Illustration by Binay Sinha
Recent trends look less favourable as the Labour Bureau’s annual Employment-Unemployment Surveys show an increase in unemployment from 3.8 per cent in 2011-2012 to 5 per cent in 2015-16. One analyst (2)
has estimated 3.7-5.5 million as the “employment loss”.
How large is the job gap? How soon can India reach a point when there is no hidden underemployment and all who want work can find it at a fair wage and decent work conditions?
The Institute of Human Development study cited earlier estimates the current surplus labour number at 117 million-52 million who can be withdrawn from work without loss of production, 52 million who are not at present in the labour force but are able and willing to work, and 13 million who are the reported unemployed. Annual additions would be of the order of 6-8 million. Can we absorb about 16 million a year in decent work and reach full employment by 2030?
Some have argued for export-driven manufacturing growth drives job creation as in China. The prospects for export growth as the driver look less attractive now because of the slowdown in the major Organisation for Economic Co-operation and Development markets and growing protectionist threats. A major concern about the medium-term future of manufacturing and commercial service jobs comes from the prospective growth of robotics and automation, which may slow down the growth of global value chains.
We have launched a major drive for growth in manufacturing output with Make in India and for skill development with Skill India. We need to connect the two so that manufacturing growth is oriented to absorb labour and skill development creates the capacities needed for the industries and services of tomorrow. India could do well by promoting jobs in infrastructure construction, urban development, and housing, in technology development and deployment, particularly in the info-tech sector and in accelerated investment in the energy transition that it is already pursuing.
The organised sector cannot deliver jobs on the scale required. Job creation will require skill development for productivity enhancement in what is today the unorganised sector. Anything which galvanises entrepreneurship and improves working conditions to attract skilled labour in this sector will contribute towards this end.
Creating jobs is not enough. Our labour markets are far from competitive and labour reforms are required to ensure not just competition but also fair wages and decent work conditions. A very limited proportion of workers are able to exercise market power through trade unions. But despite that the wages of production workers as a proportion of gross value added declined from 15.4 per cent in 2000-01 to 8.5 per cent in 2011-12 in the organised sector. The vast majority of workers in the unorganised sector lack any form of security and are subject to local monopsonies of employers. Labour market efficiency is questionable, as there is wage differentiation by caste, community, gender, and geography for virtually identical tasks.
Some reforms in employment-protection and wage-determination processes in the organised segment of the economy, particularly the public sector, are necessary. But the really crying need for labour reform is in ensuring greater security and more just and fair wage determination processes in the unorganised sector. We need a labour policy that addresses inequities and exploitation as vigorously as it bemoans excessive protection.
India can meet its job-creation challenge. But for that it needs a growth strategy centred on modernising its labour market and galvanising the large hidden potential of the unorganised sector.
1. Ajit Ghose, India Employment Report, 2016, Institute for Human Development and Oxford University Press
2. Vinoj Abraham, “Stagnant Employment Growth”, Economic & Political Weekly, September 23, 2017, vol. 52, no. 38