By Kalilur Rahman
About a year back, I remember reading an article about how 255 PhDs were amongst the 2.3 million applicants for 368 peon posts in UP. While it was no surprise, it was a sad message to digest. A few days back, a friend told me a story about his neighbour living across the street. The breadwinner, in his mid-40s, was laid off and was out of a job for a few months. His elder son, who was going to class 12, and his daughter going to class nine stopped attending the school in which my friends spouse was a teacher. The entire family lost about 25 percent of their weight in a span of months. The toll was very much visible. The number of heart-wrenching stories caused by unemployment must be staggering.
Indias economic growth
India is home to the largest number of youngsters in the world. India is likely to overtake China in the near future, largely due to the One Home , One Child policy enforced by China for the past four decades. However, a stark statistical difference exists between India and China. China added close to 62 million jobs since 2012akin to adding the population of France. Whereas, in India, close to 1.5 million jobs were added (as per BSE-CMIE report) against 26 million entering the ring.
While the top-performing firms of BSE-500 have had a decent workforce growth (around 3.8-5 percent), over the past few years, the challenge is non-creation of jobs for a large section of the educated workforce. As per some estimates, 12-13 million jobs need to be created every year to sustain the pace of economic growth. The challenge to India is that unemployment has increased in the past few years, largely as a result of the number of candidates increasing, while the growth has slowed down due to a large number of global factors. The service industry, especially the IT and ITES industries, which creates around 3.2 indirect jobs, has slowed down in India. There is an element of underemployment in the nation, as per a comment made by a NITI Aayog official.
Impact of economic tailwinds
With the boom in the service industry, the number of educational institutions increased multi-fold. On a lighter note, it is easier to get an engineering degree in India than to get an iPhone within the first hour of launch. The commercialisation of education, lack of quality infrastructure, learning methodology, staff and quality of inflow to institutions, the quality of students graduating is getting catastrophically low. To increase employability, the quality of the educational system needs to be very high, across the boards.
There is a strong case for labour reforms, especially in the unorganised sector, to ensure that people get the right wages. It would ensure job securities and the avoidance of disparity in pay scales across levels. This is evident in certain informal sectors where birds of a feather style economy exists. Inclusive labour reforms will be a key aspect to consider.
Chinas growth was largely propelled by a manufacturing boost and was complemented by quality technological support aided by a stable central government (leaving human rights discussion aside). Some of the leading economies (small or bigger) had very strong foundations and astute support by non-partisan leaders with a vision. Given that unemployment and economic challenges are highlighted as some of the biggest global risks as per World Economic Forums reports over the past few years, are we on the right track to address the challenge of unemployment?
Indias inflation rates have reduced over last few years, but some of the essential commodities such as LPG gas have nearly doubled in price. As per a famous curve predicted by A.W Phillips, inflation and unemployment are inversely related to each other. A question arises then, is the current increase in unemployment rate contributed to the inflation? In a larger scheme of things, macroeconomic indicators play a role. However, in the case of India, it is purely a case of ‘Supply Vs Demand’. The supply growth factor is huge while the demand is more or less static in terms of growth percentage.
What can be done?
To increase the job market demand, a lot of economic stimuli is needed, be it centrally funded infrastructure projects, industries or enticement of foreign investments that result in increased labour stimulus and job growth. A strong inclusive labour policy needs to be implemented. From a service-oriented economic growth, services, manufacturing and informal or cyclical labour market growth are needed.
On the quality front, increasing the quality of the job aspirants by making them employable is the key. Quality is very important over quantity. This has an important link with the quality of the educational institutes and the national skills development mission. Some of these structural changes will take time. Leaving the frictional and cyclical unemployment cycles aside, structural unemployment will decrease when there is a strong demand for a skilled work-force.
A quadrant of quality education, skill-development programs, strong labour policies and investment enabling economic stimulus will help address this need. One strong contributor will be better tax collection that can be used for national development purposes. Like some of the health indicators, unemployment needs to be at manageable levels.
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