I have been part of the assembly line of education unit for more than 20 years now, and ever since my childhood, my parents have always suggested me to keep on increasing my educational background to increase my demand and the number of opportunities for myself. But the recent report published by Azim Premji University on State of Working India’2019 made me go back to the above hypothesis and critically analyse it.
Any sane mind based on his instincts will surely agree with the hypothesis that there exists a direct correlation between your education and the number of desirable opportunities you will have in the market.
But the above result, as presented in the report by APU was sufficient enough to make me conclude who actually is unemployed in the “New” India. It was mind-boggling to note that after every step of education qualification the probability of remaining jobless increases and that too in multiples once you get out of the secondary unit.
The above result is taken from the report of State of Working India’2018, In one of my previous articles, I have presented that how the economic model of Independent India has changed over the seven decades from Mahalanobis Model to Harrod-Domar Model (https://qrius.com/india-a-land-of-high-growth/) and its impact on the government spending. Ever since the initial steps towards economic liberalization in 1980s, the government has shifted its focus from self-reliance public projects towards more infrastructure-related projects and have started depending more on the private sector for boosting the economy and generating employment.
A minor look at figure 2 is sufficient to make us visualize the huge difference between the CAGR of GDP and employment, it is easy to conclude that even during our high growth years of 2003-2009, it was more of a jobless growth which we were experiencing. To give it a context, the total wealth in the nation was increasing but the increase in the number of hands in which it was getting distributed was almost negligible to it. It was more of a growth of the top 1% of Indians rather than the whole of India.
The Tenth Planning Commission (2002-2007) made the visionary plan of creating a hundred million jobs in the next ten years by strengthening the manufacturing sector which could intake the ever-increasing workforce. To transform this vision into reality multiple efforts were made to make India a hotspot for Investors, proposals like the establishment of Special Economic Zones, Relaxation in the Labour Laws, Usage of Bureaucracy in Land Acquisition and what not? was done to favour the investors. A quick impact of it: Manufacturing sector used to contribute to 10.7% employment in 1983 and it has almost remained stagnant ever since, even today it contributes only 11% of the workforce. Of the total workforce in the manufacturing sector, its only one-fifth which is engaged with the factory work (formal economy), from 1995 to 2010 a total of only 0.88 million jobs were created in it with a CAGR of 0.84%. For a moment just forget the vision of creating hundred million jobs, even for the sake of increase in its share, with the expected annual GDP growth to be in the range of 7%-9% in real terms, manufacturing must grow by 10%-12% in real terms, or more than 15% in nominal terms [3]. In the current state, it remains far from being achievable.
Major issues which India is currently facing are:
Collapse of Public Sector: Historically, Public Sector had been the largest employer when it comes to formal jobs. With the changed agenda of Govt. to support private firms for employment generation, the public sector experienced a huge collapse resulting in a slowdown of recruitment, at the same time the supply of the educated youth experienced a steep increase, the situation resulted in a huge supply-demand gap.
Automation & AI: With the advancement in technology, the ability of the private sector to recruit is facing a downfall across the globe, this is particularly true for the manufacturing sector. As in the early 1980s, one crore rupees of investment (in 2015 rupees) created around 80 jobs in the organised manufacturing sector, by 2015 this had fallen to less than 10 jobs [4]. In one of the estimates, World Bank projects two-thirds of all the jobs in the developing world to be vulnerable to automation, India is at risk of losing 68% of its current jobs to automation [5].
Current Scenario
India has a workforce of 500 Million with an unemployment rate of 6%. Of the total employment, 93% of it is in the Informal Sector and its only 7% which is in the formal economy. More than 10 Million youth enters the job market every year & just to cater their needs the market should grow at >2% annually, but based on the data of last 15 years, it is surely too much to expect. With this level of increasing unemployment, I was forced to agree with the Hon’ble Prime Minister of India Mr Narendra Modi when he mentioned that even selling Pakora is a job in India.
This huge gap in the supply and demand of labour reminds me of the concept of “Reserved Army” as mentioned by Karl Marx in his book “Das Kapital”. It states that when employees start fighting for their rights and demanding higher pay, the capitalists bring in their reserved army of unemployed to get their work done at a cheaper rate to maintain their profits.
Something very similar is evident in the case of India as well. In a market, a labour gets turned into a commodity, and as the supply of the commodity get increased the prices suffer a downfall. With such huge influx of supply but lack of demand the wage to profit ratio for industry workers (a basic indicator of the distribution of economic prosperity) has declined from around 2.73 in the late 1980s to 0.25 in 2012 a spectacular 10-fold decline [6], the result of it was clearly observed in the IHDSII where it was concluded that its only 3% of Indians who can own all the basic 5 assets associated with the middle class.
The informal sector has already faced a lot of hits in the last 5 years, the effects of Demonetization & GST is still visible. Almost 5 million people have lost their job between 2016-2018. With the current pandemic, the informal sector is again going to face a huge blow, as per one of the estimates, 13.6 crore people are on verge of losing their jobs [8].
Now the major question to ponder about is: Corporates have experienced a huge downfall because of this pandemic, it will result in lesser revenue collection for the Govt, this will lead to a strong hit on the investments towards Skill Development & Job Creation, combined with this will come the slowdown in hiring in the corporate sector to maintain the profits. At the same time, more than 10 million people will be entering the job market this year. Does the supply and demand of labour ever going to converge?
Abhishek Singh is a student at IIT Kanpur
The views expressed in this article are solely that of the author and may not necessarily reflect Qrius Editorial Policy.
References:
[1] – https://cse.azimpremjiuniversity.edu.in/wp-content/uploads/2019/04/State_of_Working_India_2019.pdf
[2] – https://cse.azimpremjiuniversity.edu.in/wp-content/uploads/2019/02/State_of_Working_India_2018-1.pdf
[3] Indian Industry: Prospects & Challenges by Rajiv Kumar
[4] – https://cse.azimpremjiuniversity.edu.in/wp-content/uploads/2019/02/State_of_Working_India_2018-1.pdf
[5] World Bank, 2016, Chapter 2, P. 126
[6] – Annual Survey of Industries quoted from http://www.livemint.com/Opinion/53GWGOGWiVuqZibDu4hxnO/Is-Indias-labour-market-moving-towards-a-May-Day-situation.html
[7] Desai, Sonalde, Reeve & NCAER, New Delhi. India Human Development Survey II, 2011-12