By Amy Yang, Punit Gupta, Rupa Bohra
By now, it is common knowledge that India’s nationwide lockdown has disrupted businesses across all sectors. We, at TechnoServe, expect that states will enforce partial lockdowns to contain the re-emergence of community infection at different points of time. This ‘start-stop’ system in the Indian economy will continue until the pandemic is contained through mass vaccination or improved disease preparedness and response. The need for an interim start-stop economy will prevail for 18-24 months, and is expected to result in an economic slowdown through 2020-22.1
Graduates—who have historically struggled in India’s job market—will face heightened challenges during this period. Based on our projections, additional incumbent graduates will be subject to unexpected terminations or pay freezes, while those entering the workforce between 2020 and 2022 will see fewer job opportunities. However, before we dive into the details of COVID-19’s expected impact on graduates, it is important to understand the dynamics of India’s job market before the onset of COVID-19.
As of January 2020, we estimate that there are 120 million individuals with graduate degrees or above in India. Around 74 million of these graduates are employed, with approximately 40% in the formal sector and 60% in the informal sector. The government, private sector, and the education sector are the largest formal sector employers, with roughly 11 million, 10 million, and eight million graduates, respectively. Within the private sector, the largest employers are financial services and information technology-enabled services, which are estimated to have approximately three million and two million graduates each.
Although the total number of graduates has grown in recent years, higher education has not guaranteed better employment outcomes. In fact, in 2019, graduates faced an unemployment rate of 17%, which is more than double the national average. The situation is worse for female graduates, who faced a 35% unemployment rate between May and August 2019.
The high unemployment rates reveal a core mismatch between college training and skills sought by employers. Graduates often lack requisite hard and soft skills required in the workplace due to poor education standards, coursework that focuses too heavily on theoretical subjects, and limited internship opportunities. This mismatch has become more pronounced in recent years, as businesses rapidly shift towards digital solutions. Graduates without 21st-century skills, such as digital literacy, find it increasingly hard to secure a job.
These employment challenges are amplified among certain groups:
Graduates across all of these groups will grow over the next few years. As of 2018, there were 37.4 million students enrolled in graduate programs and beyond. From this figure, we estimate that 7.5 to 8 million new graduates will be added to the workforce annually between 2020 and 2022.2 Of these new graduates, approximately 48% will be female and 60% will be from rural institutions.3
The COVID-19-induced economic downturn will further hurt employment prospects for both incumbent and new graduates. To identify appropriate interventions, we conducted three-year projections to assess COVID-19’s impact on graduate employability.
“Graduates completing their degrees between 2020 and 2022 are expected to see 3.1 million fewer job openings as they enter the workforce.”
These forecasts were constructed using a combination of graduate employment data, historical benchmarks, first-hand interviews, and analyst reports on COVID-19’s expected impact across industries and sub-sectors. The forecasts provide directional insight into the magnitude of employment loss, as well as the groups of graduates who are most vulnerable to COVID-19-induced job reductions.
Overall, we project that up to 4.4 million incumbent graduates will lose their jobs in 2020, with only 50% re-hired by 2022. Moreover, graduates completing their degrees between 2020 and 2022 are expected to see 3.1 million fewer job openings as they enter the workforce.
On aggregate, graduates in medium or small businesses are projected to experience greater job reductions (1.1 million by the end of 2022) versus those in large businesses (0.9 million). This is driven by the lower capacity of smaller organisations to maintain steady payroll during the economic crisis. From a geographic perspective, Maharashtra, Uttar Pradesh, and Tamil Nadu are expected to drive 35% of the job reductions country-wide, as these are the key states where graduates work.
“Graduates in medium or small businesses are projected to experience greater job reductions versus those in large businesses.”
Additionally, male graduates are projected to see more than twice as many job eliminations as female graduates in absolute terms, due to the higher baseline count and the higher pre-COVID-19 employment rates of male graduates. Female graduates, however, will continue to face greater overall unemployment and workforce dropout rates.
Overall, we expect COVID-19 to heighten the importance of 21st-century skills, as digital literacy and higher-order communications skills become critical to support work-from-home models that are necessary under India’s start-stop economy.
We recommend a series of short-term and long-term interventions to mitigate COVID-19’s immediate impact on graduate employment and improve the job-readiness of students in the long run. These interventions require close collaboration with a variety of stakeholders, including the government, corporate recruiters, and development organisations working in skill development and employability.
In general, we suggest targeting the interventions below towards vulnerable groups. This includes the intersection of graduates who face greater overall employment challenges i.e., women graduates, rural graduates, graduates from marginalised backgrounds, and incumbent and new graduates who are projected to see higher levels of COVID-19-induced job reductions.
About the authors:
Amy Yang is a fellow at TechnoServe India. Prior to joining TechnoServe, she worked as a senior consultant at Oliver Wyman’s New York Office, and has experience leading the firm’s charity auction initiatives that generated more than USD 200,000 annually for underserved families in New York City. She is a graduate of Dartmouth College, USA.
Punit Gupta currently serves as the country director at TechnoServe India, where he provides strategic programme design guidance. He has more than 20 years of experience in leadership roles in the development and private sectors in India, Europe, and the US. Previously, Punit served as CEO of Intel Capital-funded ESPL Media, led private equity investments at Sabre Capital, and managed several strategy projects for large global corporations while at McKinsey & Company. Punit has an MBA from INSEAD, France.
Rupa Bohra is a senior practice lead at TechnoServe, where she leads TechnoServe India’s skill development and youth employability practice. Rupa has more than 19 years of experience across the financial services, technology, banking, and development sectors, and has managed multi-locations across India and the Asia-Pacific region. Prior to TechnoServe, Rupa headed corporate partnerships at Magic Bus India Foundation. She has also held leadership positions at organisations such as JP Morgan and Bank of America-Merrill Lynch, among others.