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Economic Change and Restructuring

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25-07-2023

Why is the size of discouraged labour force increasing in India?

Authors: Jajati Keshari Parida, Shiba Shankar Pattayat, Sher Verick

Published in: Economic Change and Restructuring | Issue 5/2023

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Abstract

The Indian economy is currently passing through a critical phase of economic development as its structural transformation in employment has stalled, whilst both the youth unemployment rate and the number of youths “Not in Employment, Education, and Training (NEET)” have increased to an unprecedentedly high level. In the context in which the share of the youth population is continuing to rise despite the declining fertility rate to below the replacement rate, increased educated youth unemployment has caused an upsurge in the Discouraged Labour Force (DLF). This paper explores the trends, composition, and determinants of rising DLF in India using national level employment-unemployment surveys and macro-level panel data. Based on Multinomial logit and System GMM regression results, it is argued that policies aiming to enhance human capabilities through an improved base of technical education and the promotion of industry are necessary to enhance the growth of quality jobs in order to combat the problem of rising educated youth unemployment and DLF. Moreover, these measures could help in the process of harnessing the demographic dividend in India through an increased level of labour productivity in the long run.

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This advantage is likely to be over by 2040 and the Indian economy will become an ageing society forever.

As per the National Youth Policy (2014), Ministry of Youth Affairs and Sports, Government of India, the youth population consists of persons belonging to the age group 15 to 29 years.

Although the youth completed education and training but were neither found in jobs nor searched for jobs (actively or passively), this could be partly called the DLF. We classified them as out of labour force. Persons belonging to this category were excluded from our sample to avoid confusion.

These workers consist of women and young male members of the family. They are not the principal breadwinners of the family, but they support and supplement the family income during times of crisis.

Population projection done by the Ministry of Health and Family Welfare, Govt. of India. Report of the technical group on population projections, November, 2019.

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Title: Why is the size of discouraged labour force increasing in India?
Authors: Jajati Keshari Parida
Shiba Shankar Pattayat
Sher Verick
Publication date: 25-07-2023
Publisher: Springer US
Published in: Economic Change and Restructuring / Issue 5/2023
Print ISSN: 1573-9414
Electronic ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-023-09538-0

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