Lockdown: The financial impact on India’s youth

Gaurav Jalan | Updated on October 29, 2020

The construction sector was in the midst of a slowdown even before the pandemic hit the country   -  REUTERS

Loss of employment and business opportunities has eroded the financial well-being of the youth

For decades, India has been proud of its demographic dividend. As the ‘youngest’ nation globally, India has 64 per cent of its populace in the working-age group. Such a demographic asset provides tremendous opportunities for any developing country in nation-building and infrastructure development.

The coronavirus pandemic has, however, turned things on their head. What was a blessing earlier does not necessarily seem so now. Since March 24, 2020, the nationwide and State-level lockdowns have left the economy struggling to regain its footing.

Job losses and well-being

As per CMIE, in April 2020, 27 million youth between 20 and 30 years of age lost their jobs. CMIE’s Consumer Pyramids Household Survey indicated that youngsters in the 20-24 age group comprised 11 per cent of those losing jobs while accounting for 8.5 per cent of the total number of employed people in India in 2019-2020.

CMIE lists three ways in which the lockdown has severely affected the youth. First, a decelerating economy creates muted demand for labour. Second, the younger workforce being less experienced, they are more dispensable in any organisation. Third, during lockdowns, recruits cannot be hired and trained easily by companies. Even the youth who invested heavily in higher education are hard-pressed to find work in this period.

The ILO (International Labour Organization) had warned in May that the economic fallout from Covid-19 affects many young people and could exclude them permanently from the job market. It further warned that the pandemic’s legacy may linger for decades. The ILO’s latest report states that more than one in six youth (or approximately 17 per cent) have lost jobs since the outbreak began.

Worldwide, young workers generally secure entry-level, low-skilled openings. Most firms would have invested comparatively less on training these employees. During challenging times, employers find it easier to sacrifice such jobs, rather than those in the higher echelons. Besides, as per the Atlantic Council think-tank, the youth are overrepresented in industries such as retail, tourism and hospitality. Since such sectors are more badly hit by social distancing norms, their job losses are higher, impacting more youth.

Going by some industry estimates, around 12 million people enter India’s workforce annually. But other estimates peg this figure much lower at anywhere between five and seven million. Whatever the actual number, however, with millions of jobs already lost, it is increasingly challenging for these persons to find employment in a shrinking jobs market.

The vicious cycle

Even before the pandemic struck early this year, the nation had been experiencing back-to-back years of slow economic growth. A CMIE spokesperson notes that the country’s jobs number had stalled at around 405 million since 2016. Given lower growth expectations, companies have reduced investments in expansion or creating new capacities. Instead, the market has remained in ‘wait-and-watch’ mode, hoping for a bounce-back before committing to capital expenditure.

Unfortunately, this has led to a vicious cycle of low investment leading to lower job creation, which in turn limits spending and growth. It comes as no surprise that the unemployment rate for Indian graduates in 2019 was 12.7 per cent — more than double the 6 per cent overall figure in 2018. Again, this can be traced back to the country’s inability to generate an adequate number of high-quality, non-agriculture jobs. Typically, emerging economies improve living standards by increasing employment opportunities in the manufacturing and construction segments. With a slowdown in investments in these sectors since 2012, progress has been slow on this front.

In the past year or so, there is no doubt that national and international economic headwinds have made it difficult for our youth to find gainful employment or entrepreneurial opportunities. The Covid-19 outbreak has only exacerbated the situation.

Meanwhile, the Centre and the RBI have announced a series of steps to boost liquidity and improve market sentiment, including most recently LTC cash vouchers and interest-free festival advances for government employees, among other initiatives.

There is hope that all the measures taken by the government will trigger a gradual revival in spending and economic activity. Backed by a steady turnaround in the economy, the outlook for employment should improve in the coming months. In the interim, job-aspiring youth should take up opportunities for internship and training that will hone their skills and keep them ‘battle-ready’ for the first available job opportunity.

The writer is CEO and Founder – mPokket

Published on October 27, 2020

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