Lifelong learning is the bridge between today’s jobs and tomorrow’s opportunities, added ILO Director-General Gilbert F. Houngbo. File image used for representation only.
| Photo Credit: Getty Images/iStockphoto

A major reason for the fall in labour income is artificial intelligence, says an ILO report.
| Photo Credit: Getty Images/iStockphoto

Inequality is on the rise as the share of labour income has stagnated worldwide and a large share of youth remain out of employment, education, or training, according to the International Labour Organisation’s (ILO) World Employment and Social Outlook: September 2024 Update, released in Geneva on Wednesday (September 4, 2024). A major reason for this fall in labour income, according to the report, is artificial intelligence or AI.

The ILO analysed the impact of technological innovations over the last two decades across 36 countries and said that, while these innovations have produced persistent increases in labour productivity and output, they can also reduce the labour income share. “This is consistent with automation-based technological innovations driving the aggregate effects,” the ILO said, warning that the absence of a stronger policy response across a wide range of relevant domains could push the labour income share still further down.

To mitigate the potential adverse impacts on inequality, the benefits of technological progress should be widely distributed, it said.

COVID worsened inequalities

The report also indicated slow progress on key Sustainable Development Goals (SDGs) as their 2030 deadline approaches. The study revealed that the global labour income share, which represents the portion of total income earned by workers, fell by 0.6 percentage points from 2019 to 2022 and has since remained flat, compounding a long-running downward trend. “If the share had remained at the same level as in 2004, labour income would be larger by $2.4 trillion in 2024 alone,” the report said. 

It added that the COVID-19 pandemic was a key driver of this decline, with nearly 40% of the reduction in the labour income share occurring during the pandemic years of 2020 to 2022. “The crisis exacerbated existing inequalities, particularly as capital income continues to concentrate among the wealthiest, undermining progress towards SDG 10, which aims to reduce inequality within and among countries,” it said. 

“Countries must take action to counter the risk of declining labour income share. We need policies that promote an equitable distribution of economic benefits, including freedom of association, collective bargaining and effective labour administration, to achieve inclusive growth, and build a path to sustainable development for all,” said Celeste Drake, ILO Deputy Director-General, releasing the report. 

While India’s large young workforce is a demographic dividend, an ILO report noted that they don’t appear to have the skills to succeed. File
| Photo Credit: The Hindu

India’s youth account for almost 83% of the unemployed workforce and the share of youngsters with secondary or higher education in the total unemployed youth has almost doubled from 35.2% in 2000 to 65.7% in 2022, as per the India Employment Report 2024 released by the International Labour Organisation (ILO) and the Institute of Human Development (IHD) here on Tuesday. The youth employment and underemployment increased between 2000 and 2019 but declined during the pandemic years, the study, released by Chief Economic Adviser V. Anantha Nageswaran, said, adding that educated youths have experienced much higher levels of unemployment in the country during the period.

Also read | India’s economic prospects good in the short term, says Chief Economic Advisor Anantha Nageswaran

The Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR) and the Unemployment Rate (UR) showed a long-term deterioration between 2000 and 2018, the study said but witnessed an improvement after 2019. The study added that the improvement coincides with periods of economic distress, both pre and post-COVID-19 with the exception of two peak COVID-19 quarters. “This improvement needs to be interpreted cautiously as jobs generated in the slowdown period raise questions about the drivers of these changes,” the authors of the report said during the release.

Paradoxical improvements

The report said India’s job story over the past two decades had seen some paradoxical improvements in labour market indicators, while the basic long-term feature of the employment situation in the country continued to be insufficient growth of the non-farm sectors and the ability of these sectors to absorb workers from agriculture. “This is notwithstanding the fact that non-farm employment grew at a higher rate than farm employment over the different periods prior to 2018,” the report said. Labour from agriculture was mainly absorbed by the construction and services sectors.

Also read: India’s suboptimal use of its labour power

Also, almost 90% of workers remain engaged in informal work, while the share of regular work, which steadily increased after 2000, declined after 2018. There are widespread livelihood insecurities, the report added, with only a small percentage being covered with social protection measures, precisely in the non-agriculture, organised sector. “Worse, there has been a rise in contractualisation, with only a small percentage of regular workers covered by long-term contracts,” the report said. While India’s large young workforce is a demographic dividend, the report noted that they don’t appear to have the skills to deliver — with 75% of youth unable to send emails with attachments, 60% unable to copy and paste files, and 90% unable to put a mathematical formula into a spreadsheet.

Widening gender gap

The lack of quality employment opportunities is reflected in the high level of joblessness among young people, especially among those who have achieved higher education, the report noted. “Many highly educated young people are unwilling to take on low-paying, insecure jobs that are currently available and would rather wait in the hopes of securing better employment in the future,” the study said. The country is also facing the challenge of a substantial gender gap in the labour market, with low rates of female labour force participation. “The unemployment challenge among young women, especially those who are highly educated, is enormous,” the report said.

Also read: How big is the gender gap in earnings?

Throwing light on the growing social inequalities, the report said despite affirmative action and targeted policies, the Scheduled Castes and Scheduled Tribes still lag in terms of access to better jobs. “Scheduled Castes and Scheduled Tribes have greater participation in work due to economic necessity but engaged more in low-paid temporary casual wage work and informal employment,” it said. “Despite improvement in educational attainment among all groups, the hierarchy within social groups persists,” the report added.