Big worry: unemployment and underemployment

Unemployment is the number one issue in 26 countries according to What Worries the World survey by France’s Ipsos, a global market research company. India is no exception to this and unemployment is undoubtedly the biggest challenge faced by the present government. It is not a surprise that Prime Minister Narendra Modi has removed two ministers from his Cabinet who were tasked with creating 10 million jobs per year.

Before we look at what the new ministers could do, let us decipher data from the latest report of the Ministry of Labour and Employment. The unemployment rate in India is 4.9%. The bigger issue, though, is that the unemployment rate is going up with the level of education.

The unemployment rate for people aged 18-29 years and holding a degree in graduation and above is at 28%. At the all-India level, 58.3% of unemployed graduates and 62.4% of unemployed post-graduates cited non-availability of jobs matching with their education/skill and experience as the main reason for unemployment. Only 60.6% of the people aged 15 years and above who were available for work all 12 months were able to get work throughout the year.

Interestingly, the Niti Aayog recently stated that the biggest problem in India is underemployment, and not unemployment. Underemployment includes highly skilled workers performing jobs requiring lower skills. An Organisation for Economic Co-operation and Development report states that underemployment is a big challenge for emerging economies with many workers trapped in low-paid, informal jobs which fail to develop and fully utilise their skills and capacities.

Underemployment can be argued as being both good and bad. Good: as a matter of survival, people will take on any work, be it casual or informal or a part-time job. Bad: it will be detrimental if it is a long-term trend with increasing percentage. In India, we don’t have clear measures for underemployment as such, but based on research reports, it would be about 17-20%.

Australia has pioneered the use of a broader measure called Labour Underutilisation Rate (LUR) by adding the underemployment and unemployment numbers, thereby giving a realistic picture of the unemployment challenge. Based on the available data, the LUR in India would be 21-25%. This means one in every four people is underemployed or unemployed!

India needs to act before unemployment/underemployment snowballs into a structural issue. The situation is certainly not out of control yet and we need to seize the opportunities in front of us.

China has emerged as the industrial hub of the world, but because of higher employee costs, the salary levels are at least 1.5 to 2.5 times more compared to a similar skilled job in India. India should use this as an opportunity to spur manufacturing in the country. The government’s plan to revamp the manufacturing policy is a step in the right direction. Implementation will be key to realising the Make in India campaign aimed at creating 100 million additional jobs by the year 2022 in the manufacturing sector.

The government is also trying to introduce the wage code for minimum wages. Opponents of minimum wages argue that the code would lead to job losses as businesses will invest in automation owing to the high wages. However, research reports state that automatable jobs would be good for the economy in the long term.

The 18th century industrial revolution, which it was feared would cause job losses, eventually led to job creation and prosperity. Along similar lines, low-wage workers with routine jobs (or automatable jobs) could lose their work, but this will lead to them taking up more valuable jobs. All actions from the government to spur manufacturing in the country and implement minimum wages will help India over the medium to long-term.

Boost rural employment

Employment generation in rural India must also be a priority for the government. Food processing, agricultural and farming productivity improvement must be supported for sustainable job creation in the country. In the rural hinterland, finding labour force for agriculture is a challenge. The farm workers are easily lured by sundry jobs in cities. The only way this massive migration can be addressed is by providing meaningful infrastructure in villages and towns.

Maybe, we should learn from the US, where the civic amenities are the best-in-class in villages/towns. Instead of creating 100 smart cities, India should focus on building smart villages and towns.

For India to make the most of these opportunities, some swift actions are necessary. For the Digital India campaign to be meaningful, the government must ensure that accurate employment-related up-to-date data is available, or with a lag of one to two months.

Along with this, the government should also publish employment demand-forecast in every industry sector for the next 5-10 years. Such a medium/long term forecast can have a tremendous impact as all the stakeholders can coherently help in building the talent supply.

There is an urgent need to revamp the broad education framework in the country on lines of employment-oriented education system in the world, through the dual system of vocational education and training (DSVET).

Further, the government should improve visibility on skill development and job creation. It must provide thrust on re-using existing physical infrastructure or building new infrastructure for offering training.

Finally, we need awareness campaigns celebrating the success stories from Pradhan Mantri MUDRA Yojana (PMMY), aimed at encouraging entrepreneurship. A recent report suggests that the PMMY generated 5.5 crore jobs. Getting youth to embrace entrepreneurship could well be the solution to addressing India’s unemployment/underemployment issues.

(The writer is adviser, Centre for Educational and Social Studies, Bengaluru)