Jobless growth

In a worrying development, the unemployment rate in India has shot up to a five-year high of 5 percent in 2016. According to a report by the Labour Bureau, the figure is significantly higher at 8.7 percent for women as compared to 4.3 percent for men. This news should ring alarm bells for the NDA government at the Centre, which has taken a whole host of steps to fix the problem of jobless growth, including its "Make in India" initiative. “The erosion of jobs is like climate change," said Kaushik Basu, chief economist at the World Bank. "It happens slowly and so makes no news but its impact can be devastating.” India's proud record as the fastest growing economy in the world in terms of gross domestic product means nothing with job growth in the doldrums. In economics, one often comes across the concept of employment elasticity. This concept refers to the rate of jobs growth in relation to GDP growth.

According to a recent HDFC Bank report, employment elasticity in the economy is currently close to zero. In other words, for every one point rise in GDP, jobs grow only 0.15. Fifteen years ago, this figure stood at 0.39. Numbers posted by the Labour Bureau in June indicated that employment in labour-intensive sectors dropped the most in 2015 since 2008. Only 1.35 lakh jobs were created last year, as opposed to 4.9 lakh new jobs in 2014. At a time when 12 million join the labour force every year, experts are worried about the implications jobless growth could have on India’s social fabric. Moreover, the proportion of workers across agricultural enterprises in rural India has increased while the proportion of those working non-agricultural jobs has declined, as per  the Sixth Economic Census. As argued in these columns, this is a worrying trend. Small companies are obviously in no position to take up the burden of job generation. They just aren't productive enough. Meanwhile, many large corporate houses are submerged under a mountain of debt, sparking a circle of low growth, low bank credit, job cuts, low output, and low growth. It is imperative that the government must focus on the generation of more jobs as the principal goal, rather than GDP growth. 

One of the major failures of the Indian liberalisation story has been its inability to generate enough jobs. In a recent report, the United Nations Development Programme assessed that India will need to generate 280 million jobs between now and 2050—the year when the number of people between 15 and 64 (working-age population) will reach its peak. In a stunning revelation, less than half the Indians who sought jobs between 1991 and 2013 got them, according to the UNDP report. 

In a recent column for a leading business daily, Sudipto Mundle, emeritus professor at the National Institute of Public Finance and Policy, wrote: “India’s growth has to be led by manufacturing, not services because, among other reasons, employment elasticity is higher in manufacturing. Also, a large section of the labour force has little or no education, and cannot be employed in skilled jobs in the services sector. Nor can they be easily skilled, given their lack of basic education. Outside agriculture, they can only be employed in low-skill jobs in the manufacturing sector. This leads to a second point about the urgency of education policy reform. No skill development programme can succeed without an underlying foundation of basic education. But India’s long-standing neglect of quality education at the primary level greatly limits the access to basic education, the essential foundation for skill development. In the absence of reforms in primary and basic education, India’s awesome backlog of unemployment will continue to grow.” 


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