Assessing the Quality of Employment in India: Challenges and Solutions

India adds close to eight million people to its workforce every year, and on paper, that should be a story of opportunity. But ask a labour economist what actually happens to these job seekers, and the picture gets more complicated. Most of them do not walk into a stable, well-paying job with a fixed salary and provident fund. They end up self-employed, doing casual work, or running a small roadside enterprise that barely covers household expenses. This is the real story behind India’s employment numbers: it is not a shortage of jobs so much as a shortage of good jobs. Understanding why this gap exists, and what can close it, is central to understanding the Indian economy today.

What “quality of employment” actually means 🔗

Having a job and having a good job are not the same thing. Quality of employment looks beyond the headline unemployment rate to ask whether work pays a living wage, offers job security through a proper contract, comes with social protection such as provident fund or health insurance, and makes use of a worker’s actual skills and education. A street vendor, a daily-wage construction worker, and a software engineer with a corporate job are all technically “employed,” but their working lives could not be more different.

This is why economists increasingly track indicators like informal employment share, the incidence of casual and self-employment, and how well education matches the job a person actually does, rather than just counting how many people are working.

The scale of India’s job quality problem 🔗

A workforce dominated by informal work 🔗

The numbers here are striking. As of 2017-18, close to nine in ten workers in India were part of the informal sector, and this share has stayed persistently high through the years since, a pattern one analysis describes as a vicious cycle in which too many workers are producing too little output for the economy to absorb them productively. More recent survey data tells a similar story: the latest round of India’s unincorporated sector survey showed millions of new workers added to the informal economy, but the underlying pattern was one of survival-oriented activity rather than genuine business growth, with weak technology adoption, thin capital, and heavy reliance on unpaid family labour.

The Institute for Human Development and the International Labour Organization, in their joint India Employment Report, confirm that around 90 per cent of India’s workforce remains informally employed even when workers are technically inside registered or formal enterprises, and that wages for regular and casual workers alike have stagnated or declined in real terms over the past decade.

The working poor: employed, yet not out of poverty 🔗

This is where the idea of the “working poor” becomes important. Being employed in India does not guarantee an escape from poverty. When productivity is low, earnings stay low too, no matter how many hours someone works. Economist Amit Bhaduri’s analysis of India’s labour market captures this well: roughly 90 per cent of the workforce operates in the informal economy but generates less than half of national output, while a small formal workforce, barely a tenth of all workers, produces the majority of GDP at several times the productivity level. That gap between where people work and where value is created is the structural root of working poverty in India.

Why productivity stays so low 🔗

Low productivity in the informal sector is not accidental. Most informal enterprises are tiny, undercapitalised, and technologically stagnant. A large share of India’s small businesses employ fewer than ten people and lack access to formal credit, modern equipment, or scale economies. This keeps output per worker low, and because wages track productivity fairly closely, workers in this segment are locked into low earnings regardless of how hard they work. The petty informal sector, constrained by resources and low productivity, structurally cannot generate anything but poor-quality employment, even during periods when the broader economy is growing at a healthy pace.

The education and skill deficit behind poor job quality 🔗

If low productivity is the immediate cause of poor job quality, the deeper cause lies in the education and skill profile of India’s workforce. A large proportion of Indian workers never completed even a basic school education, which severely limits the kind of work they can access and how productive they can be in it.

According to labour ministry survey data analysed in a review of India’s workforce readiness, over a third of India’s workforce is illiterate, another quarter has only primary-level schooling, and the remaining share has middle school education or higher. The same data found that roughly four out of five workers in India possess no marketable, certifiable skill at all. The ILO-IHD employment report adds a youth-specific angle: as of the most recent survey round, 42 per cent of young workers had less than a secondary level of education, and only about 4 per cent had accessed any formal vocational training.

The vocational training shortfall 🔗

The contrast with other economies is sharp. India’s youth formal vocational training rate sits in the low single digits, whereas the comparable figures reported for South Korea, Japan, Germany, and the United Kingdom run into the double digits, often well above 60 per cent.

This is not simply a supply problem. It is also a demand-and-return problem: training programmes in India have historically struggled with poor industry linkages, weak certification value in the job market, and low awareness among students, which discourages families from investing time in vocational routes even when they are available.

Why this matters for India’s growth story 🔗

India’s GDP has grown steadily for decades, but employment growth has not kept pace, and the jobs that have been created have skewed toward low-productivity, informal work. This disconnect matters because India is in the middle of its demographic dividend window, a period when the working-age share of its population is unusually large. If this large young workforce ends up underemployed, working poor, or stuck outside the formal economy, the demographic dividend risks turning into a demographic burden rather than a growth engine. The pressure is compounded by simple arithmetic: the economy needs to create a very large number of productive, non-farm jobs every year just to absorb new entrants to the labour force, let alone improve conditions for those already working in low-quality jobs.

Bridging the gap: what needs to change 🔗

Strengthening school education 🔗

Since education level is the single strongest predictor of whether a person ends up in formal, decent work, improving foundational literacy and reducing school dropout rates, especially in states that lag behind, remains the first line of defence against poor job quality. Universal, quality schooling through at least the secondary level would shift a large share of India’s workforce out of the illiterate-or-primary-only category that currently traps millions in low-productivity work.

Scaling and improving vocational training 🔗

India’s government has already built a fairly extensive skilling infrastructure. The Skill India Mission, run through a network of thousands of Industrial Training Institutes and delivered through schemes such as the Pradhan Mantri Kaushal Vikas Yojana, aims to certify workers in market-relevant skills and has expanded participation, including among women, over the past decade. The National Education Policy 2020 has also pushed for integrating vocational exposure into mainstream schooling rather than treating it as a separate, lower-status track. The challenge now is less about designing new schemes and more about improving their reach, quality, and, crucially, their linkage to actual employer demand, so that a training certificate genuinely translates into a better-paying job.

Formalising the informal economy 🔗

Skill development alone cannot fix job quality if the underlying economy keeps generating informal, low-capital jobs. Complementary measures, such as easier access to credit for small enterprises, simplified compliance for micro-businesses transitioning toward formalisation, and stronger social security coverage for gig and informal workers, are necessary to raise the productivity ceiling that skilled workers can actually reach. Better skills combined with better-quality jobs to place those skills in is what ultimately raises both wages and productivity together.

What do you think? Given how closely job quality tracks education levels in India, should policy focus more heavily on improving school education itself, or on catching up the existing, already-working adult population through skilling programmes? And do you think India’s vocational training system can shed its “second-choice” image among students and parents, or does that require changes well beyond the education system itself?

References

1. https://eastasiaforum.org/2023/04/10/indias-workforce-woes/
2. https://www.policycircle.org/economy/india-informal-sector-jobs/
3. https://www.ilo.org/sites/default/files/2024-08/India%20Employment%20-%20web_8%20April.pdf
4. https://www.phenomenalworld.org/analysis/the-productivity-gap/
5. https://www.cambridge.org/core/journals/the-economic-and-labour-relations-review/article/decent-work-deficit-in-india-deterioration-and-determinants/82393B01D8968790E85C642AEC2FF0A2
6. https://www.businesstoday.in/opinion/columns/story/indias-education-sector-quality-education-indian-economy-human-capital-workforce-270467-2020-08-18
7. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2053796