India Higher Education Report 2020

Employment and Employability of Higher Education Graduates in India

N.V. Varghese, Mona Khare, N.V. Varghese, Mona Khare

• Publisher: Routledge India
• Year: 2021
• ISBN:
  9781000434736
• Edition: 1
• Topic: Education
• Subtopic: Education Administration

India Higher Education Report 2020 critically analyzes the role played by the state, industries, and higher education institutions in the employment and employability of educated youth in India. The book discusses a wide range of topics such as employability skill gaps of higher education graduates; curriculum and skills training systems; formal and informal modes of skill formation; crisis of jobless growth in India; migration, education and employment; dimensions of gender, caste and education; general, technical and professional education; vocationalization; qualifications framework and skills certifications; curriculum and pedagogy in higher education for skill development; industry–academia linkages; entrepreneurship education and executive education; and sustainable employment.

The book focuses on theoretical insights, empirical evidences and recent data on key issues and challenges of higher education graduate employment in a knowledge economy driven by the unprecedented expansion of higher education and increasing digitization. It offers successful cases of institutional responses, examples of policy and practices as also perspectives of different stakeholders such as employers, employees, teachers and students to present trends in the changing landscape of higher education and future demands of the job market for the youth workforce across sectors, subject disciplines and gender.

This volume will be an important resource for scholars, teachers and researchers of higher education, public policy, political economy, political science, labour studies, economics, education, sociology in general as well as for policymakers, professional organizations and associations, civil society organizations, and government bodies.

Chapter 1
Employment and employability of higher-education graduates

An overview

N.V. Varghese and Mona Khare

DOI: 10.4324/9781003158349-1

The rate of economic growth determines the size of the national income, and the employment pattern determines the distribution of employment among nationals. Economists in the 1950s postulated a positive association between rates of economic growth and generation of employment. The employment elasticity of growth continued to be positive and high in many decades that followed. These trends have been changing in recent decades. It is observed in many economies that the growth in employment lagged behind the rates of economic growth, and it became close to zero, giving way to what is termed as jobless growth (ILO, 2014). Consequently, the global youth unemployment remained high and increased from 201 million in 2014 to 212 million by 2019. If new labour market entrants are taken into account, an additional 280 million jobs needed to be created by 2019 to close the global employment gap (ILO, 2015).

According to the NSSO Reports, India had a labour force of around 485 million in 2012. The huge youth population that India has currently is projected to increase to 350 million by 2022. The country is already experiencing the phenomenon of jobless growth. The situation of jobless growth may lead to explosive levels of unemployment in general and similar levels of unemployment of the educated, in particular. It seems India is already transiting from a situation of ‘jobless growth’ to ‘job-loss growth’ (Kannan & Raveendran, 2019), which will have serious implications for employment of the educated.

Being educated was considered to be security against unemployment. The level of education and the rate of unemployment were represented by an inverted ‘U’-shaped curve (Blaug, 1973) which peaked at the secondary education level. The empirical evidence before the 1990s indicated that unemployment was mostly a problem of non-educated and less educated. Even among the educated, the problem of unemployment was mostly a problem of matriculates in the 1950s, the undergraduates in the 1970s, and the postgraduates of universities who joined the pool of unemployed in large numbers in later decades (Varghese, 1989). Today the curve representing the rate of unemployment and the level of education continues to move positively and, perhaps, endlessly. The rate of unemployment seems to increase with increasing levels of education till the postgraduate levels of education.

The increasing rate of unemployment of the educated challenges the views on education as a guarantee against unemployment. The enrolment in higher education is increasing, and the number of graduates coming out of the universities is also on the rise. Most of them remain unemployed not only because of non-availability of jobs but also due to lack of ‘job-readiness’ among the graduates. The widening employability skill gaps add to the problem of unemployment of the higher-education graduates, in turn, which accentuates the problem of jobless growth.

Employability implies a good mix of skills, competencies, and attitudes to perform on the job, and it enjoys a high premium in the labour market. It has become a major concern globally and in India. The emphasis of the SDGs 2030 on job readiness and the United Nations (UN) on the employability as a priority area for youth development are indications of global commitment to employability skills. The education systems in many countries are being reformed to improve job readiness and to enhance employability skills among the youth. The qualification frameworks developed in many countries attempted to link the education and training systems with the demands of the production sectors. These frameworks are becoming the basis for curriculum reforms in many universities of the developed and developing countries.

Economic growth and employment

The models of economic growth in the first development decade helped improve output but not its distribution among the nationals. Therefore, the strategy of growth followed in the second development decade, focused on ‘Redistribution with Growth’ (Chenery et al., 1974). To promote employment and better income distribution, the World Bank focused on agriculture and rural development, and the International Labour organization (ILO) introduced the World Employment Programme (WEP) in the 1970s. The agenda for global development centred mostly on ‘employment-oriented strategy of rural development’ (Mellor, 1975).

The changes in the employment patterns in the subsequent decades contributed to the widening of income inequalities, challenging the validity of the Kuznets curve linking growth and income inequality (Piketty, 2006). The employment trends from the 1980s indicated a decline in the share of industrial employment in some high-income economies such as the Republic of Korea, Singapore, Spain, and the United Kingdom, while it remained stable in developing countries and increased in some of the emerging markets. The machines replaced workers in many routine jobs, leading to increasing unemployment of the medium-skilled workers. A phenomenon noticed recently is that the advanced economies experience fast growth both in high-skill cognitive occupations and low-skill occupations, while jobs are shifting away from middle-skilled categories (World Bank, 2019).

The decline in medium-skilled jobs and a rise in the demand for jobs at the lower and upper ends of the skill hierarchy compelled educated medium-skilled workers to compete for lower-skilled occupations. This resulted in increasing wage and income inequalities between those who are employed in high-end jobs and others (ILO, 2015). This has become a continuing source of widening inequalities in employment and income. It is projected that the demand for high-level skills will grow, and many low- and medium-skilled jobs will become obsolete. The routine manual, non-routine manual, and routine cognitive jobs will decline, and jobs in the non-routine analytical domains will grow. The demand for skills and skilled people competent to work in jobs requiring expert thinking and complex communication grew steadily and consistently over the past decades (Salmi, 2017).

Technology is enhancing the skill requirements in the labour market. The premium is rising for skills that cannot be replaced by robots—general cognitive skills such as critical thinking and socio-behavioural skills such as managing and recognizing emotions that enhance teamwork. Workers with these skills are more adaptable in the changing context of the labour markets. The empirical reality is that the labour market for certain categories of the educated continue to enjoy better employability and higher wages. The high private returns to education, in general, and for the skilled and of the higher-educated in certain domains (increased to almost 15 per cent a year) reflect this change (World Bank, 2019).

Another trend is the informalization of employment. Although, the demand from international organizations and employees’ unions is for good-quality productive employment, the empirical evidence shows a trend contrary to this. A noticeable trend is that employment has become more and more informal. It is no more a question of employment in the informal sector but also a trend of informalizing employment even in the formal sectors. The ILO estimates (ILO, 2014) that the informality rate in employment is as high as 90 per cent in some of the countries in South and South East Asia. It seems informal employment (in the informal and formal sectors) may remain the main stake for developing countries. The share of informal employment is more than 70 per cent in Sub-Saharan Africa, 60 per cent in South Asia, and remains at more than 50 per cent in Latin America. In India, the informal sector has remained at around 90 per cent. Jobs in the informal sector are characterized by low productivity and low wages, with the employees enjoying no social protection (World Bank, 2019).

The ‘future of work will be determined by the battle between automation and innovation’ (World Bank, 2019, p. 28). Automation reduces employment in the traditional sectors and especially those depending on routine work. The innovations, on the other hand, bring new tasks and jobs which require higher-order skills. In other words, it can be argued that the low- and middle-level skilled workers will benefit less from technological change because of higher susceptibility to automation. The technological change and innovations will benefit the more educated and that, too, in selected domains.

Jobless growth in India

The relationship between economic growth and employment has traditionally been positive in India. In the 1970s and 1980s, a 3–4 per cent growth in GDP contributed to around 2 per cent growth in employment. In this century, even 7 per cent growth in GDP could not contribute more than 1 per cent to employment growth (APU, 2018). In the 1980s an investment of one crore created around 90 jobs in the organized manufacturing sector, while the corresponding figure in 2010 had fallen to ten. Increasing capital intensity of production has been a feature of the manufacturing industry in India. As a result, the average annual employment elasticity of output in India has been declining, reaching 0.1 in 2016.

The Indian experience shows that high economic growth need not necessarily lead to high employment growth. It is not just the aggregate rate of economic growth but the pattern of that growth which is crucial. A moderate but sustainable rate of growth which involves employment generation and poverty reduction is preferable to a higher rate of growth that is based on greater income inequalities. Studies suggest that the virtuous circle of sustained Economic Growth–Human Development (EG/HD), as evidenced in literature where high growth leads to high per capita incomes and low unemployment, in turn leading to better quality employment and better education status leading to lesser inequalities and sustained equitable growth in a circular fashion reinforcing each other, eludes India (Khare, 2020a).

The growth in employment is experienced in the informal sector and the high-technology sectors. The informal or non-formal sector in India account for 50 per cent of the GDP and 92 per cent of the employment (Singh & Chhabra, 2017). As per the National Sample Survey 75th Round, 2019 informal employment also includes informal employment outside the informal sector, that is in formal sector enterprises and household sector (PLFS 2018–2019). Formal employment is only 8.0 per cent and is mostly in the public sector (60 per cent), occupied predominantly by males (79.5 per cent).

India experienced changes in the sectoral contribution to GDP and employment. Over a period of time the share of primary sector in GDP and employment declined and that of the manufacturing and service sectors increased. The sharp increase in the share of services in employment in India has occurred at a much lower level of per capita income than in the developed countries when they experienced a similar expansion (Ghosh & Chandrasekhar, 2007). Agriculture and allied activities still support 44 per cent of the labour force even though their share in GDP has fallen to 18.5 per cent. On the other hand, services account for more than 50 per cent of GDP but only 30 per cent of employment. While the share of the primary sector has been declining, that of the service sector is increasing (see Table 1.1).

Table 1.1 Sectoral share of employment

Sector	2004–2005	2011–2012	2017–2018
Agriculture	58.5%	48.9%	44.1%
Manufacturing	11.7%	12.6%	12.1%
Non-Manufacturing	6.4%	11.7%	12.7%
Service	23.4%	26.8%	31.0%

Source: Authors’ computations based on NAS, CSO, GOI (various years).

According to the NSS surveys, the sector contributing the maximum to employment generation is construction. Between 2004 and 2011, the share of manufacturing in total employment increased from 11.7 to 12.6 per cent, services from 23.4 to 26.8 per cent, and construction from 6.4 per cent to 11.7 per cent. Today, construction employs almost as many workers as the entire manufacturing sector—around 50 million. But unlike manufacturing, it affords seasonal and non-steady ...