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India is a poor country. Let’s not pretend we are a middle economy and accept that unemployment and its impact will ripple beyond the economy.
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India’s has a job crisis. It will worsen.
Economic growth is not creating proportionate jobs. Over the last three decades India has experienced a structured and secular labour market transformation. It’s reflecting in the decoupling of jobs and growth. Growth-job elasticity is drifting down; now 0.25 from 0.4 three decades ago. Most policymakers did not see it coming, and those who did, failed to recognise the impact of the diminishing elasticity.
These numbers don’t auger well for India’s demography.
India is a poor country. Let’s not pretend we are a middle economy and accept that unemployment and its impact will ripple beyond the economy.
India is automating, it echoes as polarisation i.e., increasing high and low-wage jobs and the corresponding decline of mid-wage jobs. Polarisation adversely impacts ‘middle’ jobs, hurts low-skilled constituents of the workforce.
For the middle aged and middle-income earners, employment equals producing something, serving someone, and doing something meaningful. For many others it’s a sense of purpose. Jobs provide several wider benefits to the individuals, their families, and society at large.
The evolution of the Indian labour market has been characterised by the shift of employment, away from agriculture (earlier) and manufacturing (now) toward the services industries and ‘value adds’. This is caused, and largely explained by the lack of competitiveness in the manufacturing sector, and the changing nature of manufacturing itself. Similarly, farmland has halved every six years; now at a point where farming is unviable for 90 per cent of small farmers. The agri sector is marked by low-income, seasonality, disguised unemployment and diminishing opportunities. As much as 90 per cent of Indian farmers are micro, face a bleak future.
The agri sector spews out even the ‘employed’ to the vagaries of the ever-shrinking job market. Policymakers are solving the wrong problems by resorting to ‘work welfarism’. MNREGA and its ilk are inefficient, mostly ineffective, and perpetuating.
*Tech adoption will accelerate. India is ill prepared to embrace transformation
A Crux study focusing on the relationship between jobs and growth, has lessons in plenty. The study covered 12 skill categories, four sectors’ in 15 economically advanced states. The decade under study has been marked by slowing employment growth.
The study articulates that impact of technology on unemployment varies across skill distribution and job roles. The middle part (mostly) or the routine jobs of the skill chain, which is easily automated and suffer much more from automation and technology proliferation, is experiencing a sharp, even a lasting decline. However, automation is a friend of the higher skilled, those performing complex cognitive tasks. Similarly, automation has little or no effect on low skilled, low wage jobs that require manual dexterity, hand-eye co-ordination. The cost-benefit discourages automation; and is difficult.
The Crux study highlights a substantial cross-industry heterogeneity for both ease and pace of technology adoption. The technology proliferation in the manufacturing sector has robbed millions of jobs. However greater use of ICT has almost no impact on the services sector. The ICT penetration has diminished labour demand by half in the manufacturing sector, even as the sector has doubled in size.
*Learning largely delinked to education
The Crux study highlights that 90 per cent of Indians have little or no ICT skills at all. Only a fifth of the graduating students can perform the simplest ICT tasks. The situation is no better amongst the ‘qualified’ and gets even more distressing. Only a fourth of Computer Science students will acquire ‘effective’ digital skills. Only a third of all professionals have the cognitive skills to evaluate problems and ‘solve’ them.
It will be critical how policymakers react to the profound transformation. India needs to revamp its educational framework that has largely focussed on education, less on learning. Similarly, we need a radical shift in our skill programmes that are delinked and decoupled with education. In addition, our higher educational institutions must focus on creating and disseminating relevant and contextual skills. Information, Communication and Technology (ICT) and soft skills must be an integral part of the education framework.
The labour reforms are equally important. Institutions like the trade unions that advocate and insist on narrow gains, at the cost of trade, hurt the very people they seek to protect. Labour unions must accept the evolving reality of the gig economy, fragmented careers, and contract jobs.
*Looking Into the Future is Notoriously Hard. Dangerous Too
Similarly, the corporate sector must embrace the idea of portability and expansion of welfares and benefits. Entitlements should be linked to individuals rather than jobs; so that they are portable from one job to the next. Industry must invest in re-skilling and up-skilling and incentivise workers for life-long learning. The government must co-partner the corporate sector and the larger ecosystem to support the disadvantaged section of the employment chain.
The future may be very different. We may well experience reversal of job polarisation, driven largely by technological changes and a profound and permeating shift in the industry structure. This will manifest as shrinking employment opportunities at the bottom. However, India may not be impacted by this trend in the very near future. The optimists believe and project an entirely different narrative predicated largely on several new tasks opening up in the ensuing economic transformation.
In a globalised world India must ‘pick and choose’ the industries where it has competitive advantage, focus on the job creating sectors and wholeheartedly invest. India ’serves’ well; and will create jobs.
*Empowering Demography: But Where are the Jobs
In the meanwhile, the government and the economic actors must act. Jobs can’t be created on thin air. India’s job problems can be solved only by a concentrated and focused approach to ‘value migration’.
At the macro level policymaking will need the intertwined and concentrated contribution of several ministries, in a sustainable holistic manner. The labour ministry must work in tandem with the ministry of education and skill. The ministry of finance must contribute it's might to the ministry of MSMEs.
Labour, education, industrial, and agri reforms must be holistically pursued. And implemented well. It needs political will in plenty.
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