Growth but no jobs


The number of people of working age is growing at a faster rate than the number of jobs being added in India, the world’s second fastest growing economy. The country’s workforce, or those between the ages of 20 and 59, will touch 716 million by 2020, but at current growth rates, even if India adds 100 million jobs by then, there will still be 170 million who will be jobless, says a staffing company ‘Team Lease’.

With the organized sector not growing and hiring most of this huge labor force of 716 million is staring at two very hard realities: widespread unemployment and poor employment. Team Lease says in a study that the quality of labor would be so poor that only about 88 million of them would be graduates.

From the study it could be observed that the sector scenario does not offer much hope to the youth of this country. The labor laws must be reformed and states get more authority to enact legislation in the sector, employment elasticity or the number of jobs created when GDP grows, will not improve from the current 0.15%. This means that when the country’s GDP rises 1%, employment increases 0.15%. At that rate unemployment would be close to 30% by 2020.

The gloomy picture is because of about 2,500 central and 25,000 state labor laws. The silent majority of unemployed and unorganized labor (93% of our labor force) need a labor regime that chooses new jobs over existing ones, does not encourage the substitution of labor by capital, and eliminates the disincentives of job creation in the organized sector.

Most of these new jobs were created by the unorganized sector. A large number of people employed in rural areas, unemployment figures may not reveal much. The problem is more of under employment. What is most worrying is that the annual average growth in employment has slowed.

The agriculture sector is blamed as the main culprit for the slowdown but it is not so.

The history of development is one of pulling people out of agriculture, into non-farm activities into manufacturing and into services, not retaining them there. In that sense, India has witnessed a failed Industrial revolution

A large number of people working in farms and manufacturing is not absorbing many. The evidence in high growth economies suggest that a country’s GDP and employment is positively linked to a free labor market. The organized sector has to expand to create more jobs. If the labor laws are rigid, employers resist hiring people.

India needs to generate a range of additional employment opportunities, rapidly improve the skill and education base of those in the labor force, and create an environment where opportunities and capabilities go together and simultaneously.

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