Question – The unprecedented drop in the absolute number of workers in the Indian economy reflects a shift from “Jobless growth to job-loss growth”. What are the reasons for the current job losses in the Indian economy? – 16 July 2021
Answer – Job-loss growth implies negative employment elasticity with respect to the growth rate in the economy. The Center for Monitoring Indian Economy (CIME) in its consumer pyramid surveys reported job losses of 11 million and an unemployment rate of 7.8% between January 2012 and December 2018. Jobless growth is different from job-loss growth because the first is a growth scenario with a slower rate of growth of job opportunities. Employment elasticity is not negative, but job-loss growth is a state of destruction in employment, resulting in an increase of unemployment.
According to a working paper published by Azim Premji University, the agriculture sector has registered a decline in employment at the rate of 4.5 million per annum (about 27 million in total) during 2011-12 and 2017-18. The share of employment in agriculture and allied sectors has declined from 49% to about 44%.
The labour-intensive manufacturing sector has registered a drop of 35 lakh jobs. Thus the share of manufacturing in total employment has come down from 12.6 to 12.1 percent. In fact, manufacturing jobs have declined for the first time in India’s history. This is not only a decline in the growth rate, but also a fall in the absolute numbers.
Reasons for loss of current job in the country
- Stagnation of labor intensive sector:
- Overall, net job losses occurred in five of the 20 sub-sectors of the economy, the most important of which are the primary sector of agriculture and allied activities and mining and quarrying, followed by other productive sectors of manufacturing.
- Thus, the productive sectors of the economy accounted for 95% of the total job losses. These 5 sub-sectors contribute to 65% of the total employment in the country.
- Given its high share of employment, agriculture has emerged as the biggest loser in terms of absolute number of jobs lost.
- Decline in government jobs:
- The government/public sector system has also registered a decline in employment to 3.73 lakh or 4.5 per cent during 2011-12 and 2017-18. In view of this fact the educated youth aspiring for public service jobs are in despair.
- Many low-ranking positions have been removed and/or subcontracted. In the name of austerity measures, many vacancies have not been filled for a long time.
- Stagnation of Economy: Indian economy is passing through a phase of declining GDP growth rate. Recent data estimates that the second quarter of 2019-20 may see a growth rate of 2 percent. The slowdown in the economy from the last quarter of the 2018-19 financial year had a negative impact on job creation.
- Structural changes in the economy: The negative impact of demonetisation and the disruption arising from the introduction of GST could lead to net job losses in the unorganized sector, which is seen as a net decline in employment, especially of workers. Agriculture, manufacturing and some services. Example- Parle has laid off 10000 employees due to low demand and adverse effect of GST.
- Education and Skills Required: It is important to note that, job loss has mostly been among the less educated people. The threshold level of educational qualification for a variety of jobs that were previously performed by the less educated may have increased with the technological and organizational changes that have occurred in many economic activities resulting in increased job-loss.
What measures can the economy take to deal with this issue-
- Focus on the rural economy with a view to strengthening the productive capacity of small enterprises through rural credit and demand generation as well as its regeneration including strengthening and enhancing the productive capacity of natural capital.
- Strengthening education, health and allied sectors, especially in the rural economy, to increase employability.
- The situation also calls for a holistic approach to harness the hidden potential of women’s labor especially from the economically poor sections. In short, a new strategy is needed to address the lack of employment and income of people in the unorganized or informal sector.
- To address the problem of aggregate demand with focus on rural economy.
- To increase production in the industrial sector to increase employment.
Job-loss growth will have an adverse effect on the country’s demographic dividend, hence there is a need for a comprehensive employment policy with an industrial policy to “address agricultural transformation, promote real wages in rural areas, ensure industrial development, consider skill issues”.