Labour force set to hit 580 million in seven years: HDFC report

MUMBAI: Labour force could increase to 580 million by 2025 from the current 480 million in India, according to a latest research by HDFC Bank. It means an additional 100 million workers will enter the workforce by 2025 or 11 million roughly every year, much higher than the 1.5-2.5 million formal sector employment generation per year, according to HDFC Bank.

“We find GDP (Gross Domestic Product) will have to grow by as much as 13 per cent on average over the next decade if we want all workers who join the labour force to be employed (assuming unemployment rate remains steady at 3-4 per cent),” noted Abheek Barua, Chief Economist, HDFC Bank.

As per the Employment and Unemployment Survey (EUS), jobs growth slowed down to 1.1 per cent between 2012 and 2016 from 2.4 per cent between 2000 and 2005. Employment elasticity, which measures employment growth with GDP growth, reduced to 0.17 from 0.20 over the last decade.

In other words, for every 10 per cent increase in output, employment grew by 1.7 per cent during 2012 and 2016 as against 2 per cent between 2000 and 2012.

This could be due to increase in capital intensity of output, moderation in the labour force participation, a mismatch in skill supply and demand, and slow growth in labour-intensive sectors.

As per the EUS database, there are close to 92 million formal jobs. In all, 22 per cent workers are in the formal sector while the informal sector accounts for the remaining 78 per cent.

The report also dealt with a recent study based on the government’s social security database which had stated that 7 million additional formal jobs had been created in financial year 2017-18.

HDFC, however, points out that this implies “an employment elasticity of above 1” and using this, the GDP growth required to absorb the labour force is a “meagre 5.8 per  cent”.