Skill, Productivity And Growth Interlinked. Key To Jobs
India at 75 is the fifth largest economy, and yet exhibits none of the characteristics of a developing country.
We suffer high (about 40 million) unemployment, and even more acute ‘underemployment’. A Crux study of the last two economic boom cycles confirms a slowing pace of job creation. The correlation between corporate revenue and jobs is weakening, down to 0.15 per cent from 0.4 per cent for every one per cent growth in topline and is at a historic low. Jobs are key to inclusion and upward mobility.
*Structural, weakening shift in demography.Transition unevenly sequenced
Indiamay be at the end of the demographic ‘dividend’ curve. The working age population at 63 per cent is the envy of the world but in a jobless growth ecosystem it is turning out to be a misfortune. At 23 one is old in Uttar Pradesh, but at 34, one is young in Kerala. Exploiting the demography will need a scalpel.
We have used the hammer.
The economy ‘creates’ merely 60 per cent of the jobs needed. Labour force participation at 45 per cent is the lowest amongst economies of our nature. The female workforce participation is even worse; and retreating. It’s even lower than that of Pakistan. This must worry us. The job ecosystem has several other inimical features. About a third of all male graduates in their twenties are unemployed.
A Crux study highlights that the young and educated’ ‘wait’ 42 months for jobs compatible with their qualification. The eager ‘accept’ and get absorbed in low-productivity segments of the unorganised sector. ‘Continued’ engagement in family firms and farms is the last resort, implying under-employment; and no better.
The productivity of the workforce is low, hurting the ambition of businesses to move up the value chain. India is yet to identify, or implement an education ecosystem that intertwines education and skill. Industry believes that only a fourth of all graduates are ‘employable’. Less than five per cent are formally skilled and less than 20 per cent acquire the requisite skills. Most ‘learn’ on the job, which lowers productivity and subtracts economic value.
Of those ‘employed’ about 80 per cent work in the unorganised sector; 70 per cent amongst them toil in low productivity, informal jobs and are often ‘underemployed’. They dig roads, lay bricks, sweep, ‘operate’ lifts, and ‘guard’ offices, making less than the per capita income, and are deprived of most ‘employee’ benefits.
*Low productivity equally a challenge
The ecosystem continues to struggle with productivity dynamics. We are amongst the bottom 10 percentile. Only eight per cent of the formal jobs contribute to 55 per cent of the GDP, while 92 per cent of the informal workforce, including farm labour, contribute the remaining 45 per cent.
Even as the unemployed are battling the dynamic and fast-changing requirement for skills, the pandemic has accelerated changes in the nature of work. ‘Formalisation’ has accentuated jobless growth and aggravated the pain of those battling informality and temporary employment. Increased focus on digitisation, (gig work) and technology have only added to the uncertainty. There is increasing evidence of job ‘polarisation’, which is likely to deepen with the adoption of AI, ML, and other advanced technologies.
*Opportunities aplenty. But future uncertain
India may breathe easy for now, as the displacement of the routine, low and medium-skilled associated jobs is a distance away. Emerging technologies and digitalisation will enhance productivity and create new opportunities.
Unlike most developed economies, India’s GDP ‘growth’ path has been powered by ‘shifting’ from farm to services, skipping the employment intensive manufacturing trajectory. While we moved people from ‘farm to the factory’, the contribution has been less than three times (because of lower productivity). India needs to create a ‘productivity’ framework to move up the value chain. Our focus on the low-end spectrum of the manufacturing value chain is perpetuating low-value, lower salaries. It’s rare. China and other economies started with a low-cost model but quickly ‘scaled and evolved’ to value enhancing jobs.
The incremental value add may never be more than five because of lower productivity and a detrimental ecosystem.
Economies extract thirty-times value adds from these shifts.
*‘Make in India’ is a generation too late. PIL gives us hope, but enablers are aligned
Manufacturing jobs are ‘disappearing’ at a rate of 10 per cent per year, even as the sector grows at a healthy 12 per cent. Despite the ‘Make in India’ pitch, India’s ecosystem is much too frail, and the support system too disjointed to support our ambition to emerge as the factory to the world.We have missed the manufacturing export opportunity.
Our regulatory framework is restrictive; ‘protects’ the 20 per cent formally employed labour. Inevitably businesses tend to see labour as a problem and to be avoided. This has hurt the more labour-intensive sectors like garments,footwear and food processing.These sectorswere our strength.
Most new jobs are from the services sectors, such as healthcare, financial services, technology etc. Tech and gig roles triggered by the half million startups are bright spots and auger well for the future. Digital and innovation has the potential to enhance productivity and yet create more jobs.
There are opportunities to ‘export’ services (foreigners spending in India), if aligned optimally and with an integrated approach. Similarly, India can further ‘build’ on the urban construction theme. appropriate skilling will not only enhance productivity but also transition many more of the underemployed from the farm to a value accrediting construction sector.
We should not ‘give’ up on manufacturing even though it will employ fewer numbers per growth unit. Manufacturing has stronger linkages with other sectors, its tributaries drive growth. It’s a true multiplier.
*Job creation a marathon; not a sprint
The evolving nature of jobs and complexity across business sectors necessitates innovative and holistic policy making.
Industries like garments and food processing need fiscal incentives and enabling labour laws. Similarly, gig work and technology-driven jobs are emerging as a new employment opportunity and must be welcomed and supported by creating a safety net, health, insurance, and other benefits. They will support the millions to make a living.
Growth alone will not solve our unemployment problems, nor will it address the less ‘visible’ challenge of underemployment. We need to evolve our education framework to one that intertwines skills. Similarly braid and integrate policies that focus on productivity, scale, and technology to move up the value chain.
India needs a new breed of economy facing institutions to design, build and implement a robust and formidable job-growth framework.
