Indian labour ecosystem needs major changes to increase efficiency

According to India Labour Report 2009, while high economic growth will create employment, its sustenance depends on the ability of people to benefit from these opportunities. This ability of India’s people to take advantage is undermined by three mismatches–the skills mismatch, the sectoral mismatch, and the geographical mismatch. These mismatches need an emergency response because demographics only create a small window of opportunity.

“Many of us intuitively recognise that the most important decision a child in India can make is to choose their parents wisely. But, the second most important decision the child can make is to choose where they are born. India’s geography of work is creating a tragedy because jobs are being created in different areas from where people who need them are located. But demographics are not destiny and states can bend the curve with a radical overhaul of their education, employability and employment regime,” says Manish Sabharwal, Chairman, TeamLease Services.

The India Labour Report 2009 has also ranked states on the basis of their labour ecosystem that covered performance related to education and training, infrastructure, governance and the legal/regulatory structure - areas that are mostly determined by state-level efforts. The aggregate labour ecosystem index shows that the topmost performers are Andhra Pradesh, Karnataka and Maharashtra – each has had significant improvements in its index values and ranks.  The report finds that almost all the states have made significant improvement in the 2000s including Bihar (J&K and Assam being the two states that have made some progress in the period 2005-09 but continue to be below their performance levels in 1995).  Another state that has not shown any improvement in the post reform period has been Orissa that has been worsening in a secular manner.

The report points out that, like many other developing countries, India will have to adjust to an aging population that is markedly faster than what was witnessed by today’s developed countries.  India may become the most populous country in the world by 2050.  But at that point the window of opportunity that demographic dividend presents will be a limited one.  Beyond 2030, India will begin to age too.  So the window of opportunity is between now and 2025.

In 2025, 25 per cent of the world’s workforce will be in India. But to tap the demographic dividend, India needs better mortality and morbidity indicators. India needs better education and skills. “We believe that states are losing an important opportunity to differentiate their 3E ecosystems (education, employment and employability). States with poor 3E ecosystems – those at the bottom of our ranking - have a higher probability of poverty, forced migration and social problems like Naxalism,” adds Manish Sabharwal.

The report finally concludes on the note that states investing in good labour ecosystems are those that grow more rapidly in the long run. The India Labour Report is part of TeamLease’s broader campaign to increase information around the current labour regime that hinders job creation and the expansion of non-traditional employment. This Annual Report complements TeamLease’s research series that includes its Annual Temp Salary Primer, quarterly Employment Outlook Index, and quarterly changes to India’s world of work series.