Labour Bureau Survey and Issue of Low Job Creation

The most recent quarterly survey by the Labour Bureau showed India created only 1.35 Lakh jobs in 2015 in comparison to 9 Lakh in 2011 and 4.19 Lakh in 2013. This indicates that the days of jobless growth are back and India would be far from reaping the demographic dividend.

Questions & Answers

Why this is alarming?

It is estimated that Indian economy needs to generate 115 million non-farm jobs over the next decade in order to reap the demographic dividend. As stated in the Economic Survey in 2015, in the last decade (2001-11), the growth rate of the labour force (2.23%) was higher than the employment growth rate (1.4%). Also, as per the data provided by the census, the average growth rate of economy is 7.7% per annum whereas it was only 1.8% for employment. With decrease in employment rate, it is worrisome on how to gainfully employ the one crore people who enter the workforce annually.

What are the consequences?

This slow down in job creation has resulted in the demonstrations by young Patels of Gujarat and Jats of Haryana in the name of reservations. Unavailability of jobs in the private sector made them to look for government jobs.  But with the shrinking of public sector, Government jobs, which were 19.5 million in 1996-97, are about 17 million today. Not only there are less job avenues for the youth but those that are available are precarious and badly paid because of the informalization of the economy.

What are the reasons for the jobless growth?
  • Employability problem: While the services sector can easily provide white collar jobs, without basic training it has become difficult for transforming and employing peasants into factory workers. According to the Economic Survey 2015, only 6.8% persons have reported to have received vocational training. In addition, poor education offered in the primary and secondary levels has increased the dropout rate. In this context the paltry increase (3 to 3.1) in the share of education in 2015-16 Union budget has not made any difference. The government’s reliance on private institutions to address these anomalies is also not going to help as none of the country has so far developed without a robust public education system.
  • Small and medium enterprises (SMEs) are four times more labour intensive than that of large firms. Multinationals sell their products to the white-collar middle class but are not creating the manufacturing workforce the country is looking for. For example in the “Make in India Week” celebrated in February, the multinationals made impressive investment commitments at $225 billion over five years. But the fact that it would translate into the creation of only 6 million jobs are not heartwarming. In fact, the programme reveals the jobless growth syndrome of the country. The solution lies in promoting SMEs, which employ 40% of the country’s work force, contributes to 45% of India’s manufacturing output and 40% of India’s total exports. But SMEs are not treated well and neglected by the policy makers.
  • Firstly, SMEs do not have access to credit. According to Ram Jass Yadav’s survey, approximately 95 per cent of SMEs are out of the banking fold. While the banks are mandated to register at least 20 per cent year-to-year growth in credit to SMEs, they are instead lending money to big companies.
  • Secondly, SMEs are at present facing the erosion of state protection. The items which were exclusively reserved for them are being reversed in favour of big capitalistic companies. The positive discrimination enjoyed by the cottage industries after independence is no longer available to the present SMEs.
  • Thirdly, the menace of crony capitalism distorts the market economy. The big companies have been the main beneficiaries of the government’s fiscal policy. In the 2015-16 Union budget, they were given tax exemptions to the tune of Rs. 5,50,000 crores. Also, they are permitted to establish their own SEZs where they enjoy preferential treatment and make huge profits.
What is the way forward?

With the median age in the country less than 30 years along with new entrants entering the work force every year, the government needs to adopt a holistic action plan. The measures like running skilling and re-skilling programmes to increase employability and productivity; incentivizing SMEs that absorb a huge workforce; increasing the job creation by carrying out massive infrastructure upgrade etc. has to be taken immediately. Ultimately, creation of jobs should be made as the pivot for social and economic policy making in the country.