In a jobless growth economy, unemployment remains stubbornly high even as economy grows. This may be because a relatively large number of people may have lost their jobs or new members entering the workforce are much higher than jobs available. In India, the latter seems to be the case, thereby obstructing the benefits of growth from reaching the masses. While analysing the paradox of jobless growth, I have categorised the reasons and the possible solutions into a ten-point action plan:
*Formalise labour arrangements: India experienced decline in jobs due to a reduction in contract workers (nearly 70,000 were retrenched in the first half of FY16, compared to 161,000 additions in the first half of FY15). Contractualisation is a universal phenomenon and the solution is to simply end the informal nature of employment. Better pay, job security, safe work environments and social security benefits will only help workers bring out their best. In fact, companies making high-specification products realise that contract labour can lead to batch rejections.
*Improve business sentiment: Employment in export units, reeling under a shrunken global demand, has seen a sharp decline. In the automobile sector, only a handful of jobs have been added. Large manufacturers are trimming operations; Nokia shut down its handset factory in Chennai, rendering 8,000 workers jobless, and for Microsoft, the new owner of Nokia, making smartphones in China and Vietnam was cheaper. Following on the heels of Goldman Sachs and Nomura, JP Morgan Asset Management also exited its onshore India-based mutual funds business. Cement major Lafarge is another case in point. The focus should be on kick-starting the investment cycle, incentivise job creation by giving infrastructure a push, finding a way to lower interest rates and improving ‘ease of doing business’.
*Improve labour-absorption: The economy is generating fewer jobs per unit of GDP—more work is being done with fewer employees due to major improvements in automation, robotics and productivity. So, more focus on labour-intensive sectors will generate employment. While sectors like financial services and e-commerce seem obvious as ones to focus upon, the significance of new economy enterprises shouldn’t be underestimated. These could be in education, hospitality, healthcare, as also green sectors such as solar and wind.
* Policy push to speed up the five labour market transitions: Transitioning from farm to non-farm, rural to urban, subsistence self-employment to wage employment, informal to formal, and school to work will enhance productivity norms.
*Schemes to promote MSME growth: Arresting the lacklustre global demand and weak exports, and diversifying the exports basket are the dire needs of the MSME sector. Enhancing the employment potential of MSMEs is critical as the sector contributes 40% to India’s manufacturing output, employing 14 crore workers.
*Skilling for an industry-ready workforce: Given India’s demographic dividend, it acquires special significance. With 54% of our population below 25 years of age, we are sitting on a massive workforce. Unfortunately, many of them are unemployable with their skills not matching the emerging industry requirements. While curriculum has largely remained static, its application has become dynamic.
Major gaps in skills are in industries such as auto, building and construction, textiles and retail. Also, there is a skills shortage for jobs ranging from welders to masons and from electricians to nurses. Industries require market-driven skills to meet their business needs of higher productivity, lower costs and higher efficiencies. It is imperative that apart from beefing up their in-house training facilities, the industry focus on tie-ups with educational/training institutes, and refurbishing curriculum, content, teaching/training methodologies.
*Manufacturing sector needs a boost: While the services sector contributes 58% to India’s GDP, the manufacturing sector’s contribution is 24%. India’s late policy resurgence towards manufacturing is the main reason why the country lags behind China. The sector’s role in triggering structural change has remained unattended while we have focused on the less employment-providing, less tradeable and less technology-oriented services sector.
India is not likely to emulate China where 34% of its labour force is involved in manufacturing. But even if we can increase this to 20%, up from the current 11%, it would account for another 100 million jobs!
*Producing periodic and reliable data on employment: Regular estimation of job numbers and related indicators has long guided policy creation in some of the other successful economies. Employment generation must be the soul of policy creation; to do that, it is imperative to know the statistics on the same periodically. The last time India carried out a focused and comprehensive estimation of the employment situation nationwide was in 2012 through the 68th round of NSSO. Needless to say, these figures are no longer used for gauging policy exigencies in the country.
*Promoting entrepreneurial sector: Many of the jobs in the economy are created by Flipkarts, Myntras and Snapdeals of the world. Start-ups are an engine of job-creation. According to NASSCOM, 3-4 IT start-ups are born every day in India and India is the third largest start-up base; just behind the US and the UK but ahead of China and Israel, with 1,400 new start-ups in 2016, up by 8-10% from 2015. These ventures are poised to grow 2.2 times to reach 10,500 by 2020.
*Dignity of labour: It remains an exotic concept in India. Shuffling papers is seen as more dignified as compared to holding a torque wrench and rolling up of sleeves on the shop-floor. The faster this mindset changes, the better it is for India.
UNDP’s Asia-Pacific Human Development Report 2016 warned India could face a critical shortage of jobs in the coming 35 years. There are two ways to look at it—as a huge wave of unemployment and demographic disaster that will leave India floundering, or as an unprecedented resource for wealth creation that will outpace much of the world if equipped with right skills.
The author is executive vice-president at Wadhwani Foundation
