Ritika Karan
Almost every other individual is facing the consequences that have occurred due to the possibility of a jobless growth economy. In an economy, where the growth process isn’t showing accompanied growth in the number of jobs, it is difficult for the investors, employees and the industries to adjust with the new economic order. When the growth of an economy is accompanied with a high rate of unemployment, it means that there are structural changes going on in that economy. These changes have both positive as well as negative aspects, it provides opportunities to some and difficult choices for others.
Jobless growth is basically a phenomenon in which the economy of a country grows but the rate of unemployment remains obstinately high. India has been facing this conflicting pattern of economic growth where the economy has been on a sustained growth path. However, there are no signs of an equivalent increase in the level of job creation. With an increase in the population of a country, it is necessary for the people to work in order to support their families and themselves for their well-being. It is obligatory to have an expanding economy in order to employ all those individuals who seek work. If there isn’t sufficient economic growth, it would not be possible for the individuals to find work. It is an individual’s work possessing employable skills that would help him find work in any economic condition. If there are plentiful jobs, then there will be more opportunities for individuals having less attractive skill sets. In an economy where there is the situation of jobless growth, the rate of unemployment remains stubbornly high even if the economy itself is growing. It tends to occur when a comparatively large number of population have lost their jobs and the resulting recovery is insufficient to absorb the unemployed, underemployed and those first entering the workforce.
Agricultural sector being the biggest employment sector, employing around 45% of total population contributes only 15% to the GDP, whereas the service sector being the biggest contributor to GDP employs less than even 30% of the population. The IT sector and the financial services are considered as the key drivers of service sector as per the growth patterns of the last two decades. However, both the sectors are not employment intensive which leads to jobless growth in India. It is impossible for a labour intensive manufacturing sector to become the growth engine of an economy. It was the knowledge intensive service sector with some portions of capital intensive manufacturing that contributed to be the growth engines of India. The problem was that these sectors did not promote intensive employment. Due to the inactiveness of manufacturing sector and shrinking of labour intensive segments, the employment led growth got hindered. The excess rigidity in the manufacturing labour market and the regulations created disincentives for employers to create jobs. According to the World Bank study, the Industrial Disputes Act has led down the employment in organized manufacturing sector by 25%. The rigorous employment protection legislation has plunged the employers towards capital intensive means of production, rather than warranted by existing costs of labour relative to capital. The impediments to entrepreneurial growth in small scale firms along with an age old history of small scale reservation policy has blocked the entry of large scale units in labour intensive industries.
The economies go through cyclical as well as structural changes while recovering from a recession. The employment growth and decline follows the expansion and contraction of an economy in case of a cyclical economy whereas a structural change is responsible for displacing many unemployed workers as their companies fail to fully recover.
In cyclical economies, as the companies lay off workers to bring cost in line with the revenues, the GDP of the company starts contracting. Unemployment climbs up, which in turn contributes to the economic contraction. At certain point, the economy stabilizes and starts to expand again. When the economy expands, the companies rehire their laid-off workers. This rehiring process leads to reduced level of unemployment. The skills and the training of the workers in this scenario perfectly fit the needs of the companies. This revulsion in the activities of the established industries help the laid-off workers to get rehired in their field or increase their chances of finding similar work at a different company. The employees working in diminishing industries should acquire new skills and undertake additional training in order to become employable. It takes time to obtain new skills and to adapt to the changing industries. Another major reason due to which the rate of unemployment increases, even if the economy is stable or growing is the adjustment period. The improvements in technological processes as well as the productivity leads to change in the nature of the employment and also increases the time it takes to retrain the employees. The presence of a large number of workers that are unable to find work is a major consequence of structural change in an economy. The individuals that don’t have jobs or are underemployed, clutch the growth of the economy back because it requires a number of years before that these people learn the skill, they need to be employed at a similar level. The existence of changes regarding the fundamental basis of work for everyone are depicted by a jobless growth economy. The efficiency of a worker in performing the activities for growing industries depends on his skills and training. There are some workers that face long term unemployment or underemployment and would not be able to find work until they acquire new skills. The investors who’re able to recognize the structural changes in the economy would get benefitted if they orient their investment portfolios with the economy’s growth opportunities. They need to follow the employment numbers in context to the industry, which would help them in having a comprehensive study regarding the promising companies within that sector.
Keeping aside all these factors, the main factor that requires utmost concern and critical evaluation is the unsound and erroneous education system which does not make an individual proficient enough to be job ready. Individuals do not possess the vital skills and understanding to survive in this world- a world where the new age ideas of artificial intelligence and machine learning are the scrutinizing forces behind the growing economies. Here, the government should be held accountable for this reluctance because it has always accentuated on a system of education that promotes rote learning rather than knowing concepts comprehensively. There are numerous solutions that have been advocated in order to move towards an employment friendly regime. We should also focus on generating quality employment rather than focussing on the quantity. For instance, if we consider the apparel sector, it has the potential to employ about 45 million people as per the estimation by Apparel Export Promotion Council. There are numerous solutions that have been advocated in order to move towards an employment friendly regime. We should also focus on generating quality employment rather than focussing on the quantity. For instance, if we consider the apparel sector, it has the potential to employ about 45 million people as per the estimation by Apparel Export Promotion Council. The sectors which employ the major amount of India’s population need to be entirely developed through intensified development of productivity to hinder the mass migration of people out of the vocation. An amplified role of the MSME (Ministry of Micro, Small and Medium Enterprises) is required as it contributes about 40% to India’s manufacturing output and hires around 14 crore people. The launch of MUDRA Bank in order to provide credit to the small scale entrepreneurs is a great initiative. Government has also initiated certain schemes like Make in India, Digital India and Skill India to enlarge the skill set of the population and also to increase the employment. Among these, the Make in India scheme’s main motto is to turn India into an attractive global manufacturing hub while reshaping the whole economy.
Another issue which is of utmost concern and requires attention is the data sources on employment and unemployment. NSSO (National Sample Survey Office) is the only data source which is credible even though the data is not recorded periodically. A major part of the workforce is either working in the informal sector or is self-employed which is not being recorded by the data sources. Therefore, any statistical analysis or estimation without recording the whole data will lead to a false analysis of the scenario.
The need of the moment is to make livelihood creation at centre in accordance with the development strategies rather than just safeguarding it as a natural fallout of growth. It needs to be accepted that the organized manufacturing sector is not the answer to generate large scale employment like that in the past. The labour laws should be reformed. A few job intensive sectors like the Food Processing sector should be promoted. The education system should rebuild to create the desired skill sets. The entrepreneurial instincts of the individuals should be encouraged, whether they create Startup India or delivers the results under Standup India missions, it would generate sustainable outcomes. The MUDRA Scheme should be encouraged more and more as it can be a game changer for MSME sector to create the required amount of jobs in India. It is a sensible goal to raise the standards of economic growth and lead the country across a substantial growth path to prosperity, but an employment aligned and growth oriented strategy is what is the need of the hour. For a country like India, where majority of the population still resides below poverty line and where the growth benefits are unable to reach to a large section of the population, we need to change our norms and build fresh strategies for employment led growth.
(The author is Student (Five Years Integrated MSc Economics) Shri Mata Vaishno Devi University, Kakryal, Katra)
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