In its first Budget presented on August 13, the new Tamil Nadu government announced several initiatives to expand and diversify the State’s industrial base. The ultimate aim is to create productive jobs for Tamil Nadu’s youth. The starting point in a quest for job creation is to understand how much proportion of the young adults in the State is employed and in which sectors, unemployed or not seeking work and why.

Using unit-level data from the National Sample Survey Office’s employment-unemployment surveys for 2004-05 and 2011-12 and Periodic Labour Force Survey for 2019-20 (July 2019 to June 2020), we created a uniform pooled cross-section data for young adults in Tamil Nadu in the age group of 20-29 years.

We used the usual status approach to measure employment and verify that the early impact of the Covid pandemic, which hit in March 2020, is not reflected in data by comparing them with 2018-19 data. The estimates for these two years are not very different and, thus, we can derive long-term structural trends about young adults’ employment patterns in Tamil Nadu.

We left out those younger than 20 because there has been a dramatic rise in the years of education and nearly 83 per cent of Tamil Nadu’s 15-19-year olds, typically included in the working-age population, were still in education in 2019-20. Further, instead of looking at the traditional measures of employment and unemployment as a ratio of the labour force (people who are in work or seeking work), we estimated the useful, but often neglected, labour market indicators by taking employed, unemployed and those not seeking work as a ratio of the total population in the age group.

Structural changes

This allowed us to map the structural changes in the labour market outcomes for Tamil Nadu’s young adults. We further divided those not seeking work into those involved in domestic work, in higher education or not looking for paid work for other reasons such as disability.

Our estimates suggest that there is a dramatic fall in farm employment among young adults over time. Only 5.6 per cent of young adults were working on farms in 2019-20 (pre-pandemic) compared to around 25 per cent in 2004-05. At the same time, the proportion of unemployed young adults rose to over 12 per cent in 2019-20 compared to a mere 3.5 per cent 15 years ago. A year earlier, in 2018-19, the same was marginally higher at 13.2 per cent.

There are several implications of this inevitable, but a secular declining trend of farm employment among the State’s youth, alongside a rise in unemployment. First, with rising education levels, young adults are seeking non-farm employment, which is not getting created at the same pace. Alternatively, available jobs are either not aspirational for youth or do not match their education and skills.

Irrespective of the reason, an increase in unemployment in the last decade among young adults increasingly resembles the structural form of unemployment and could get entrenched unless the public policy proactively addresses the reasons behind it. Even in rural areas, the unemployment among young adults was around 13 per cent in 2019-20. Further, with the share of young adults in higher education doubling over the last 15 years to nearly 12 per cent, their late entry into the labour market would raise youth job expectations and aspirations. Second, with the average age of farm labour inevitably set to rise in Tamil Nadu, higher mechanisation may become necessary. Our estimates suggest that the average age of a person working on a farm increased to nearly 47 years in 2019-20 from 40 in 2004-05.

An average farmworker in Tamil Nadu now is five years older than the national level average. With highly fragmented farmland — over 90 per cent of Tamil Nadu’s farmers are small and marginal with less than two hectares of land in 2015-16, farm mechanisation would, however, be difficult. Further, paddy, the State’s major crop, is labour intensive as well as water-intensive, both of which would be in deficit going forward. Crop diversification, therefore, assumes greater importance.

There has been an increase in the share of employment in services to nearly 24 per cent in 2019-20 while the industry’s share has fallen to 19 per cent among young adults. Once again, this change in the pattern of youth employment in the State, suggests either lower availability of manufacturing jobs, possibly due to higher levels of automation, or the unwillingness of youth to take up manufacturing jobs.

While the latest Budget has announced several initiatives to expand Tamil Nadu’s manufacturing, which is a step in the right direction, the reasons behind the drop in manufacturing’s share in employment need to be studied to understand the youth psychology of job acceptance. Alternatively, the inability of the traditional educational qualifications to match the skill requirements of the manufacturing sector could be another reason. If so, the focus would have to shift to more vocational training rather than the traditional ‘degree’ education.

Another significant challenge for Tamil Nadu’s public policy is to address the gender disparity in youth employment. Over half the young women are not seeking paid work since many in this age group would be young mothers and involved in child care. A more concerning fact is that despite half the young women not seeking work, a further 8 per cent could not find paid work and were unemployed in 2019-20. With another around 11 per cent in higher education, over 70 per cent of young women did not seek paid work in 2019-20.

In sum, paying close attention to youth’s job aspirations, employability, skill-mismatch and gender disparity in employment, and associated implications on the economy and the society require the policymakers’ urgent attention.

The writers are respectively with Great Lakes Institute of Management, Chennai, Madras School of Economics, and Data Development Lab

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