Create employment through the means of productive jobs

GDP growth is only an instrument and well-being is the outcome. The main indicator of well-being is productive employment.

One of the development challenges for the new central government and various state governments is the generation of employment.

It is not just creation of any type of employment but the generation of quality or productive jobs which is a big challenge.

Policies are needed to take advantage of ‘demographic dividend’ in terms of youth bulge.

This article looks at changes in employment in recent years and the challenges of employment for the new government.

India Labour and Employment Report shows some positive changes in employment and wages in recent years.

The share of agriculture in total employment declined sharply by about 10 per cent between 2004-05 and 2011-12.

For the first time in the history of India, the share of agriculture in employment was less than 50 per cent in 2011-12.

The biggest increase in the share, of course, was in the construction sector.

Another notable feature is the significant rise in real wages, particularly for casual labourers, which is accompanied by rising labour productivity.

The share of organised sector workers rose from 11.8 per cent in 2004-05 to 17 per cent in 2011-12.

The access to quality employment of social groups – such as SCs and STs – increased to a small extent particularly in the public sector, whereas the share of Muslims declined.

The share of OBCs in both public and private sector employment increased largely in place of the upper strata of society.

The present government has rightly focused on manufacturing employment with  the ‘Make in India’ slogan.

A study by Ramaswamy and Aggarwal at Indira Gandhi Institute of Development Research (IGIDR) suggests that the service sector would be an unlikely destination for the millions of low-skilled job seekers.

The policy signals have to clearly say that we stand to support manufacturing activity in a big way.

Productive employment has to rise in SMEs and unorganised manufacturing.

It does not mean that service sector has no potential. There is a complementarity between manufacturing and services.

However, service sector has greater duality in terms of informality and wage inequality.

On the one hand, we have highly skilled activities like IT getting very high salaries.

On the other, we have the low productive, large, informal sector getting very low incomes and wages.

Programmes like MGNREGA can supplement in the generation of employment.

A study by IGIDR on Maharashtra shows that 80 per cent of the activities under NREGA relate to agriculture activities and therefore they can increase agriculture productivity.

However, the present government has to keep in mind that the most important challenge is increasing quality employment and skill development.

India has one of the highest number and proportion of informal workers in the world. Out of 472 million workers, 92.4 per cent (436 million) were informal workers in 2011-12.

In other words, only 7.5 per cent of the total workers in India are formally employed and enjoy regular jobs.

The need for increase in organised sector jobs is obvious.

Flexible labour market

Labour market rigidities are considered as constraint for the expansion of organised sector.

The present government is thinking of labour reforms. But despite regulation, the labour market is flexible in practice.

The proportion of informal workers in the organised sector has increased from 41 per cent in 1999-00 to 58 per cent in 2011-12.

It shows that even in the organised sector, contractual employment has been increasing faster.

Labour market alone can’t improve organised manufacturing. There are other constraints like ease of business, land acquisition, credit, infrastructure, etc.

Another issue is the problem of ‘working poor’. The overall unemployment is low but many are informal workers working at low wages and low working conditions.

One-fourth to half of Indian workers were below poverty line in 2011-12.

In India, education and the skills of workers are low although they have been rising over time.

Even in 2011-12, around 78 per cent of rural females, 56 per cent of rural males, 47 per cent of urban females and 30 per cent of urban males are either illiterate or have been educated upto primary level.

Only about 5 per cent of rural females and 13 per cent of rural males have a higher secondary education and above.

Skill development numbers show that overall only 10 per cent of the workforce in the age group of 15-59 years received some form of vocational training in 2009-10.

The percentage of workers who received vocational training was the highest in the service sector with 33 per cent.

This is followed by manufacturing (31 per cent) and agriculture (27 per cent). But, majority of workers have non-formal vocational training.

Youth employment/unemployment is another related challenge.

Demographic dividend can be attained only when youth, who are becoming educated, are provided productive jobs. Youth unemployment (6.1 per cent) was nearly three times to that of overall unemployment rate (2.2 per cent) in 2011-12.

The unemployment among educated youth was 14 per cent in the same year. High rate of youth unemployment can lead to social unrest in the society.

Most of them aspire for regular formal employment and decent jobs in terms of having good conditions of work and getting social security benefits.

Lastly, the work participation rates of women have declined significantly in recent years.

More women are attending educational institutions.

Over time, though, there is a need to improve work participation rates of women for their empowerment and higher economic growth.

The work participation rate for women in India is only 28 per cent compared to 65 per cent in China and 48 per cent of the world average.

In conclusion, inclusive development mainly refers to creation of employment through the means of productive jobs.

The success of development strategies followed by the present government depends on attaining this goal in future.

(The writer is Director and Vice-Chancellor, IGIDR, Mumbai)