Unemployment and mental health

 

In 2017–18, the Periodic Labour Force Survey (PLFS), a household employment–unemployment survey providing annual estimates on key labour market indicators, reported a 45-year high in India’s open unemployment rate of 6.1%.  What was particularly alarming was that this statistic was largely a consequence of high unemployment amongst the youth, i.e. those in the 15–29 age bracket. The aggregate youth unemployment rate stood at 17.8% and has remained at above 15% in the period 2017–2020.

 

While the youth unemployment rates observed over the last three years are considerably higher than those witnessed ever before, it is noteworthy that even in earlier employment–unemployment surveys, the unemployment rate amongst the youth has been significantly greater than all other age groups (Figure 1).

What is more, a disaggregated analysis of trends across the youth by education levels shows that unemployment rates rise with education levels. In 2018–19, before the pandemic struck, the unemployment rate amongst the educated youth (defined as those having secondary education and above) stood at 24.5% compared to 7% amongst those with primary education only.

 

Given these statistics, it is no surprise that the fact of highly-qualified candidates applying for low-level jobs was one of the drivers of the recent disturbances in U.P. and Bihar. Amongst the 12.5 million candidates, who had applied for the 35,281 job openings in ‘non-technical popular categories’ (typically considered low-end jobs), many had college degrees. In fact, some of the protesting applicants felt that the Railways were biased towards candidates with college degrees, shortlisting them even for jobs where the minimum requirement was lower. The widespread joblessness amongst the educated youth, therefore, created fears amongst the less educated that they would be crowded out of even low-end jobs.

The phenomenon of higher unemployment amongst the educated youth is not a recent phenomenon. A time series analysis of earlier employment–unemployment surveys shows that the educated youth have typically reported a higher unemployment rate than other age- and educational-groups.  As far back as1959, Professor K.N. Raj had pointed to the high open unemployment rate amongst the educated youth and cautioned that India’s future lay in the quality of jobs generated for its youth.   The challenge has dramatically exacerbated over time as the Indian economy has failed to generate adequate employment opportunities outside the agriculture sector for its rapidly rising young population, which has been becoming increasingly educated over time.

 

However, it is important to note that the clamour for Railways’ jobs is not just about the disillusionment amongst the youth due to their inability to find jobs. It is also about their inability to find ‘good jobs’ that offer them security of tenure, earning stability, access to social protection schemes and career advancement opportunities. In 2018, too,19 million candidates had applied for 63,000 vacancies with the Indian Railways.

 

Given the nature and quality of youth employment, this is unsurprising.  Using the most recent PLFS data for the pre-pandemic period (2018–19), it is observed that over one-fourth of employed youth were engaged as casual labour (Figure 2). One-fifth were working as unpaid family workers/helpers in their household enterprises – they were working full- or part-time but did not receive any regular salary or wages in return for the work performed. Only 10% were engaged in regular salaried work that provided access to social security benefit (referred to as regular formal employment).

 

Jobs which provided security of tenure were few and far between. Amongst the youth engaged in regular salaried work, over 78.3% had no written contract and a mere 11.3% had contracts for more than three years. In contrast, in the older cohort of 30–59 years, the quality of regular salaried work was comparatively better, with the share of regular salaried workers who had no written contracts was 65.6%, while the share of those who had contracts for more than three years was 26.5%.

 

Given the precarious nature of their job contracts, it is unsurprising that post-pandemic the youth have borne a disproportionate burden of the job losses. Many of them have found themselves pushed to work as unpaid family helpers with the share of this group of workers in 2019–20 rising to 25.3% – a 3.5 percentage point increase over the previous year.

 

Significantly, the two states, Bihar and U.P., where the violence was witnessed account for the largest share of youth in India – Bihar accounted for 7.9% and U.P. for 17.2%  of all 15–29 year olds in India. However, both states perform particularly poorly in terms of quality of employment. In Bihar, a mere 9.6% of the youth had regular salaried jobs. In U.P., the corresponding share was 15.2%. What is more, 58.4% and 65.7% of the youth in Bihar and U.P. respectively were self-employed, working predominantly in agriculture. The lack of adequate employment opportunities outside the agriculture sector, which is reflected in the low shares of employment in the industrial sector (particularly the manufacturing sector which accounts for only 4.75% of total employment  in Bihar and 11.1% in U.P.), have compelled many frustrated job-seekers to look for government jobs.

 

What is the connection between mental health and unemployment?

Unemployment – not having a job and actively seeking work – has consistently been found to have a negative impact on a range of health outcomes. There are several mechanisms by which unemployment could harm health: through stress and reduced self-esteem arising from the loss of the day-to-day structure of work or the stigma associated with unemployment as a result of financial hardship, insecurity and reduced future earnings potential, leaving people with stress (which damages health) from the social security system itself, which can have a negative impact on mental health through the claims process, work capability testing and job search conditions.

The health consequences of unemployment have been shown to increase with duration – for mental health and life satisfaction as well as for physical health. Pandemic restrictions have led to extended periods of reduced income, job loss or unemployment, and the long duration of these circumstances is a particular cause for concern.

Policymakers’ interest in unemployment, particularly for young people, partly stems from the long-term scarring effect that a period of unemployment can have on future earnings potential. However, research also suggests that there are long-term mental health scarring effects of youth unemployment (and multiple spells of unemployment) during the life course.