State needs to address employability levels of graduates

The contemporary discourse on skills, quality of higher education and employability of graduates, is more concerned about the under-skilled in labour force, especially graduates.

Research studies and reports of international organisations like ILO, OECD, the World Bank and World Economic Forum (WEF), along with academic institutions and social scientists, have been repeatedly raising concerns regarding the labour market outcomes with such an under-skilled in labour force. These concerns have serious implications for the economies that embody the emerging knowledge-based and an impending fourth industrial revolution and AI-driven decision-making.

The Skill India annual reports since 2014 have raised alarm over employability of graduates across states. They reported that around 50 per cent of graduates are ‘unemployable’.

Studies by various other business consultancy firms like KPMG, Deloitte, and PwC have drawn similar observations. Skill India survey assesses and reflects the graduates’ employability before they enter the labour market. However, how the graduates in the labour force are faring in the labour market is another interesting question one needs to explore.

Unemployables do not remain unemployed forever. It is particularly interesting to take stock of graduates who have completed their first-degree (undergraduate level) or above in higher education in the 21st century.

India’s higher education system witnessed a rapid quantitative expansion during the last two and a half decades while facing issues and challenges related to quality and skill deficit.

For such analysis, estimates are drawn using unit record data of PLFS-6 (2022-23). The 21st century graduates are identified as those aged between 25 and 45 years. Going by age-appropriate class and sequence of successful transitions to higher grades since enrolling in a formal school at the age of six, a person can be an undergraduate by the time he/she turns 21 or 22 and two more years for post-graduation.

Estimates show that Telangana’s performance is modest regarding employment conditions of the 21st century graduates, as compared to the national scenario. The percentage of graduates in Telangana in the age-cohort (25-45 years) is 24 per cent, which is eight percentage points higher than the national average of 15.7 per cent. It corroborates the state’s modest performance in the national higher education ecosystem. The labour and work force participation rates of 21st century graduates are higher in Telangana than the national average. Ironically, even the unemployment rate is also higher in Telangana. Graduates are more likely to be employed as a regular salaried staffer with estimates showing that regular salaried are predominant in the workforce of graduates. But a percentage of the self-employed is also considerable. Around 71 per cent of graduates in their workforce in the state are employed as salaried staff, while this is 11 percentage points higher than the national average.

However, most importantly, although the percentage of graduates employed in occupations matching their skills is quite high, even the percentage employed in under-skilled occupations is also considerable. The matching skill occupations for graduates are those requiring graduate-equivalent skills.

The skills required in under-skilled occupations are below the graduate-equivalent skills. In Telangana, the percentage of graduates employed in under-skilled occupations is high at 40 per cent, although it is less than the national average, which stands at 46 per cent. Further, the average earnings of graduates in these under-skilled occupations are considerably lower than those in matching skill occupations. Graduates working in occupations lower to their skills still earn higher - a ‘premium’ - over those working in similar occupations. However, such a graduate premium for graduates employed in under-skilled occupations does not close the gap in earnings with those working in occupations with matching skills.

If a considerable number of graduates are employed in occupations lower to their qualifications or skills, then why does such a situation arise?

Is it due to an inadequate demand for graduates, or is it due to graduates lacking the required skills? In the former situation, it may lead to unemployment, in which case some graduates compromise with the labour market conditions and take up available under-skilled occupations with lower earnings than some of their counterparts employed in matching skill occupations.

The labour market outcomes for graduates depend on the economic growth and development, as that creates demand for employment. The regional analysis across states indicated that the proportion of graduates employed in under-skilled occupations is lower in high-income states and vice versa (Motkuri and Revathi, 2025). A state’s higher levels of development create better employment opportunities for higher-skilled occupations, thereby increasing the demand for graduates.

Telangana is a high-income state with a relatively low percentage of graduates in under-skilled occupations and a low unemployment rate compared to low-income states. However, both the percentage of under-skilled and unemployment are considerably high in the state and require explanation beyond the argument of the level of development.

Explaining the co-existence of demand for graduates in the labour market along with unemployment and underemployment of graduates is intriguing and needs further exploration. Industry stakeholders and leaders have been forwarding the skill-deficit argument and such coexistence. The contemporary skill discourse is slightly tilted towards the skill-deficit argument. It is pertinent to know what measures are in place to maintain standards and improve the quality through the regulatory mechanisms of the higher education system.

How Telangana is faring on those measures and mechanisms needs to be deeply pondered. A concern in this regard is that despite a high density of higher education institutions in the state, there are hardly any places that the state’s higher education institutions occupy in global rankings and NIRF. Further, the percentage of colleges that have attained NAAC accreditation is also comparably low. Although the faculty-student ratio in Telangana is close to the norm, most are not regular faculty: they are either ad hoc, contract, or part-time.

Moreover, the AISHE-based estimate of GER at 40 per cent is underestimated as it does not account for Telangana native students pursuing higher education in institutions outside the state. An estimate based on a large-scale household survey (PLFS), which captured the migrant students, indicates that the difference between the AISHE-based gross enrolment ratio and the household survey-based gross attendance rate (GAR) is high in Telangana. It shows a high out-migration of students from the state, given their choice and preference for quality. It raises concerns regarding the quality of higher education in institutions in the state. An all-encompassing streamlined state policy to address these issues is the need of the hour.

(The writers are associated with the Centre for Economics and Social Studies, Hyderabad