long-term (three or more years) contract and social security benefits,” said the report.