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The Spectre of Jobless Growth in India

N Chandra Mohan, is an economics and business commentator

NEW DELHI, Oct 2 2015 (IPS) - India faces a serious challenge of dealing with joblessness despite statistically being the world’s fastest growing economy. The spread, depth and intensity of the problem, especially among the educated youth, is not reflected the latest unemployment number of 4.9 per cent in 2013-14. This estimate captures the chronically unemployed – those who sought or were available for work for the major part of the year – but it rarely figures in public discourse as the rate is relatively low and stable over time. Another reason is that the economy continues to generate employment opportunities even if they are largely casual or temporary in the informal sector.

N Chandra Mohan

N Chandra Mohan

A better description of the reality is jobless growth. An adequate number of jobs is not being created despite economic growth accelerating to 6.9 per cent in 2013-14. In other words, growth is not employment-intensive enough, as evidenced by the fact that the state government of Uttar Pradesh recently received 2.3 million applications for 368 job openings as peons. What’s more, these job seekers included 250 PhD candidates, 25,000 post graduates and 152,000 graduates. In Chhattisgarh, 75,000 people applied for 30 job openings as peons, some of whom were post graduates and engineers. These bleak employment prospects are observed in other states as well.

An important characteristic of the chronically unemployed – highlighted in all the five-yearly surveys of the National Sample Survey Organisation (NSSO) – is the concentration among the educated youth. Three-quarters of those without work on a long-term basis were observed to be fresh entrants to the labour force who are 15-29 years of age. Nothing much has changed over the years in this regard. If anything, this trend has worsened. In NSSO’s survey for 2011-12, four-fifths of those chronically employed were fresh entrants. The applicants for the posts of peons are from the ranks of educated youth.

Why are the long-term unemployed concentrated in this segment? Educated youth prefer to wait for better opportunities, unlike the poor who take up whatever is available. Supply-side factors like population and labour force growth also ensure that the share of the youth cohort is bound to be high among the fresh entrants. With rising enrolment in institutions of higher education, most of the new entrants are also educated. Attendance in institutions of higher education, corresponding to graduation and above among [DSJ1] those 20-24 years of age recorded the highest rates of growth according to the NSSO. Higher unemployment among the youth and among the educated thus are two sides of the same coin.

A growing reserve army of unemployed youth portends serious strains on the country’s social fabric. As the electorate that swept the Narendra Modi-led Bharatiya Janata Party (BJP) into power in May 2014 is predominantly young ­ from villages and small towns ­ the government must expeditiously address the challenge of jobless growth. This threatens to turn India’s demographic dividend of having a young population into a curse. Such voters are likely to expect employment opportunities to be generated immediately. Currently, there are only two million jobs being created annually, which are inadequate to absorb the 12 million young people who seek work every year.

Tackling jobless growth cannot be done through quick fixes. It is not only about labour reform. It is not possible to address the problem without developing skills that industry wants. India presents a paradox of skill shortages despite a situation of labour surplus. Around 15 percent of India’s trucks are idle due to a shortage of drivers. The steel industry is short of metallurgists. The healthcare sector is short of paramedics and technicians. The booming construction sector has a shortage of civil engineers. These skill mismatches must be met by stepping up enrolment in industrial training, vocational institutes and public-funded institutions of higher learning.

Creating more productive jobs over the near term thus is a big policy challenge for the National Democratic Alliance (NDA) government. As expectations are high, it must deliver soon on its promises, especially to the youth that has voted it to power with such a commanding majority. Consider the consequences if the shift of population away from agriculture gathers momentum and the trend of jobless growth persists in India’s manufacturing sector. If fewer jobs are created outside agriculture, more will be forced to stay in this sector, increasing the pressure on land and lowering incomes. Income inequalities will worsen while the growing ranks of jobless youth will turn restive.

The growing frustration has already spilled out onto the streets of Gujarat with the relatively well-off Patel community demanding backward caste reservation for education and jobs. The fresh entrants to the towns and cities who are looking for work are unlikely to be satisfied with the quality of employment that is on offer in urban India. Most of the jobs being generated are in the construction sector outside the purview of labour legislation or trade unionism. Employment in large factories, where work conditions are better protected, is sluggish. Equally unacceptable are temporary or causal odd-jobbing in the informal sector. In this dismal milieu, the lowly job of a peon has had many takers.

But the vast majority of the chronically unemployed are unlikely to be satisfied with such job openings. The NDA government must deliver on its flagship programmes like Make in India to generate meaningful employment opportunities. The absolute number of the educated unemployed will only keep rising due to the growth of the youth cohort among the fresh entrants to the labour force. To absorb them gainfully, labour-intensive manufacturing like textiles has to be re-vitalised. Greenfield investments to set up factories in other industries like automobiles also must be incentivised.

Lowering the official 4.9 percent rate of chronic unemployment may not seem like an urgent matter. After all, if you look at such figures the problem appears much worse elsewhere in the world, especially in Spain and Greece. Further, Brazil and Russia are deep in recession and unemployment has hit 7.5 per cent and 5.3 per cent respectively. In South Africa, joblessness is as high as 25 per cent. By contrast, the rate of unemployment in India may appear manageable. But to really think so would be a terrible mistake as the spectre of jobless growth haunts India.
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