Supply-side policies not enough to improve job outcomes: ILO expert

ILO's Radhicka Kapoor says stronger labour demand and structural reforms are needed to translate gains in education and welfare access into better employment outcomes

Strong labour demand is critical to ensure that improvements in education and welfare access lead to better employment, said Radhicka Kapoor, senior employment specialist at the International Labour Organization, highlighting the need for policy attention beyond supply-side interventions.

 

“Policies that expand access into schooling, higher education or some kind of income support, improve participation and capabilities, but do not by themselves transform into improved outcomes in the absence of complementary structural conditions,” Kapoor said on Friday. She was speaking on "Green Industrialisation and Inclusive Growth in a Fractured World Order" at the UNU-WIDER Development Conference in New Delhi.

 

Kapoor said structural constraints such as labour market conditions, job scarcity and institutional factors can limit the returns from policies to expand access. In such cases, improved education or higher labour force participation may not necessarily translate into better employment outcomes.

   

Kapoor noted that education levels have improved in India, but employment outcomes have not always kept pace, particularly for younger and more educated workers. While India’s unemployment rate is lower than in several countries, a large share of the workforce continues to be in the informal sector.

 

Over two-thirds of unemployed Indians aged 20–29 were graduates in 2023, according to the “State of Working India 2026 report” by Azim Premji University. The share of degree holders among the unemployed rose from 46 per cent in 2017 to 67 per cent in 2023, despite educational attainment in India increasing over the past decade, with a larger share of young people completing higher education and entering the labour market.

 

“We have all these policies working on the supply side — expanding labour supply, improving education, encouraging people to enter the labour force — but the key question is what is happening on the demand side,” Kapoor said. Labour force expansion and improvements in human capital represent supply-side developments, but policy discussions also need to address how labour demand will grow to absorb a more educated workforce.

 

The structure of economic growth and the composition of industries shape employment outcomes. People with higher education levels are often better positioned to benefit from welfare programmes by accessing formal employment opportunities or starting higher-productivity enterprises.

 

“States with more tertiary education possibly have more diversified economies and more modern sectors so there are better opportunities for the more educated to transition into gainful and productive employment opportunities,” she said.

 

Industrial and sectoral policies can help strengthen labour demand and better align education and human capital development with industry needs, Kapoor said.

 

Alongside industrial policy, Kapoor said broader macroeconomic measures such as fiscal, monetary and trade policies also influence employment creation and labour demand in the economy.