UPSC MAINS 2019: The shape of the jobs crisis

The shape of the jobs crisis

 

Topic: The shape of the jobs crisis

Topic in Syllabus: General Studies Paper 3: Indian Polity

 

The shape of the jobs crisis

Context:

India has no industrial policy or employment strategy to ride the wave of its demographic dividend.

 

Facts:

  • Job creation has slowed since 2011-12, the year of the last published National Sample Survey Office (NSSO) labour force survey.
  • Experts have used Labour Bureau annual survey (2015-16) data and Centre for Monitoring Indian Economy Pvt. Ltd. (CMIE) data (post-2016), which has a sample size larger than the NSSO labour force surveys, to reach this conclusion.
  • Both surveys cover rural and urban, and organised and unorganised sector employment.
  • They capture both the Employees’ Provident Fund Organisation/National Pension Scheme (organised) as well as such employment as might be generated by MUDRA loans or platform economy jobs.
  • The latter two job sources are precisely what the government claims were not being captured by jobs data available.
  • However, government claims on absence of ‘good’ data on jobs are simply untenable.

 

Current situation in India:

  • The leaked NSSO 2017-18 data have shown that while the open unemployment rate (which does not measure disguised unemployment and informal poor quality jobs that abound in the economy) by the usual status never went over 2.6% between 1977-78 and 2011-12, it has now jumped to 6.1% in 2017-18.
  • This was expected as in the last 10-12 years, more young people have become educated.
  • The tertiary education enrolment rate (for those in the 18-23 age group) rose from 11% in 2006 to 26% in 2016.
  • The gross secondary (classes 9-10) enrolment rate for those in the 15-16 age group shot up from 58% in 2010 to 90% in 2016.
  • The expectation of such youth is for a urban, regular job in either industry or services, not in agriculture.
  • If they have the financial wherewithal to obtain education up to such levels, they can also “afford” to remain unemployed.
  • Poor people, who are also much more poorly educated, have a much lower capacity to withstand open unemployment, and hence have lower open unemployment rates.

 

Key Trends in Job Creation in Last Few years:

  • During the last decade (2001-11), the growth rate of the labour force (2.23 per cent) was significantly higher than the growth rate of employment (1.4 per cent), which itself was several-fold less than the growth rate of the economy.
  • According to Census 2011, the average growth rate of the economy was 7.7 per cent per annum, when it was only 1.8 per cent for employment.
  • 66th round of the National Sample Survey Office (NSSO) data on employment in 2011 revealed that between 2004-05 and 2009-10, only 1 million jobs were added per year; in a period when the economy averaged a record 8.43% growth annually.
  • An Indian Labour Bureau survey of 2015 showed that 2,000 companies in eight sampled industries generated all of one lakh jobs, a fall from the four lakh generated in 2014, even though growth in 2014 was lower than in 2015.
  • A HDFC Bank report on India’s tapering jobs growth says that “employment elasticity” in the economy is now close to zero – for every one point rise in GDP, jobs grow only 0.15. Fifteen years ago, it was 0.39.

 

Reasons behind the Jobless growth:

  • In India, growth is attributed to service sector, whereby both employment and wages have seen a rise. But as figures say, the biggest employing sector in India is the Agriculture sector, employing 45% of the population but contributing 15% to the GDP, whereas Service sector is the biggest contributor to the GDP but employs less than 30%. IT and Financial services are drivers of service sector growth in last 2 decades however both of these sector are not employment intensive.Thus contributing to jobless growth in India.
  • Labour –intensive manufacturing sector did not become the engine of growth in India. In fact, it was the knowledge-intensive services sector which along with some segments of capital intensive manufacturing was the engines of growth in India. But these sectors by their nature were not employment-intensive.
  • Stagnation in manufacturing output and employment and contraction of labour-intensive segment of the formal manufacturing sector: (Due to)
  • Excess rigidity in the formal manufacturing labour market and rigid labour regulations has created disincentives for employers to create jobs
  • Industrial Disputes Act has lowered employment in organized manufacturing by about 25% (World Bank Study)
  • Stringent employment protection legislation has pushed employers towards more capital intensive modes of production, than warranted by existing costs of labour relative to capital
  • The nature of Indian manufacturing is not employment-friendly. Most of them are automated and any employment is highly skilled. Thus they Have contribute to growth, but not necessarily to employment.
  • The labour intensity of MSME is four times higher than that of large firms. – But they are not treated well in India they have poor access to credit and they are plagued by many serious problems which has limited there growth potential.
  • Impediments to entrepreneurial growth in small firms (such as high costs of formalisation) along with a long history of small scale reservation policy which has prohibited the entry of large scale units in labour intensive industries.
  • The tax incentives, subsidies, depreciation allowance all are solely linked to the amount invested and not to the number of jobs created.
  • Sluggish process in education and skill levels of workers.

 

Factors leading to alarming unemployment:

  • Though India is a fastest growing largest economy in the world, the growth rate of the economy is consistently declining.
  • The global economy is itself also growing slower.
  • The economy till 2011-12 was growing at 8.4% per annum but presently it is growing much less than that.
  • The young population are getting more and more educated and there is a silent revolution across the country in terms of education.
  • There is a dramatic increase in secondary enrolment during 2010-15, from 58% to 85% along with gender parity which shows that the girls are also getting educated.
  • Inevitably many of these young population would want to join the labour force but only in the situation when the jobs were growing.

 

More young people have become educated:

  • This was expected as in the last 10-12 years, more young people have become educated.
  • The tertiary education enrolment rate (for those in the 18-23 age group) rose from 11% in 2006 to 26% in 2016.
  • The gross secondary (classes 9-10) enrolment rate for those in the 15-16 age group shot up from 58% in 2010 to 90% in 2016.
  • The expectation of such youth is for a urban, regular job in either industry or services, not in agriculture.
  • If they have the financial wherewithal to obtain education up to such levels, they can also “afford” to remain unemployed.
  • Poor people, who are also much more poorly educated, have a much lower capacity to withstand open unemployment, and hence have lower open unemployment rates.

 

Across education categories:

  • A sharp increase in the unemployment rate of the educated should have worried the government.
  • It is estimated that the unemployment rate rose over 2011-12 to 2016 from 0.6% to 2.4% for those with middle education (class 8)
  • Even more worrying, for those with technical education, the unemployment rate rose for graduates from 6.9% to 11%, for post-graduates from 5.7% to 7.7%, and for the vocationally trained from 4.9% to 7.9%.

 

Solutions for this crisis:

  • The need of the hour is to make livelihood creation central to development strategies rather than just projecting it as natural fallout of growth. It needs to be accepted that organized manufacturing is no longer the answer to generate large-scale employment, as it was in the past
  • First of all Labour Laws should be reformed as due to the stringent Labour Laws Corporates in India are preferring Capital intensive mode of Production in a country where labour is abundant .
  • Encouraging people’s entrepreneurial instincts — whether they create mom-and-pop undertakings countrywide, or deliver results under the Startup India or Stand-up India missions — will generate sustainable outcomes.
  • The education system needs to be revamped to create the desired skill-sets. At present, the education system is failing miserably in delivering even whatever it is designed to.
  • Job Intensive sector like Food Processing Should be promoted.
  • MUDRA scheme should be expanded as it can be a game changer for MSME sector and this sector has a potential to create required jobs in India.
  • It is estimated that the number of new entrants into the labour force (currently at least 5 million per annum), and especially educated entrants into the labour force will go on increasing until 2030.
  • It will thereafter still increase, though at a decelerating pace.
  • By 2040 our demographic dividend — which comes but once in the lifetime of a nation — will be over.
  • China managed to reduce poverty sharply by designing an employment strategy (underpinned by an education and skills policy) aligned to its industrial strategy.
  • That is why it rode the wave of its demographic dividend.
  • It is time India should also devise and align its industrial policy and employment strategy to reap the benefits of its demographic dividend.

 

Role of MSME sector and job creation:

  • It is actually the MSME’s & self-employment, that creates the employment along with the government and organized sector.
  • They are important sectors for jobs as their weightage is very large because the unorganized segments of manufacturing and services is very large.
  • In informal sector, the small enterprises lost jobs in huge number due to severe cash crunch during demonetization.
  • People shifted away from informal sector due to job loss in large numbers because the business went down severely.
  • There was increase in the number of people looking for work in MANREGA from 3 million to 8.2 million during demonetisation.
  • Most of the non-agricultural employment across the country is in clusters (modern and traditional manufacturing) i.e., MSME’s.

 

Conclusion:

  • There are several such issues related with employment where the government and all the policies in general till date have been lacking.
  • The economy can just be optimistic in revival from the employment crisis as there are opportunities in the Indian economy but it just needs proper planning and initiatives from the government.

 

Sample Question:

Discuss the Reasons and Consequences Jobless Growth in India? Enumerate the solutions for addressing the issue?


Job Crisis - Feb 13th - Infographics