Much before acquiring skill and experience many individuals participate in the job market at a young age. A large majority of the youth end up in low productivity activities in the informal sector and/or formal sector activities in an informal capacity given the compulsions of earning their livelihood. The income outcomes are naturally poor and the prospects for acquiring further skill in the current job are dim. The kind of activities they are engaged in do not offer any opportunity for accessing on-the-job training. Hence, the scope of regularisation or any upward mobility is meagre.
Besides, capital-intensive economic growth has given rise to a wide spectrum of problems for young job market aspirants. In the post-Covid scenario, the youth has been facing severe challenges. The deceleration in demand and the lack of its revival aggravated labour market outcomes. New types of jobs have emerged (i.e., platform workers) but with new challenges. Whether the new jobs compensate for the job losses is an important question to be investigated. What job market securities and safety-nets are available, and in what ways the vulnerability of the youth can be reduced need detailed analysis. The labour market deregulations, the weakening of the bargaining power of the young labour market participants and the absence of adequate employment programmes are some of the major lacunae.
Further, mechanisation, technological advancements and innovation have brought in new employment challenges. New innovations relating to technological upgradation are highly capital and skill intensive, which in turn pose threats to the youth, especially those who do not have adequate skill and experience. Some of them may have joined the informal sector at a young age to acquire work experience but that may not be adequate to cope with the new challenges posed by technological progress. Besides, improvements in technical efficiency are a function of human capital which many young participants may lack. The young elderly, at times are compelled to participate in the labour market due to paucity of consumption expenditure.
Given their experience, employers prefer them over youth. In this process competition surges between the elderly and the youth as a result of which the latter keeps reducing the reservation price in order to get a hold in the labour market. This aggravates vulnerability of the youth. Machines and old people act as substitutes for young people in many fulltime jobs. As agriculture still accounts for a large percentage of the work force and the sector is already characterised by low levels of productivity, it is unlikely that new entrants into the labour market would have a high probability of getting absorbed into this sector. With higher levels of educational attainments, the expected earnings of the youth would not match the wages prevailing in the agriculture sector. The next best option is the rural non-farm sector.
However, if the activities in this sector are of a residual type, the rural to urban migration can become prevalent and migration of youth is likely to raise the supply of labour in urban areas significantly. Though employment configurations are generally envisaged in terms of three important dimensions ~ self-employed, casual wage and regular wage employment – , there can be many grey areas, not falling directly in these categories. If the own account enterprises are running profitably, they can be considered as the major absorber of new entrants as they protect youth from the vagaries of job search. However, given the fact that many of these enterprises operate at the margin, it is most likely that wage employment will be the category most sought after.
However, high shares of vulnerable employment, informality and working poverty are dominant in south Asia. Labour demand in the formal sector is too sluggish to absorb large numbers of young labour market entrants. Manufacturing accounts for a small share of total output and employment, compared to other developing regions, and this mostly affects low- and medium-skilled workers, who are still predominantly confined to working in agriculture and informal services. Given the inelasticity of employment in the public sector, the focus should be on the private sector as far as the prospects for growth and job creation are concerned. From the supply point of view, although primary school enrolment has increased, the transition rate from primary to secondary schooling is declining. Poor quality of basic formal education and persistent gender gaps in educational attainment do not allow the most vulnerable youth to get a chance to obtain decent work.
The world’s highest youth-to-adult unemployment rate ratio is evidenced in south Asia and more than 60 per cent of the region’s employed are estimated to be in vulnerable employment. The new entrants, particularly potential migrants, access a great deal of information pertaining to the job market at the destination through various informal networks. While the networks and familial ties are instrumental in job searches, the adverse outcomes are inevitable. Fragmented information acquired and passed on by the contact person to the potential migrant results in labour market segmentation, which in turn leads to mismatches between labour supplies and demand in various pockets within a given city, often with the former exceeding the latter.
The higher the duration of unemployment, higher is the probability that the job seeker would reduce the reservation wage; eventually employment taking place with meagre earnings. Further, neighbourhoods with higher spells of unemployment are likely to witness persistent unemployment, informality, vulnerability and unrest in terms of crimes and social disorder. Networks in such situations are often redundant and they reduce the probability of securing jobs as job-seekers may not be trustworthy. Informal networks with network concentration (or the lack of network diversification) lead to the absence of mobility and youth either hover around petty and marginal activities or remain engaged residually in activities with meagre earnings. The practice of similar jobs with different remunerations gets reinforced in the face of excess supplies of labour.
Those who are engaged informally either in the formal or in the informal sector encounter such consequences due to inadequate experience, partial information about the jobs and differences in networks. Even within the same organisation similar activities are performed at different wage rates due to the information asymmetry and the lack of regulations. Third-party involvement in hiring facilitates such discriminatory activities. The desperation of the youth to join the labour market without quality education triggers the compulsions to endorse such practices. The vulnerability of dropouts from education is highly prevalent in urban areas as the rural youth of such background migrate on a large scale. Part time and casual engagement do not generate any skills; even some of the fulltime occupations do not offer opportunities to improve employability.
With such occupational background as they initiate a search for fulltime jobs, they hold only weak bargaining power. On the other hand, volatility is extremely high as far as part time jobs are concerned which in turn adds to the vulnerability of the youth. Fulltime jobs in many activities, in the retail sector especially, have been split into several part-time jobs with a view to reducing costs. On the other hand, part-time jobs are the major hindrances to occupational and income mobility. The mismatches between education acquired at schools and the requirements in the job market are also said to be the major barriers to productive absorption of youth. Besides, those from poor socio-economic background are believed to have the pressure of joining the job market early for which they leave school, thus getting stuck in low productivity jobs.
Hence, from an empirical point of view it would be important to examine if youth from certain social background and poorer economic households are as vulnerable as those with lower educational attainments. Inadequate housing and poor health and social stress are said to raise the participation of youth in the job market. The inadequacy of skills and the compulsion to participate in the labour market, concentration in activities with excess supplies of labour, unrecognised work experience, lack of upward mobility and working with information asymmetry are some of the issues that the volume reflects on. Caste and gender disadvantages play an instrumental part in this context. Whether certain caste categories and young women are at a greater disadvantage than others, is an important line of enquiry.
A wide range of issues relating to occupational flexibility are pertinent. The role of skill-imparting institutions and major lacuna associated with their functioning have been widely noted. Social unrest and threats to the prospects of future growth in the absence of adequate youth employment are some contentious issues. The problems of the educated and uneducated youth are quite different and they need to be tackled separately. The youth tribulations due to the lack of economic growth and in the face of rising inequality and inadequate labour market opportunities are inescapable. Which policies hold better prospects for success and how the on-going policies need to be revived are indeed the important considerations.
(The writer is Professor of Economics, South Asian University)