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Untitled 1

Uploaded by

Sanatan Kumar
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Jobless Growth

Growth in an economy is often equated with rising employment. A growing


economy translates into better opportunities for individuals to earn a
living. But is it possible that in a growing economy, jobs become stagnant?
In this article, we shall explore this anomaly where economic growth does
not translate into the growth of jobs.

Contents

1 What is Jobless Growth?


2 What is the data telling us?
3 What factors are leading to Jobless Growth?
4 Why should we be worried?
5 What steps have been taken to improve the situation?
6 What more steps are required to address Jobless Growth?
7 Conclusion

What is Jobless Growth?


Jobless growth is when the economy experiences growth but
unemployment remains stubbornly high. In other words, the economy is
expanding but this is not translating into an increase in employment.

This usually happens when a large number of people lose their jobs during
an economic downturn and are unable to find a new jobs when the
economy recovers.

What is the data telling us?


India experienced job growth of 3% p.a in the 70s at a time when our
economy grew at 3-3.5% p.a but over the last 3 decades our economy
grew at over 5-8% p.a but our job growth has been close to 1% p.a.

Employment elasticity has fallen from close to unity in the 70s to 0.4 in the
90s to less than 0.1 today. Hence, the phenomenon of India’s jobless
growth.

Employment Elasticity is defined as the percentage growth in employment


for one per cent growth in GDP.

According to the Centre for Monitoring Indian Economy (CMIE) in India to


meet the current demand for employment, we need to create 20 million
new jobs each year in India and employment needs to grow at 5% per
annum.

But currently, we are adding less than 2 million jobs a year with an
employment elasticity close to 0.1. If we continue to grow our economy
and even accelerate it further without dealing with the issue of
employment elasticity, the jobs crisis is not only going to intensify.
What factors are leading to Jobless Growth?
First, India has failed to create enough jobs in the manufacturing and
services sector. For an emerging economy, the path to higher incomes,
productivity and growth must lead workers away from agriculture.
However, the transition has failed to happen in India.

In fact, the share of manufacturing in employment has been declining.


According to CMIE, the manufacturing sector employed 51 million Indians
in 2016-17, which had come down to 27.6 million in 2020-21. The
manufacturing sector in India has been capital-intensive rather than
employment intensive. Moreover, most of the jobs in manufacturing and
services are limited to skilled or semi-skilled professionals.

Second, India’s poor system of education and job training means that
graduates have limited skills and are not valued by employers. In large-
scale surveys, employers have said that less than 50% of the college
graduates entering the workforce have the cutting-edge skills they need
or the ability to pick them up in the workplace. So many would-be job
seekers decide instead to

1. Continue their studies


2. Join family members in farming (this enhances disguised
unemployment)
3. Just stay home, surviving on rental income, pensions received by
elderly household members or government transfers.

Third, India has not witnessed an export boom of low-skill, labour-


intensive products. India’s economic growth has been largely services led
in contrast. A leap from the primary to the tertiary sector hasn’t been able
to generate sufficient jobs.

Further, the bulk of the jobs in the service sector case is in petty retailing,
small eateries, domestic help, sanitation, security staffing, transport and
similar other informal economic activities. They seldom provide
reasonable pay and adequate social security benefits.
Fourth, the enhanced adoption of new technologies like AI, Automation
etc. is decreasing the demand for manpower. With these technologies,
companies are able to generate higher revenues with minimum manpower.
Some economists worry that this may worsen the jobless growth scenario.

Fifth, the Government has made efforts to generate jobs but these are
hindered by legacy issues of poor infrastructure, complex and variable
rules, skill deficiencies, hidden costs and more.

Last, many women are opting for unpaid work at home, taking care of
elderly relatives and kids. In most Indian families, care work is the
exclusive responsibility of the female members.

Why should we be worried?


First, India has the advantage of youth, half the population is under 30;
but it will start ageing in the coming decades. Therefore a significant
number of jobs are desired to reap this demographic dividend.

What is more worrisome is that the rate of unemployment among the


youth (20-24 years) is much higher than the overall unemployment rate.

Second, in the absence of meaningful livelihood opportunities, society will


be susceptible to social unrest. This was evident by the protests that
erupted in June over the Agnipath Scheme.

Third, to sustain growth and attract global investments, India needs to


ensure there’s a trained workforce for the industry.

Fourth, jobless growth can lead to reduced productivity, as workers who


are unable to find employment become discouraged and drop out of the
labour force, reducing the overall level of economic output.

Lastly, high levels of unemployment can lead to increased social


spending on unemployment benefits and other social safety net
programs, putting pressure on government budgets.
What steps have been taken to improve the
situation?
1. The Union Government has announced plans to hire a million people
by the end of 2023 to fill vacancies in government departments. Read
More: Here
2. National Education Policy, 2020: The Aim of the policy is not only be
cognitive development but also to build character and create holistic
and well-rounded individuals equipped with the key 21st-century
skills.
3. Sector Skills Councils were set up from 2009-10 onwards, and
competency frameworks were prepared for short- and long-duration
skill programmes. Industrial Training Institutes (ITIs), polytechnics
and other skill-oriented institutions were brought on a common
platform. As a result, apprenticeships increased. Over 100,000
training institutions came forward to work with 55 million youth to
prepare them for the job market. Read more: Here
4. Pradhan Mantri Kaushal Vikas Yojana (PMKVY): It is a flagship
program of the Ministry of Skill Development and Entrepreneurship
(MSDE) implemented by the National Skill Development Corporation
(NSDC).
Under PMKVY, training and assessment fees are paid completely by
the Government. Pay-outs are provided to the Training Providers
(TPs) in alignment with the common norms.

What more steps are required to address Jobless


Growth?
First, the private sector should be given greater support in form of
subsidies and tax rebates, especially the budding start-ups which have
the potential to generate multiple jobs.

Effective implementation of current schemes like MUDRA, Startup India


etc. could be a game changer in this regard.

Further, the commercial dispute redressal mechanisms need to be


strengthened in order to attract more investment into the industrial sector.
Currently, India has 163rd rank in enforcing contracts as per Ease of Doing
Business reports.

Second, a more focused approach is necessary with respect to skilling


and educating the youth according to the demand of the 21st century.
They should be encouraged to learn new-age skills like 5G technology,
Big Data, Digital Marketing etc. that would enhance their probability of
employment.

Third, the Government should also focus on boosting the social security
net apart from creating 1 million jobs. This includes enhancing days under
MGNREGA, introducing an urban MGNREGA and taking a decision on
Universal Basic Income.

Fourth, the focus should also be placed on tackling the inefficiencies of


government setup which includes corruption, maladministration, red
tapism etc. This will ensure the optimum utilization of resources and
ensure the creation of more jobs with minimum inputs.

Further, it should avoid the sudden introduction of reforms and policies.


For instance, since 2017, the dual impact of demonetisation and the
rushed introduction of goods and services tax has caused many small and
medium businesses to shut down.

Fifth, educational institutions must focus on inculcating an entrepreneurial


mindset in the students. This will ensure that students become job givers
rather than job seekers in future thereby helping to solve the
unemployment crisis.

Sixth, local governments and community organisations like women’s self-


help groups and youth organisations should be fully involved in the skilling
plan for a local area. A database of all men and women seeking
employment or enterprise support needs to be drawn up for each and
every local body, rural or urban. Equally important is a detailed micro
credit plan for each and every household developed after assessing the
asset base of a poor household.

Conclusion
Jobless growth remains the single biggest challenge to the Indian
economy. To create jobs on a mass scale there is a need to boost
manufacturing that hinges on creating infrastructure, removing red tape
and reviving investor sentiment. A robust manufacturing sector is a must
for absorbing the excessive workforce of the agriculture sector as well as
enabling the nation to reap its demographic dividend.

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