What do you understand by employment elasticity? Discuss the trends in contribution of manufacturing and services sector in aggregate employment elasticity of India.

Published: January 27, 2017

Employment elasticity is a measure of how employment varies with economic output.It means whether high GDP growth has translated to high employment and vice versa.
The year between 2004-2010 witnessed high GDP growth rate for India but this also has witnessed jobless growth.
Trend in manufacturing sector and service sector:

The employment elasticity in the manufacturing sector too was negative, at -0.31 There was a reduction in the number of people employed in manufacturing. Before liberalization, between 1983 and 1987-88, the employment elasticity of manufacturing was 0.59.

As per the economic survey, in India, the growth of services-sector GDP has been higher than that of overall GDP between the period FY2001- FY2014. Services constitute a major portion of India’s GDP with a 57 per cent share in GDP but it failed to create job with respect to its growth.
Reason for such trend in manufacturing and service sector:
1.)Most of them are automated and employment is high skilled.Hence it contribute to growth but not to employment
2.Labour laws of the country has created a barrier for labour because industry invest in technology leading to loss of job.
3.)Indians risk averse attitude and hence not inclined to enterpreneurship .Hence no alternative job created.
4.)Service sector is the largest contributor to economy but it is not labour intensive and hence it has less absorption of labour force given lack of skilled personnel in India.

Model Questions Category: