Gen Z is protesting. Here is the economics behind the rage

Ek chhoti si naukri ka talabgar hoon main
– Shailendra, Naukri (1954)

Maine kuch ghaas nahi kaati kiya BA pass
– Shailendra, Naukri (1954)

BA kiya hai, MA kiya,
lagta hai woh bhi aiwen kiya
– Gulzar, Mere Apne (1971)

Papa kehte the bada naam karega
– Majrooh Sultanpuri, Qayamat Se Qayamat Tak (1988)

Chakrita aami pae gachhi Bela shuncho
– Anjan Dutt, Bela Bose (1994)

It was October 2005 and I had only recently landed in Mumbai and in journalism.

One of my first assignments was to cover a press conference where a mutual fund was launching a new scheme to invest in Indian stocks. 

And that was the first time I heard the terms – the India growth story and India’s demographic dividend. The mutual fund was making a case for investing in Indian stocks. 

The demographic dividend is a brief period of a few decades in a country’s history where the working age population is growing at a faster pace than the overall population.

When the youth entering the workforce get jobs, they earn money and spend it. This spending creates more jobs and propels the whole economy at a fast pace of growth, pulling a large number of people out of poverty. The history of economic development has many such examples.

What also happens is that the share of children and elderly shrink with respect to the working age population. With fewer dependents per worker, households (and the country) save a higher share of income.

That pool of savings gets invested in physical capital, infrastructure and education – this along with consumer spending leads to faster growth over decades.  

In simple terms this was supposed to be the India growth story. In slightly complicated terms, this was supposed to be India’s demographic dividend. 

Of course, the demographic dividend is a necessary but not a sufficient condition – meaning it works as long as the youth entering the workforce find jobs in line with their education and skills.

In 2005, India was a very young nation with a median age of just over 22. Put simply, if you lined up every Indian from the youngest to the oldest, the age of the person standing exactly in the middle would be the median age. Half the population would be younger than that person and the other half older.

In 2026, India is still a young nation – though not a very young one – with the median age now being just over 29.

And in the last two decades – the so-called demographic dividend – hasn’t really played out as it was projected and expected to. 

And the physical embodiment of that demographic dividend – the country’s youth – the Gen Z – is now out on the streets. Of course, there is an immediate reason for the same as well – the continuous leaking of question papers of many different exams over the years.

In simple English, enough jobs haven’t been created for the Indian youth who are better educated now than they were in the past – though not necessarily better skilled for the jobs that are on offer. Indeed, the opportunities for a better economic future have shrunk.

The problem is not that India failed to educate its young people, but something more complicated than that.

So what happened?

Over the last four decades, educational attainment among young Indians has risen sharply.

According to the State of Working India 2026 report published by the Centre for Sustainable Employment at Azim Premji University, among those aged 15-19, the proportion of young men in education has increased from 49 percent in 1983-84 to 73 percent in 2023-24. 

Among young women, it has risen from 38 percent to 68 percent.

The availability of colleges has improved from 29 colleges per lakh youth population aged 20–24 in 2010 to 45 in 2021. It needs to be said here that the southern states have done much better on this front. 

As per the report around 367 million Indians are between the ages of 15 and 29 – that’s India’s youth population – which is around a third of the country’s working age population. 

If we leave out those studying, roughly 263 million constitute the country's potential young workforce. This is the demographic dividend – it’s reasonably well educated, and given that it lives in the digital age, it is also well-connected and highly aspirational. 

Unlike their parents, many in the Gen Z – who are digitally better connected – know what a good life entails.

The demographic dividend was always based on one critical assumption – that the economy would create enough productive jobs for this expanding workforce. If we look beyond basic government data, that assumption has not turned out to be true. 

According to the government's Periodic Labour Force Survey (PLFS), the unemployment rate among those aged 15-29 or the youth unemployment rate has fallen from 17.8 percent in 2017-18 to 10.2 percent in 2023-24.

The fact that this rate fell to 12.9 percent in 2020-21 and 12.4 percent in 2021-22 – the pandemic years – doesn’t pass the basic smell test. (It was at 9.9 percent as per the latest instalment of the survey which is for the period January to December 2025.) 

But this data hides more than it reveals.

In a rich country, someone who loses a job can often afford to remain unemployed for a while and continue looking for suitable work. In India, most people do not have that luxury. They need an income to survive. 

As a result, many young people who fail to find salaried jobs end up creating work for themselves – running a small shop, driving an auto or cab, delivering food, freelancing in some way, working on their own small farm, or helping in a family business. 

Statistically, they are counted as employed, even if they earn very little or work only because they have no better option. Then there is also the problem of underemployment – many people who look for work throughout the year do not find it. Many are employed on and off.

Also, there are people who get disheartened during their job search, stop looking for a job and drop out of the labour force, and are thus not counted as unemployed.

To be counted as part of the labour force, a person must either be employed or be unemployed but available for work and actively looking for a job.

This helps explain why falling unemployment does not necessarily mean that the labour market is healthy. The real issue is not whether people are working, but whether they are working in productive jobs.

The State of Working India 2026 report notes that much of the recent increase in employment has come from self-employment and agriculture, while earnings from self-employment have largely stagnated.

As the report points out: “The number of women in own-account self-employment has seen a nearly four-fold increase since 2017. Self-employment earnings among women and salaried earnings (for men and women) have largely stagnated.” 

A 2025 report titled India’s Employment Prospects: Pathways to Jobs and published by the National Council for Applied Economic Research (NCAER) points out something similar: “Recent increases in employment are primarily due to the rise in self-employment… highlighting the need for creating not just jobs but ‘good’ jobs.”

In effect, many young Indians are becoming entrepreneurs not because they spotted a lucrative business opportunity, but because they could not find jobs. 

Self-employment, in such cases, becomes less a sign of enterprise than a coping mechanism. Many such entrepreneurs are what economists Abhijit Banerjee and Esther Duflo refer to as reluctant entrepreneurs. (At the risk of deviation, it’s like the MBA college I went to. In order to show 100 percent placement, it categorised those who did not get jobs as entrepreneurs.)

Another point needs to be made here. As Chaitra Purushotham of Goldman Sachs Research put it in a June 2025 research note titled The Economic Opportunity of India’s Women Workers: “Official Indian labour statistics show a higher participation rate, possibly because they count unpaid women workers who assist in household and other non-farm activities.”

So, a major reason for the unemployment rate coming down is the way it’s calculated.

Further, unlike the experience of most countries, where economic development typically shifts workers from self-employment to regular salaried jobs, India has been moving in the opposite direction.

The share of self-employed workers has risen, while the proportion of both casual labourers and regular salaried employees has declined. This trend has been particularly pronounced among women. As the NCAER report points out: “Self-employment is the fall-back option for the working-age population.”

So the official rate of unemployment may be falling, but it does little to fulfil the promise of the demographic dividend, which was built on the expectation that a growing workforce would move into increasingly productive and better-paying jobs.

In recent years there has been a lot of talk about the gig economy creating jobs. It is often marketed as “flexibility and entrepreneurship,” but functionally acts as disguised underemployment without social security or upward mobility. Of course, something is better than nothing, but then it doesn’t stop at just that.

Also, too many companies are competing in the gig delivery economy. Quite a few will ultimately shut down or shrink – which means the gig economy jobs will also shrink. That’s something that needs to be kept in mind. 

Further, with their discount models – where goods and services are sold at prices which make no economic or business sense – they will continue to destroy the smaller businesses competing in the same space. 

(I have written extensively on this issue. You can read it here and here.)

And there’s more… 

According to the State of Working India 2026 between 2021-22 and 2023-24, India added around 83 million jobs. On paper, that looks like an extraordinary achievement. But nearly 40 million of these jobs were in agriculture.

In fact, the government’s Periodic Labour Force Survey also bears this out. In 2018-19, around 42.5 percent of the workforce was employed in agriculture. This shot up to 46.1 percent in 2023-24. (As per the latest survey for the period January to December 2025, it has fallen to 43 percent.)

Agriculture has huge disguised unemployment. Disguised unemployment essentially means that there are way too many people trying to make a living out of agriculture.

On the face of it, they seem employed. Nevertheless, their employment is not wholly productive, given that agricultural production would not suffer even if some of these employed people stopped working.

Also, countries cashing in on the demographic dividend move people away from low-productive agriculture to other more productive sectors – something which hasn’t really happened in India.

In 2018-19, on average, 425 out of every 1,000 individuals in the workforce worked in agriculture. In 2025, this figure stood at 430. 

The graduates 

Between 2004-05 and 2023, around five million graduates entered the labour market every year. But only about 2.8 million found employment annually. 

Graduate unemployment among those aged 15-25 remains close to 40 percent, while among graduates aged 25-29 it is around 20 percent. High graduate unemployment is not a recent phenomenon. It has remained the norm over the years. 

Even those who eventually find work often struggle to obtain the jobs they had prepared for. Among unemployed graduates, only about 49 percent find any employment within a year. Just 6.7 percent obtain a permanent salaried job. These figures for a 12th standard pass are 52 percent and 4 percent, respectively.

The trouble is that even salaried jobs aren’t a safe space anymore. In fact, the NCAER report points out that the earnings of regular salaried workers remained largely constant between 2017–18 and 2023–24. But even this modest picture hides an important difference: while men saw a small increase in earnings, women ended up earning less than before.

This is something clearly happening in India’s information technology sector – which used to be a huge job creator – where starting salaries have barely budged over the years. 

The NCAER report also points out that between 2017-18 and 2023-24, India's working-age population has increased by nearly 90 million. Over the same period, the economy generated only around 60 million jobs, leaving a gap of roughly five million jobs a year.

And even among those who do find work, only one in four enters the formal wage economy. Most end up in informal services, self-employment or low-productivity agriculture. As the report points out: “These trends point to an employment structure that is increasingly fragmented and unable to offer quality work opportunities at scale.”

Why is the economy failing to create these jobs? Because India’s growth story has made a wrong turn.

Unlike East Asian economies that built their demographic fortunes on labour-intensive manufacturing, India jumped straight from low-productivity farming to high-skilled services.

At the root of this crisis is a fundamental structural flaw in India’s economic growth engine. Historically, developing nations cash in on their demographic dividend by shifting millions of low-to-medium skilled workers from agriculture into labour-intensive manufacturing – think textiles, garments, toys and footwear.

India, however, skipped this crucial phase, leaping straight from agriculture into high-skill, capital-intensive services like IT and finance. While this model generates impressive GDP figures, services simply cannot absorb hundreds of millions of young job seekers given that India’s comparative advantage has been the abundance of low-skilled labour.

The result is a growth model where economic expansion happens without creating the sheer volume of mass-employment opportunities the country needs.

It is a capital-intensive growth model – great for generating headlines and stock market highs, but terrible for creating mass employment. Capital-intensive growth is economic growth driven mainly by machines, technology and equipment rather than workers, creating fewer jobs for each rupee invested.

This is a growth model which keeps giving orgasms to the men – primarily men – in the business of managing other people’s money – but it doesn’t cash in on India’s demographic dividend.

Further, a service-led economy simply lacks the capacity to absorb tens of millions of low- and medium-skilled youth entering the workforce every year.

Also, what hasn’t helped is the fact that the concentration of big businesses in the Indian economy has grown over the years. The economic opportunities have been shared amongst a few major business groups.

Sarkari Naukri 

Getting back to the issue of those with degrees finding it difficult to find jobs, The India Employment Report 2024, jointly published by the International Labour Organization (ILO) and the Institute for Human Development, arrives at a similar conclusion.

As the report pointed out: “The share of educated youths among all unemployed people also increased, from 54.2 percent in 2000 to 65.7 percent in 2022.”

India's employment problem is therefore no longer one of an uneducated workforce. It is increasingly one of educated young people unable to find jobs that match their qualifications and aspirations.

This helps explain another striking feature of India's labour market – the extraordinary importance attached to government jobs. Secure public-sector jobs offer something that has become increasingly scarce in the wider economy: stable employment, predictable salaries, career progression and social prestige.

As Abhijit Banerjee and Esther Duflo write in Good Economics for Hard Times: “There are a small fraction of jobs that are much more attractive than the rest, for the reasons having nothing to do with productivity. The best example are government jobs… In the poorest countries, public-sector workers earn more than double the average wage in the private sector. And this is not counting generous health and pension benefits.” 

Millions of young Indians therefore spend years preparing for competitive examinations. Families spend substantial sums on coaching classes, accommodation and study material. Many young people postpone employment, marriage and financial independence while chasing a government job.

Given this, it hardly helps that question papers for government job recruitment exams and college entrance tests keep getting leaked. 

A recent piece in The Indian Express pointed out: “Reports suggest that over the past decade, test papers have been leaked in over 150 different competitive examinations held in India.”

Also, typically the examination centres for many such exams aren’t in the applicant’s hometown – something that reminds me of my only visit to Hazaribagh and Muzaffarpur in Bihar in the mid 1990s. (Hazaribagh is now in Jharkhand.)

Given this, a retest doesn’t just mean spending more time preparing for the exam; it also means extra spending.

The spree of paper leaks stems directly from institutional decay and the widespread outsourcing of recruitment exams. In an effort to manage massive applicant volumes on tight budgets, government bodies have offloaded exam administration to private, third-party vendors.

Lacking strict regulatory oversight and state capacity, this privatised machinery has proven vulnerable to corruption – leaving desperate aspirants to pay the price for systemic neglect.

Further, while chasing a government job – which most are unlikely to get – the waiting gets reported not as unemployment but as being a ‘student’.  This also leads to the unemployment figure going down.

As mentioned earlier, graduate unemployment among those aged 15-25 remains close to 40 percent, while among graduates aged 25-29 it is around 20 percent. What’s happening here? The government exams allow a certain number of attempts and can usually be attempted until a certain age. The number of attempts drops as an individual ages and crosses the age of 25, and approaches the age of 29.

As they run out of attempts, such individuals are forced to look for a low-end private job.

All this explains why leaked examination papers provoke such an intense reaction. 

Finally, the trouble is that both the central and state governments are financially stretched by rising salary and pension bills, as well as the growing cash handouts they now dispense to win elections. This has made it difficult for them to keep recruiting more and more people. 

And there’s still more…

The Indian Express piece referred to earlier points out that the education ministry’s share of the Union Budget has nearly halved in the 12-year period from 2013-14 to 2025-26, whereas the share allocated to the Ministry of Road Transport and Highways has nearly trebled. The Narendra Modi government was first elected to power in May 2014. 

This raises several points.

First, lesser spending by the government on education has some impact on the quality of education being delivered. That can be clearly seen in the explosion of coaching centres over the last decade.

The coaching economy is a huge shadow industry that profits directly off this institutional failure and youth desperation, extracting money from middle/lower-income families.

Of course, that’s how any market operates. Someone somewhere sees an opportunity that people may be ready to pay for and starts a business.

The trouble is that the government has been encouraging this rentier economy in its own way.

What this also means is that students, in order to be able to compete, need to go to coaching centres. This requires money, immediately making things easier for those who belong to financially better placed households.

Second, this is not to say that building roads and highways isn't important – not at all. But for a government obsessed with controlling the narrative, it's far easier to cut reels showcasing shiny new highways and other physical infrastructure than to make reels about allocating a larger share of the Union Budget to education.

Third, while more of India’s youth are getting educated, the skills that are in demand for jobs on offer are not being developed enough. As the NCAER report points out: “Despite a fall in the share of untrained workers between 2018 and 2024, as of 2024, only 4 percent of workers had received formal skill or vocational training.”

This lack of skill also explains why lakhs apply for a few hundred openings in government jobs, including many instances where engineers, MBAs and PhDs apply for jobs of peons. 

Consider the Madhya Pradesh Police Constable Recruitment Exam 2025. It attracted nearly 9.5 lakh applicants for just 7,500 posts, even though the minimum qualification was only Class 10.

Among the applicants were 52,000 postgraduates, 33,000 graduates, 12,000 engineers and around 50 PhD holders – a stark reminder that India's problem is not just unemployment, but the shortage of good jobs.

And this is just one random exam which I googled. Such news items have been regularly appearing in the media for nearly a decade and a half now. 

It also explains why at the same time many corporations struggle to find individuals with the right skillset for the jobs they have to offer. 

And finally…

Indeed, the immediate trigger for the protests may be leaked examination papers, but the anger has been building for much longer. It reflects the widening gap between what India's demographic dividend promised and what the government has delivered.

The promised acche din never arrived. They have now been postponed to 2047. 

Twenty-one years ago, when I first heard the phrase “India's demographic dividend,” it was like a breath of fresh air. The idea – once I had heard it – seemed almost self-evident. It was a story of hope. It was a story of a bright economic future that awaited this country. 

A young population would study, find productive jobs, earn incomes, spend, save and drive economic growth. India has fulfilled the first part of that promise. It has created a generation that is more educated and more ambitious than any before it.

What it has not created is enough good jobs for that generation. Until that changes, every leaked examination paper, every delayed recruitment process and every student protest will be about much more than an examination. They will be reminders of a country and its government that are yet to create the promised dividend.

To conclude, Gen Z is out on the streets protesting. Millennials are religiously paying their EMIs, hoping that their SIPs will make them rich by the time Amrit Kaal arrives in 2047, while simultaneously convincing themselves that AI won't make them irrelevant. And Boomers and their parents are busy forwarding WhatsApp messages and watching Instagram Reels, and asking but what about that, while shouting from the rooftops that all is well in this great land of ours.

All in all, it doesn't look good.

In the end, it all boils down to what the great Majrooh Sultanpuri wrote in 1988: Papa Kehte Hain Bada Naam Karega. For far too many young Indians, that dream is beginning to fade. They can no longer envisage a reasonable economic future for themselves. 

Meanwhile, I am still writing and talking about the demographic dividend – or rather, the lack of it. Such is life…

Vivek Kaul is an economic commentator and a writer.

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