OECD Skills Outlook 2025: India's Demographic Dividend Threatened by Deep Skills Disparities
SDG 4: Quality Education | SDG 8: Decent Work and Economic Growth
Ministry of Skill Development and Entrepreneurship (MSDE) | NITI Aayog
The OECD Skills Outlook 2025 report emphasizes that skills are the fundamental drivers of economic adaptation and resilience, warning that traditional training models are insufficient for the demands of the 21st-century labor market, that demand literacy, numeracy, adaptive problem-solving, social and emotional skills, and the ability to delay gratification.
The Global Challenge: The central challenge is ensuring equal access to opportunities for developing and using skills, particularly through targeted investments in lifelong learning and agile, data-driven governance that learns from labor-market intelligence. The traditional “frontloading” of skills through initial training for a single qualification is no longer sufficient.
Wider Disparities: The report notes that unequal access to skills development stunts economic growth due to underutilized talent.
Socio-economic background is the strongest driver of skills disparities, with adults from higher socio-economic backgrounds outperforming their peers in literacy, numeracy, and problem-solving.
Younger adults generally have higher information-processing skills than older adults, while differences between men and women often lie in how skills are used and rewarded (e.g., through field-of-study sorting and occupational concentration).
India-Specific Relevance
The OECD’s global findings directly reflect India’s central challenges, underscoring that the success of its demographic dividend is threatened by severe structural and spatial inequalities:
Pervasive Disparities: India faces significant socio-economic disparities in education and skills development, particularly in rural areas and among marginalized communities. This leads to a severe underutilization of the educated workforce, with over 50% of graduates working in roles that typically require lower skill levels.
Gender and Urban-Rural Divide: Policies must address prevalent gender gaps in both education and employment, noting that women remain underrepresented in STEM fields and high-paying occupations. Simultaneously, a stark urban-rural divide limits access to quality education and skills infrastructure, necessitating targeted investment in rural areas.
Limited Mobility: The challenge is compounded by limited intergenerational occupational mobility, where systemic barriers often prevent individuals from surpassing their parents’ occupational status, perpetuating inequality across generations.
Adult Learning: To address these gaps, the OECD calls for India to strengthen its adult learning systems and promote skills-based hiring practices, micro-credentials, and the formal recognition of non-formal learning to address unemployment and underemployment.
What is Intergenerational Occupational Mobility? Intergenerational occupational mobility refers to the ability of individuals to achieve a professional status significantly higher than that of their parents. The OECD framework uses this concept to measure whether skill and education systems effectively break the cycle of poverty and open pathways to high-paying jobs across generations, ensuring that talent, not background, dictates success.
Policy Relevance
The OECD report underscores that the success of India’s demographic dividend hinges entirely on its capacity to convert educational attainment into actual occupational skills.
It mandates a strategic policy shift for the Ministry of Skill Development and Entrepreneurship (MSDE) and NITI Aayog beyond simply increasing enrollment numbers. The central policy task is to invest in agile, data-driven governance to dynamically align education and training systems with evolving labor market demands.
Specific policy action must focus on eliminating the urban-rural and gender divides in access to quality skills and implementing robust lifelong learning systems to upskill older workers and facilitate the transition into the digital and green economy. Strengthening career guidance in schools and public employment services is essential to ensure that youth make informed decisions, reducing long-term socio-economic and gender disparities in career opportunities.
Follow the full news here: OECD Skills Outlook 2025