INDIA’S AGEING WORKFORCE
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Context: India's population is predominantly youthful, with a significant number of people under 30 years old. The Prime Minister emphasized the potential, capabilities, and resolutions of India's youth, noting the favourable environment for growth and development. Despite a youthful population, an analysis of workforce data indicates that India's workforce is ageing rapidly.
- According to the Centre for Monitoring Indian Economy (CMIE), India's workforce, which comprises all the employed people in the country, has seen a decline in the share of young people and an increase in the share of older people in the past year. The CMIE defines youth as those belonging to ages above 15 years and below 25 years, but for this analysis, the workforce is divided into three groups:
- Those aged 15 years or more but less than 30 years.
- Those aged 30 years or more but less than 45 years.
- Those aged 45 years and older.
- The CMIE data shows that the share of the first group (a), which can be considered as the youth, has fallen from 25.5% in 2019-20 to 21.9% by December 2020.
- The share of the second group (b), which can be considered as the prime working age, has also fallen from 37.6% to 36.1%.
- The share of the third group (c), which can be considered as the older workers, has risen from 36.9% to 42%.
- The data shows that India's workforce is ageing, or becoming older on average. This is contrary to the popular perception that India is a young country with a large pool of potential workers.
Ageing of India's workforce is not uniform
- Urban workers: The share of urban workers aged 45 years and older has increased from 34.4% to 41.7%, while the share of urban workers aged below 30 years has decreased from 28.4% to 23.2%.
- Women workers: The share of women workers aged 45 years and older has increased from 32.8% to 40%, while the share of women workers aged below 30 years has decreased from 27.2% to 22.5%.
- Educated workers: The share of workers with graduate and post-graduate degrees aged 45 years and older has increased from 29.4% to 37%, while the share of workers with graduate and post-graduate degrees aged below 30 years has decreased from 31.3% to 24.8%.
- Salaried workers: The share of salaried workers aged 45 years and older has increased from 31.8% to 38.7%, while the share of salaried workers aged below 30 years has decreased from 29.7% to 23%.
These features indicate that the ageing of India's workforce is largely driven by higher job losses among those below the age of 40 years, especially in urban areas, among women, among educated and skilled workers, and formal sector employees.
Implications for the Country's Economic and Social Development
- Lower growth potential: A younger workforce is generally more productive, innovative and adaptable than an older workforce. A younger workforce also implies a higher labour force participation rate and a lower dependency ratio, which boosts economic growth. An ageing workforce, on the other hand, may reduce India's growth potential and competitiveness in the global market.
- Higher social security burden: An older workforce may require more expenditure on health care, pensions and other social security benefits, which may strain India's fiscal resources and crowd out public investment in other sectors. An ageing workforce may also increase the pressure on the existing social security schemes, such as the Employees' Provident Fund (EPF), Employees' State Insurance (ESI) and National Pension System (NPS), which are already facing challenges of coverage, adequacy and sustainability.
- Lower human capital development: An ageing workforce may imply a lower investment in education, skill development and training for the younger generation, which may hamper India's human capital development and future productivity. An ageing workforce may also reduce the opportunities for inter-generational learning and knowledge transfer within organisations and sectors.
- Healthcare and Well-being: Older workers often require more healthcare services, both preventive and curative. Employers may need to provide health insurance plans that cater to the specific needs of older employees, and workplace policies might need to accommodate flexible hours or ergonomic adjustments to support the well-being of ageing workers. Additionally, investing in workplace wellness programs can help maintain the health and productivity of older employees.
Steps Taken to address the challenges posed by an ageing workforce
- Skill Development Initiatives: Programs like "Skill India" are crucial in equipping the workforce with the skills needed to remain competitive in a rapidly evolving job market. By offering training and upskilling opportunities, the government helps workers transition to new roles and industries, reducing the risk of job displacement due to technological advancements.
- Policies for Older Workers: Encouraging companies to retain and utilize the expertise of older workers is essential for knowledge retention and transfer. Such policies might include flexible work arrangements, mentoring programs, and opportunities for phased retirement. This not only benefits the older employees but also creates a balanced workforce with diverse experience levels.
- Retirement Age Considerations: Extending the retirement age recognizes the valuable contributions that experienced workers can make. By keeping older employees in the workforce for a longer period, the economy can benefit from their skills and knowledge. However, this approach should be balanced with considerations for health, social security, and opportunities for younger generations.
- Promoting Skill Development: The Skill India Mission, Pradhan Mantri Kaushal Vikas Yojana (PMKVY), National Skill Development Corporation (NSDC), and National Apprenticeship Promotion Scheme (NAPS) are all initiatives aimed at improving the employability and skill level of India's youth. These programs help bridge the skills gap, increase job opportunities, and create a more adaptable workforce capable of meeting evolving industry demands.
- Expanding Social Security Coverage: Extending social security benefits to informal sector workers is a critical step in providing financial stability to a vulnerable segment of the workforce. Schemes like Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM), PM Laghu Vyapari Mandhan Pension Yojana (PMLVMY), and Pradhan Mantri Kisan Maan DhanYojana (PM-KMY) offer social security coverage, pension, and insurance benefits to workers who might not have had access to such protection previously.
- Encouraging Active Aging: Policies that promote active ageing allow older workers to remain engaged and productive for longer. Raising the retirement age, allowing partial withdrawal from retirement funds, and providing tax incentives for senior citizens encourage older individuals to continue working, contributing, and maintaining their financial independence.
These initiatives collectively contribute to building a more inclusive and adaptable workforce that can address the challenges posed by demographic shifts and technological advancements. By investing in both skill development and the well-being of workers across different age groups, the Indian government is taking proactive steps toward ensuring the country's economic growth and stability in the face of an ageing population.
Key challenges that India faces in dealing with an ageing workforce
- Reviving Job Creation: Reviving job creation is essential to absorb the young and educated workforce entering the job market. The government needs to focus on policies that promote economic growth, encourage entrepreneurship, and attract investments in high-skill and high-value sectors. Creating an environment conducive to business expansion and innovation can lead to more employment opportunities, especially in urban areas.
- Improving Job Quality: Ensuring decent wages, social security benefits, safety standards, and labour rights is crucial, particularly in the informal sector. By enhancing job quality, the government can retain skilled workers and discourage labour migration. This can also contribute to reducing the exploitation of workers and improving overall working conditions.
- Enhancing Lifelong Learning: Offering continuous education, skill upgrading, and retraining programs for older workers is necessary to enable them to adapt to technological advancements and changing market dynamics. Providing opportunities for reskilling and upskilling can enhance their employability and productivity, allowing them to remain active contributors to the workforce.
- Youth Unemployment: Addressing youth unemployment requires aligning education and training programs with industry demands. By fostering partnerships between educational institutions and businesses, young individuals can acquire skills that are relevant to the job market. Promoting entrepreneurship and creating a supportive ecosystem for startups can also generate job opportunities for the youth.
- Education Quality: Improving the quality of education and vocational training is crucial to ensure that the younger workforce is adequately prepared for the demands of the job market. This includes updating curricula to match industry requirements, integrating practical skills training, and promoting critical thinking and problem-solving abilities.
- Skill Mismatch: Bridging the gap between the skills possessed by job seekers and those required by employers is essential. The government can facilitate this by promoting industry-recognized certifications, internships, and apprenticeships, which provide practical experience and relevant skills that align with job roles.
- Pension and Social Security: The strain on pension systems due to an ageing workforce requires careful financial planning and management. Ensuring that pension systems are adequately funded and sustainable is crucial to providing retirees with the financial support they need after leaving the workforce.
Addressing these challenges requires a multi-faceted approach that involves collaboration between the government, private sector, educational institutions, and various stakeholders. By implementing targeted policies and programs, India can better prepare its workforce for the challenges posed by demographic changes while ensuring economic growth and stability
Strategies that India can adopt
- Fostering a Multi-Generational Workforce: Creating an inclusive work environment that values the contributions of both older and younger workers is essential. By promoting collaboration, mentorship, and shared learning between different age groups, organizations can harness the strengths of each generation and facilitate knowledge transfer.
- Strengthening Social Protection Systems: Enhancing social protection systems, including health insurance, long-term care, and income support, can provide a safety net for older workers. This requires a commitment to adequate funding, effective governance, and the involvement of various stakeholders to ensure these systems are sustainable and beneficial.
- Building an Age-Friendly Society: Developing an age-friendly society involves creating infrastructure, services, and policies that cater to the needs of older individuals. This includes accessible transportation, public spaces, healthcare facilities, and community engagement opportunities. Fostering active ageing promotes the well-being and continued engagement of older workers.
- Lifelong Learning: Encouraging continuous learning throughout one's career is vital to remain adaptable in a changing job landscape. Providing opportunities for upskilling, reskilling, and accessing new knowledge enables workers of all ages to contribute effectively to their respective fields.
- Flexible Work Arrangements: Offering flexible work arrangements, such as remote work or part-time options, can accommodate the needs of older workers who may require a different work-life balance. This promotes retention and utilizes their skills and experience.
- Health and Well-being: Prioritizing health and well-being initiatives in the workplace ensures that older workers can maintain their productivity and contribute effectively. This includes promoting physical health, mental well-being, and work-life balance.
- Multi-Generational Collaboration: Creating platforms for collaboration and knowledge exchange among different age groups fosters a learning culture and facilitates the transfer of expertise from experienced workers to younger ones.
- Inclusive Policies: Policies that consider the diverse needs of all age groups in the workforce contribute to a fair and balanced environment. Addressing issues like age discrimination, work conditions, and career advancement can create a more equitable workplace.
- Entrepreneurship Support: Encouraging older workers to explore entrepreneurial ventures or mentoring roles taps into their wealth of experience and expertise. This can contribute to economic growth and job creation.
- Investment in R&D: Investing in research and development leads to the creation of new industries and opportunities, absorbing the younger workforce and contributing to overall economic advancement.
- While India's youthful population offers immense potential, the challenge of an ageing workforce necessitates proactive strategies to ensure a balanced and productive workforce across all age groups. A holistic approach that addresses skill development, flexible work arrangements, and supportive policies is vital for addressing the implications of an ageing workforce and harnessing the demographic dividend effectively.
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Q. What is the impact of India's ageing workforce on its economy, and what challenges does the country face in managing this demographic shift? Furthermore, what strategies and approaches can be considered as a way forward to address these challenges and maximize the potential of both younger and older workers in the workforce?