Long read: ‘For 1st Time In 4 Decades, Young Men Are Withdrawing From Education’

Rosa Abraham is an associate professor of economics at Azim Premji University and she is the star economist who has published the pathbreaking and much needed ‘State of Working India 2026’ report. This seminal piece of research traces four decades of data on youth employment and education in India and highlights how grim the current situation is. In this interview with IndiaSpend, Dr Abraham makes three inter-related points around employment, wages and education that everyone who invests in India or is interested in the country’s future should take note of.

Firstly, the wage gap between male vs female graduates has closed but this is a bittersweet victory which hides good news and bad news: “By 2023, a 20- to 29-year-old graduate woman was earning as much as her male peers. When we look closely at these trends, there is both cause for celebration as well as for worry.

Between 2017 and 2023, young women’s earnings increased at the rate of 1% per annum (after accounting for inflation). On the other hand, young men’s earnings have slowed down significantly, and in fact, between 2017 and 2023, average annual growth rate was -0.1% in real terms. Therefore the gender gap closing has come from a combination of both these two trends. Graduate women have seen an improvement in their labour market opportunities but not graduate men.”

In our latest book, “Breakpoint: The Crisis of the Middle Class & The Future of Work” we have shown using Income Tax data and using compensation data from Annual Reports of the Nifty50 companies that middle class wages have stagnated in nominal terms (fallen sharply in real terms) over the past decade. This is something that has NEVER happened in India before and the implications of this manifold including the second point made by Dr Abraham.

“The second surprising trend was the withdrawal of young men from education. This is the first time this is happening in the last 40 years that we have data for. Between 2017 and 2023, the share of young men in education has fallen from 38% to 34%. And, this is not just a poor-household phenomenon. It was seen across all households and more so among the upper-middle income households…

There were two possible explanations for this recent decline in graduate men’s earnings. One explanation was that perhaps, entry-level industries have changed for the newer cohort of young graduates. They are entering into industries that don’t pay very well. The other explanation was that industrial composition itself had not changed over time, but rather, the premiums on graduate education have gotten compressed across all industries.

We use a simple econometric technique to try and tease out which of these better explained these recent trends. What we found was that the fall in earnings did not come from a change in the composition of entry-level industries. Rather, average wage premiums to graduate education across all industries seem to have dampened, resulting in the fall in earnings.

Part of this could be a result of the fact that demand for graduates has not kept pace with the supply of graduates. Industry has created too few jobs, and the consequent ‘surplus’ of graduates have resulted in stagnation of earnings.”

Other than wage stagnation and the gradual withdrawal of young men from the job market, the third finding Dr Abraham highlights is the squeeze on middle class incomes (which is the central point of our book, “Breakpoint”). Quoting Dr Abraham:

“The share of young men withdrawing from education citing household income needs has jumped from 58% to 72% in six years….Across all household quartiles (the poorest, and the richest), the share of young men who cite budget constraints as a reason for withdrawal from education has increased between 2017 and 2023. While the poorest household saw one of the largest such increases, it was interesting to see that the third quartile of households also saw a similarly sharp increase. This was also a strange finding for us.

One possibility is that the stagnation of salaried earnings has possibly affected the middle/upper-middle income given that the former are households that are more likely to rely on salaried incomes. Consequently, the salary squeeze may be felt acutely among them. This could explain the increase even among the upper-middle income households…

the pathway into good jobs, after graduation, has become more tenuous in the last few years. In a separate study, with my co-author Surbhi Kesar, we find that there is no ladder into formal/salaried employment from informal employment. The only way to secure permanent salaried employment is to enter into the labour market as a salaried worker, i.e. your entry level job.

And as a result, you’ll find graduates waiting longer to get their ‘aspirational’ employment, which with age, mellows and perhaps recalibrates, and they eventually enter, but not necessarily into their aspired job.”

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