In short
Asia’s youth job crisis and how a soft labor market affects consumer demand, social stability, and long-term growth.
Guest backgrounds
No guests; host is Chetan Ahya, Morgan Stanley’s Chief Asia Economist.
Key claims
Asia youth unemployment averages 16% vs 10.5% in the U.S.; youth unemployment is 2–3x headline rates. China, India, and Indonesia face the worst youth unemployment, near double other Asian economies.
Notable examples
China urban youth (16–24) unemployment rose since 2019 due to labor-demand/supply mismatch: university graduates up 40% to ~12 million while economy-wide employment fell 20 million; entry wages sluggish; automation and weaker services growth limit opportunities. India unemployment 17.6% with underemployment: primary sector jobs rose 50 million post-COVID, despite <20% GDP but ~40% employment. Indonesia youth unemployment is second-highest; ~60% jobs informal and often below minimum wage, tied to falling investment-to-GDP. Way forward: China shift toward consumption/services; India/Indonesia boost investment—India needs stronger industrial/export growth; if reforms lag, consider higher social welfare spending.
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Chapters
Tap a time to open that second in VOThe Challenge for Asia's Youth
0:20 to 1:00
An overview of the rising youth unemployment rates in Asia compared to other regions.
“Across Asia, a concerning trend is emerging.”
Youth Unemployment in China
1:00 to 1:46
A detailed look at the rising youth unemployment rates in China and its drivers.
“Youth unemployment rates for these three economies are running close to double compared to the other economies in Asia.”
The Situation in India
1:46 to 2:55
Exploring India's high unemployment rates and the issue of underemployment.
“Employment creation has been subdued, and on top of it, India also faces another issue, underemployment.”
Challenges Faced by Indonesia
2:55 to 3:47
Discussing Indonesia's youth unemployment and the role of informal sector jobs.
“And to address the issue of underemployment, the required run rate in GDP growth must be even higher at 12%.”
Path Forward for Asia's Youth Employment
3:47 to 4:03
Strategies for addressing youth unemployment and improving job opportunities in Asia.
“If reforms fall short, policymakers may need to fall back on increasing social welfare spending to manage social stability risks.”
Transcript
Automatic transcript. May contain errors.0:00Chetan Ahya:Welcome to Thoughts on the Market. I'm Chetan Ahya, Morgan Stanley's Chief Asia Economist. Today, Asia's young workforce is facing a significant challenge. How a soft labor market will shape everything from consumer demand to social stability and long-term growth. It's Tuesday, October 14 at 2 p.m. in Hong Kong. Across Asia, a concerning trend is emerging. The region's younger generations face mounting challenges in the job market. Asia's youth unemployment averages 16%, which is much higher than the U.S. rate of 10.5%. Youth unemployment rates are running two to three times higher than the headline unemployment rates.
0:46Chetan Ahya:The underlying situation is even weaker than what is represented by unemployment rate. And within Asia, the challenge is most acute in China, India, and Indonesia, the three most populist economies. Youth unemployment rates for these three economies are running close to double compared to the other economies in Asia. Now let's take a closer look at China. The urban youth unemployment rate, i.e. for 16 to 24-year-olds, has steadily increased since 2019. What's driving this rise in unemployment? a mismatch in labor demand and supply. The number of university graduates surged 40 % over the last five years to close to 12 million.
1:32Chetan Ahya:But economy-wide employment has declined by 20 million over the same period. Entry-level wages are sluggish, and automation plus subdued services growth mean fewer opportunities for newer entrants. Turning to India, their unemployment rate is the highest in the region at 17.6%. Employment creation has been subdued, and on top of it, India also faces another issue, underemployment. Post-COVID, primary sector, i.e. farming and mining, employment rose by 50 million, reaching a 17-year high. Note that these jobs are relatively low-productivity jobs, And this is explained by the fact that primary sector accounts for less than 20 % of GDP, but it employs about 40 % of the workforce.
2:24Chetan Ahya:That's a sign of COVID-induced underemployment. How fast must growth be to tackle the unemployment challenge? In our base case, India's GDP will grow at an average of 6.5 % over the coming decade. And this will mean that India will be one of the fastest-growing economies globally. But this pace of growth will not be sufficient to generate enough jobs. To keep unemployment rates stable, India needs an average growth of 7.5%. And to address the issue of underemployment, the required run rate in GDP growth must be even higher at 12%. Shifting to Indonesia, its youth unemployment rate is the second highest in the region.
3:10Chetan Ahya:Moreover, close to 60 % of jobs are in the informal sector. And many of these jobs pay below minimum wage. Similar to India, both these trends signal underemployment. The key reason behind this challenge is weak investment growth. Indonesia's investment to GDP ratio has dropped meaningfully over the last five years. So what's the way forward? For China, shifting towards consumption and services could reduce labor market mismatches. And for India and Indonesia, boosting investment is key. India in particular needs much stronger growth in its industrial and export sectors. If reforms fall short, policymakers may need to fall back on increasing social welfare spending to manage social stability risks.
4:03Chetan Ahya:thanks for listening if you enjoy the show please leave us a review wherever you listen and share thoughts on the market with a friend or a colleague today the preceding content is informational only and based on information available when created it is not an offer or solicitation nor is it tax or legal advice it does not consider your financial circumstances and objectives and may not be suitable for you
From the publisher
Our Chief Asia Economist Chetan Ahya discusses how youth unemployment will impact future growth and stability across China, India, and Indonesia.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Chetan Ahya, Morgan Stanley’s Chief Asia Economist.
Today – Asia’s young workforce is facing a significant challenge. How a soft labor market will shape everything from consumer demand to social stability and long-term growth.
It’s Tuesday, October 14th, at 2pm in Hong Kong.
Across Asia, a concerning trend is emerging. The region’s younger generations face mounting challenges in the job market.
Asia’s youth unemployment averages 16 percent, which is much higher than the U.S. rate of 10.5 percent. Youth unemployment rates are running two to three times higher than headline unemployment rates. The underlying situation is even weaker than what is represented by [the] unemployment rate.
And within Asia, the challenge is most acute in China, India, and Indonesia, the three most populous economies. Youth unemployment rates for these three economies are running close to double, as compared to other economies in Asia.
Now let’s take a closer look at China. The urban youth unemployment rate, i.e. for 16–24-year-olds, has steadily increased since 2019.
What’s driving this rise in unemployment? A mismatch in labor demand and supply. The number of university graduates surged 40 percent over the last five years to close to 12 million. But economy-wide employment has declined by 20 million over the same period. Entry-level wages are sluggish, and automation plus subdued services growth mean fewer opportunities for newer entrants.
Turning to India, their unemployment rate is the highest in the region at 17.6 percent. Employment creation has been subdued. And on top of it, India also faces another issue: underemployment. Post-COVID, primary sector – i.e. farming and mining – employment rose by 50 million, reaching a 17-year high. Note that these jobs are relatively low productivity jobs. And this is explained by the fact that [the] primary sector now accounts for less than 20 percent of GDP but it employs about 40 percent of the workforce. That’s a sign of COVID-induced underemployment.
How fast must growth be to tackle the unemployment challenge? In our base case, India's GDP will grow at an average of 6.5 percent over the coming decade – and this will mean that India will be one of the fastest-growing economies globally. But this pace of growth will not be sufficient to generate enough jobs. To keep [the] unemployment rate stable, India needs an average GDP growth of close to 7.5 percent; and to address underemployment, the required run rate in GDP growth must be even higher at 12 percent.
Shifting to Indonesia, its youth unemployment rate is the second highest in the region. Moreover, close to 60 percent of jobs are in the informal sector. And many of these jobs pay below minimum wage. Similar to India, both these trends signal underemployment. The key reason behind this challenge is weak investment growth. Indonesia's investment-to-GDP ratio has dropped meaningfully over the last five years.
So, what’s the way forward? For China, shifting towards consumption and services could reduce labor market mismatches. And for India and Indonesia, boosting investment is key. India in particular needs much stronger growth in its industrial and exports sectors. If reforms fall short, policy makers may need to fall back on increasing social welfare spending to manage social stability risks.
Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.