Addressing the jobs challenge

ILO report on India’s employment crisis is prescriptive. Policymakers need to take note

The India Employment Report released by the International Labour Organization on March 27, gives a much-needed broad-brush picture of India’s employment challenge. It has reiterated some basic stylised facts such as a worsening of labour market outcomes in the decade ending with the pandemic and the subsequent improvement in indicators such as labour force participation and unemployment rate. However, what makes the report important and attention worthy is the fact that its analysis goes beyond a comparative statistics approach. Here are three things which are worth reiterating.

The most important takeaway is that leaving the resolution of India’s employment challenge to the markets alone is not going to work. This is because of the simple reason that production, especially in manufacturing, is becoming increasingly capitalintensive. This means that even if we manage to get high manufacturing growth, employment generation might continue to disappoint. This basic point cannot be overemphasised in India.

The second important takeaway from the report is the emphasis on the broken link between education and employment. “A large proportion of highly educated young men and women, including the technically educated, are overqualified for the job they have,” the report notes. This should not be a surprise in a country where hundreds of thousands, with qualifications as high as PhDs, apply for blue-collar public sector jobs in the hope of job security. The third key takeaway from the report is the emphasis on the need for an active policy engagement to solve both qualitative and quantitative aspects of India’s employment challenge. It flags the challenges of addressing inequalities, improving the quality of jobs, putting in place an effective skill enhancement framework and fixing information asymmetries in the labour market. The report rightly calls for giving “primacy to labour-intensive manufacturing employment to absorb the abundant unskilled labour” and to support “the emerging employment-generating modern manufacturing and services sectors”.

To be sure, this is not the first time an academic study has underlined these points about India’s employment challenge. Will these recommendations find favour with politicians and eventually governments? This is a more difficult question to answer in a country where politics tends to gravitate towards populist solutions such as blanket hiring for government jobs or demanding or extending the scope of reservations when it comes to dealing with employment concerns.