• UGI USER
  • Jul 19, 2024
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THE MISSING PIECES IN INDIA’S JOBS PUZZLE

Syllabus:

  • GS-3- Jobs , Unemployment and measures to calculate rate of it , economic indicators

Focus :

The article highlights the critical role of the informal sector in India’s job market, the impact of recent economic crises on employment, and the need for targeted policy interventions to address the productivity and employment challenges in both the informal and formal sectors.

Source - LM

Introduction

  • The Indian job market is an intricate puzzle, with the informal sector playing a pivotal role as a buffer between agriculture and formal sector employment.
  • The recent general election results have prompted the ruling Bharatiya Janata Party (BJP) to focus on employment in the upcoming budget.
  • The past decade has seen negligible job creation, with a dramatic fall in female employment.
  • The COVID-19 pandemic led to a sharp increase in job creation according to government data, but these figures have been controversial.
  • The Reserve Bank of India’s (RBI) recent data release has further complicated the picture.

Employment Trends Over the Decade

The Lost Decade of Employment

  • 2010-2019: A Decade of Stagnation: The decade from 2010 to 2019 is considered a lost decade in terms of job creation. Various estimates indicate a dramatic fall in employment, particularly for women.
  • This period saw a negligible increase in employment despite the growing working-age population.
  • COVID-19 and Job Creation: The COVID-19 pandemic and its aftermath led to a sharp increase in job creation according to government data. However, the accuracy of this data is debated.

The Controversial RBI Data

  • RBI’s Optimistic Job Creation Figures: The RBI reported that approximately 46 million jobs were created between 2022-23 and 2023-24.
  • This data is based on sources such as the government’s Periodic Labour Force Survey (PLFS), without primary field surveys conducted by the RBI.
  • Sector-Wise Breakdown Unclear: The RBI did not provide a sector-wise breakdown for the 2023-24 numbers, which raises questions about the data’s reliability.
Types of Unemployment

  • Structural Unemployment-Rooted in mismatches between the skills of the workforce and the requirements of available positions, structural unemployment underscores systemic issues within the labor market.
  • Cyclical Unemployment-Linked to economic cycles, this type of unemployment increases during economic downturns and decreases during periods of expansion, highlighting the sensitivity of job availability to macroeconomic conditions.
  • Frictional Unemployment (Transitional Unemployment)-Also known as transitional unemployment, this type arises from the natural transition between jobs, reflecting the temporary period individuals spend searching for new employment opportunities.
  • Underemployment-Though not strictly unemployment, underemployment refers to individuals working in positions that underutilize their skills or provide insufficient working hours, contributing to economic inefficiency.
  • Hidden Unemployment-This type involves individuals who are not actively seeking employment due to discouragement or other factors but could potentially enter the job market if conditions improve.
  • Disguised Unemployment-Disguised unemployment occurs when more laborers work in a factory or on land than are needed, resulting in reduced productivity, or lower production per unit of labor.

Agricultural Employment and Economic Crisis

The Shift Back to Agriculture

  • Reversal of Trends: Between 2019-20 and 2022-23, the RBI data shows 23 million jobs were created in agriculture, reversing the previous trend of declining agricultural employment.
  • This shift is often seen as a marker of economic crisis, with workers forced to take any available job, even if it paid little.
  • ILO’s Perspective: According to the International Labour Organization (ILO), the rise in agricultural employment involved many rural women workers, mostly in unpaid or casual work, indicating a return to subsistence activities due to a lack of opportunities outside agriculture.

Informal Sector Dynamics

Informal Sector as a Buffer

  • Role of the Informal Sector: The informal sector acts as a buffer stock of labor, absorbing workers unable to find employment in the formal economy. Informal sector workers typically earn lower wages, have less job security, and are less productive than those in the formal sector.
  • Impact of Crises on the Informal Sector: The informal sector has been significantly affected by demonetization, the introduction of GST, and the COVID-19 pandemic. These crises have compounded the challenges faced by informal sector enterprises.

Employment Estimates Discrepancies

  • Differing Estimates: The RBI data is generally more optimistic about job creation compared to other sources like the ILO. For instance, the ILO estimated that the workforce grew by 79.4 million people between 2000 and 2019, while the RBI estimated a growth of 91.6 million.
  • Female Employment Decline: Studies indicate a significant decline in female employment, particularly in rural areas, during this period.

Productivity Crisis in the Informal Sector

Productivity Trends

  • Nominal vs. Real Productivity Growth: The average value of output produced per worker grew by 6.5% annually between 2012 and 2019 according to ILO data. However, this growth is not adjusted for inflation.
  • Stagnation in Real Productivity: After adjusting for inflation, the growth in productivity in the informal sector has been essentially flat since 2015-16. Manufacturing sector workers saw better productivity growth compared to the informal services sector.

Annual Survey of Unincorporated Sector Enterprises (ASUSE)

  • ASUSE Findings: The government’s Annual Survey of Unincorporated Sector Enterprises (ASUSE) revealed that the informal sector’s contribution to GDP has fallen between 2015-16 and 2022-23. Despite employing a greater share of the workforce, the sector’s output has not kept pace.
  • Impact of Financial Exclusion: Many informal sector enterprises operate without bank accounts, highlighting the challenges of financial inclusion.

Manufacturing and Services Sectors

The Manufacturing Imperative

  • Need for Manufacturing Growth: To address the employment crisis, there is a need to boost the manufacturing sector, which has the potential to create high-quality jobs.
  • The global manufacturing landscape is shifting, with opportunities arising from corporations looking to diversify their supply chains away from China.
  • Challenges in the Services Sector: The services sector, particularly modern services like IT and finance, has seen a slowdown in employment growth. This raises questions about the sustainability of India’s services-led growth model.

Government’s Role

  • Policy Interventions: The government must focus on reversing the stagnation in manufacturing and addressing the employment crisis through targeted policy interventions.
  • Increasing Formal Employment: Efforts to increase the share of formal employment in the economy are crucial. This includes promoting the growth of large enterprises and enhancing labor productivity.

Conclusion

  • The Indian job market faces significant challenges, with the informal sector acting as a crucial buffer but struggling under multiple crises.
  • The discrepancies in employment data highlight the need for reliable and transparent statistics to inform policy decisions.
  • The focus should be on boosting manufacturing, addressing the productivity crisis in the informal sector, and increasing formal employment opportunities to ensure sustainable economic growth and job creation.

Source:Livemint

Associated article

https://universalinstitutions.com/jobs-still/

Mains Practice Question :

GS-2

  • “Discuss the role of the informal sector in the Indian economy and the impact of recent economic crises on informal sector employment. What measures can the government take to enhance labor productivity and increase formal employment opportunities?”(250 Words)