There’s a jobs crisis. Acknowledge it
There are several ways to create employment. But first accept the problem and think of solutions that can do justice on the required scale
Every year, India’s annual Budget is elevated from a mundane accounting exercise to a statement of intent and priorities of the government at the helm. The Budget speech made by the finance minister (FM) is scrutinised to check how many times a particular sector, industry or policy issue is mentioned to gauge the government’s priorities and preferences. Jobs, by the way, was mentioned three times in the Budget speech this year.
In the speech, the FM mentioned there were initiatives in the pipeline that could create six million jobs over the next five years. That is, an average of 1.2 million jobs each year. While there is a minor sense of relief that the government is finally taking cognisance of the jobs problem (instead of relying on pakora wallahs), unfortunately, the overwhelming feeling is that of inadequacy. The vague pronouncement betrays the government’s lack of appreciation of the magnitude of the jobs problem.
Roughly 18 million Indians turn 18 every year, of which a large majority enters the workforce. Additionally, at least 100 million people need to get out of the low productivity and low-wage “jobs” in the agriculture sector — the disguised unemployed — and move into more productive non-agriculture jobs. Finally, there’s the stock of unemployed, which amounts to roughly 200 million Indians who need a job today. These do not show up in unemployment numbers in a country where the labour force participation rate is below 42%, the lowest in comparable emerging economies. The required rate of job creation is at least 20 million each year — a target removed from the government’s subdued ambition.
The consequences of a large population of unemployed youth can be drastic for India’s social fabric. Unless India creates 20 million jobs every year, we are going to increasingly witness unrest, demands for reservation, political activism, and heightened societal disturbances.
The answer to jobs is usually straightforward and requires economic growth. However, India’s unique economic structure makes it a lot more complicated. In order to achieve the scale of 20 million jobs, we need a Gross Domestic Product (GDP) growth above 10% every year and crucially, for employment elasticity to increase multiple times from the current level of 0.1%. Currently, a 10% increase in GDP results in about 1% increase in employment (elasticity), which needs to increase significantly.
The great GDP growth run that India witnessed in the last three decades has largely been jobless. Deep structural issues (labour laws, for instance) have rendered firms in a labour-abundant country to be capital intensive.
Large-scale manufacturing has a way of generating jobs, but manufacturing has just not taken off in India. Blame is rightfully laid at the doorstep of “archaic labour laws”, the non-performing assets crisis, ease of doing business or the lack thereof. There have been some improvements in these areas, but these leave a lot to be desired. A study by the International Labour Organization predicts India will have a severe skills shortage in the years to come and by 2030, we may have 29 million jobs that go unfilled because we do not have the right skills. A massive thrust is needed to help Indians upskill. Career-impact bonds that leverage the financial market by securitising “at-risk” loans given to people seeking to upskill themselves could be a great way of sustainably skilling the nation for job readiness.
Cities are where jobs are created due to agglomeration effects and the availability of opportunities. With Indian cities being listed among the least liveable in the world, there is an opportunity to build new cities.
There is also an opportunity for building larger cities centred around educational institutions, industrial clusters or even large medical or transport hubs. If we create 20-30 new cities with a population of around 8-10 million, we can generate a significant number of new jobs in building, maintaining and running those cities.
Tourism, an area that is criminally overlooked in policymaking, has a vast potential to create jobs, as international experience shows. For a country as large and diverse as India, this should be a low-hanging fruit in the employment generation endeavour.
Creating a more enabling social environment where women can work with safety and dignity can increase women’s labour force participation rate (WLFPR). Encouragement to large manufacturing such as the garment industry has created a large number of jobs for women in Bangladesh; 80% of the four million people who work in the garment industry there are women. Bangladesh has a WLFPR of 36% against the abysmal rate of below 20% for India. Every woman employed can create more than one job, because some of the unpaid housework is now outsourced to others. Women entrepreneurs tend to hire more women. Helping women entrepreneurs access credit more easily can make a significant impact on jobs, especially for women.
Other ideas to create jobs include entering into treaties with countries struggling with labour shortages and providing a safe emigration process. The gig economy is creating many jobs but these come with huge income volatility and poor working conditions. Creating a safety net for gig workers will make a difference in supporting growth in this sector.
These are the outlines of some ideas for job creation, apart from many others that exist out there. The first step, however, is an acknowledgement of the magnitude of the problem and to think of solutions that can do justice on the required scale.