EMPLOYMENT

51 million dollar question

In his budget speech, the finance minister rightly highlighted the need to create several million new jobs in the manufacturing sector — the “Achilles heel” of the Indian economy — over the coming years. India adds one million people to its working-age population every month. That’s right, every month. Not everyone looks for a job, though. Labour force participation is around 58 per cent — this means, of every 10 lakh persons between the age of 15 and 59, only 5.8 lakh will actually seek a job every month. The others would mostly be studying or working at home. Even with such low labour force participation, our calculations show that the number of job seekers would have risen by a whopping 51 million during the seven fiscal years leading up to 2018-19. In the global context, India will have to create 16.6 per cent of the additional jobs that are needed each year across the world. It’s a staggering number and challenge.

Creating adequate employment opportunities for new entrants in the job market, especially in the non-agricultural sector, will be a stiff task for policymakers as growth slows down. Successful employment generation is, of course, vital for equitable growth. If India is unable to generate the required number of new jobs, its much-vaunted demographic dividend will morph into its bugbear.

A recent CRISIL study estimates that the non-agricultural sector (industry and services), which now accounts for 86 per cent of the GDP, will add only 38 million jobs between 2011-12 and 2018-19 — a quarter less than the 52 million jobs that were added during the preceding seven-year period. With not enough opportunities outside the agricultural sector to absorb the 51 million new job seekers, an additional 13 million people will be forced to either depend on low-productivity farms for work or remain unemployed. That’s the opposite of what happened between 2004-05 and 2011-12 — during this period, 37 million people migrated out of agricultural employment.
As the economy develops, surplus labour needs to shift out of agriculture into more productive sectors, which will raise the per-person farm income and benefit the economy. The inability to do so will increase disguised unemployment and limit productivity improvement.

India’s growth prospects as well as its ability to translate growth into employment have been curbed in recent years. The economy grew at 4.5 per cent during the last fiscal year, and is unlikely to do much better in the current one. What is clear is that India will have to live with diminished growth expectations for the coming years. We expect the economy to expand at a lower average growth rate of 6 per cent during the seven fiscals up to 2018-19 compared with 8.5 per cent between 2004-05 and 2011-12. The 250 basis point decline will be due to the sluggishness in industry and services, assuming that agriculture grows at its trend rate of around 3 per cent. Slower non-agriculture growth, in turn, will mean fewer jobs being created.

Aggravating the slowdown is the sharp decline in the employment elasticity of the GDP, which is defined as the percentage increase in employment for every percentage point increase in the GDP. The number deteriorated sharply to 0.38 per cent between 2004-05 and 2011-12, from 0.52 per cent in the five preceding years, for the non-agricultural sector.

Two factors were responsible for this “jobless” nature of growth. First, the growth in the GDP has been driven by the services sector, which is less labour-intensive than industry. And even within the services sector, growth is driven increasingly by less labour-intensive services, such as finance, real estate and business services, including information technology and information technology enabled services.

For example, in 2011-12, these services, which account for 19 per cent of the GDP, employed only 3 per cent of the workforce. These sectors grew at over 11 per cent per year. In contrast, the more labour-dependent service sub-sectors, such as health, education and recreation services, which require 6.5 times as many people to produce output worth Rs 1 million, grew at below 7 per cent annually during the seven fiscals leading to 2012.

Second, the ability of labour-intensive sectors such as manufacturing to absorb workers has declined considerably. The employment elasticity of manufacturing fell sharply to an average 0.17 in the seven fiscals leading to 2012 from 0.68 in the five years up to 2004-05. Inflexible labour laws and increasing automation have resulted in the large-scale substitution of labour by capital. Automation is part of technological progress and is inevitable. And restrictive labour laws are speeding up the process of automation, which is an unhealthy development for an economy endowed with a large and fast-expanding workforce.

It is imperative for the government not only to push growth up but also to arrest the pace of decline in employment elasticity. For this, it will have to raise the labour dependency of the manufacturing sector by simplifying labour laws and encouraging the growth of labour-intensive industries such as textiles, gems and jewellery, handicrafts and food processing.

There is an emerging export opportunity in some of these low-cost/ labour-intensive sectors, such as textiles, as wages in China rise and businesses there start exiting these segments. Bangladesh is a good example of an economy that took advantage of its low-cost structure and developed its textile sector. This not only created jobs but also improved social indicators. Today, Bangladesh beats India on most social indicators despite having a lower per capita income.

Within services, politicians should also focus on developing the health and education sectors. This will not only create jobs as they are labour-intensive services, but also raise India’s growth potential by making the workforce healthy, skilled and educated.

And finally, we need to focus on physical infrastructure and the construction sector. This sector not only has high employment elasticity but can also absorb low-skilled labour from the agricultural sector.

Construction has the highest employment elasticity among non-agricultural sectors —  a percentage point growth in the construction sector raises employment by more than 1 per cent. No wonder the number of people employed in the construction sector went up by 25 million, in contrast with only six million in manufacturing, in the seven fiscals leading to 2012, even though both sectors grew at a similar rate of around 9 per cent per year. More than 65 per cent of the labour force used in construction is unskilled or semi-skilled — a key characteristic of people coming out of agriculture. A fast-growing construction sector can therefore create significant employment opportunities for low-skilled surplus labour in agriculture.

Cutting to the chase, policymakers have their task cut out. Inaction will be perilous as it will transform India’s potential demographic dividend into a demographic liability.

We must act fast to create jobs, improve the workforce' - See more at: 

By the year 2020, India — already one of the youngest nations in the world — will have an average age of 29. Already, 58% of the population is under the age of 30.

For years, development gurus have looked forward to this period as a time when the nation will finally be able to cash in on a ‘demographic dividend’ within its massive population.

The crux of the dividend is this: India is at a point where the ratio of the working population (15-59) is rising, the ratio of the child population (0-14) declining, and the ratio of those over 60 growing only moderately.

The beauty of this is that increased labour supply could raise GDP — while the declining child dependency ratio could boost savings and investments, helping build the nation at many levels.

This is an opportunity that comes but rarely in the life of a nation. It represents a time to build with the energy of a young workforce, strengthen the economy and create assets that will boost growth for generations — allowing for stability when the tide turns and the population begins to age.

In the West, a similar demographic dividend arrived in the industrial age and was chanelled into the high-productivity industrial and service sectors, creating assets that boosted the wealth of those nations and continue to reap dividends.

Without the right economic climate, however, the demographic dividend can turn instead into a liability, as a restless young population finds itself underutilised, its dreams and aspirations thwarted by a lack of access and opportunity.

Various rounds of employment and unemployment data indicate that our demographic milestone is, unfortunately, tending towards this direction.

Most of the 1990s experienced jobless growth. Employment did increase significantly between 1999-2000 and 2004-05, when the average yearly increase in the number of workers was 7.7 million, but studies show that this was essentially distress-driven, primarily a result of an agrarian crisis.

The increase in number of workers has now declined to 2.5 million per year (2004-05 to 2011-2012), while the working-age population has risen at the rate of 14 million per year between 2001 and 2011.

All in all, it is becoming obvious that India is already failing to realise the potential of its demographic dividend.

Nearly half of India’s workforce (49%) is dependent on agriculture, which contributes less than 15% of the GDP.

The role of household industry and manufacturing is limited to just a fifth of the workforce, while 90% of the urban workforce is employed in the low-paying unorganised sector.

The quality of the workforce is also low — 11% of the urban male workforce and 28% of the urban female workforce is illiterate; only 53% of male workers and 40% of female workers have studied past secondary school.

What India must do now is increase jobs in the industrial and manufacturing sector, as agriculture cannot meet the growing demand.

In urban areas, growing job markets in the service sector should be supplemented by the expansion of the industrial and manufacturing sectors, so as to gainfully accommodate all levels of potential young employees. Skills development and training will also play a critical role in achieving this goal.

Most importantly, we need to move fast. Because the biological clock is ticking, and our youngsters will not wait quietly on the sidelines forever.

- See more at: http://www.hindustantimes.com/comment/analysis/we-must-act-fast-to-create-jobs-improve-the-workforce/article1-1184458.aspx#sthash.M1cggajT.dpuf

Young and jobless-DTE

Across the globe, unemployment is growing three times faster among youngsters than among those above 24 years of age

The good news is that economies the world over are set to grow. The bad news is that the growth will not be able to check unemployment that has been rising steadily since the 2008 global financial crisis. Over 202 million people were jobless worldwide in 2013, which is 25 million more than in 2008, says a report released by the International Labour Organization last month. The number of jobless will touch 215 million by 2018, says the report titled The Risk of Jobless Recovery, Global Employment Trends 2014.

The young population has been the worst hit by the increase in unemployment. This is alarming when one considers that the world has never been younger. The population in the age group of 15 to 24 is the largest ever at about 1.2 billion. “It is estimated that some 74.5 million young people—aged 15-24—were unemployed in 2013, which is 1 million more than in the year before,” states the report (see table). The global unemployment rate for youngsters was 13.1 per cent, which was three times that for adults (above 24 years of age). As a result, the average age of young people entering the market has gone up in developing countries, where youngsters are turning to higher education because they are not getting jobs. In developed countries, they are waiting for the job scenario to improve.

Joblessness has also pushed informal employment that accounted for 90 per cent of the employment opportunities in South Asia in 2013. It was around 70 per cent in 2011. “Even though progress in reducing poverty has been the strongest in these regions (South Asia), the lack of formal employment opportunities is likely to constitute a barrier to a sustainable further reduction in poverty,” states the report. Informal employment accounted for more than 20 per cent of the total employment in Eastern Europe and the Commonwealth of International States (countries formed out of former Soviet Union). In Latin America, it was below 20 per cent.

Also, the number of working poor continues to decline globally, but at a slower rate than during previous decades. Working poor are those whose incomes fall below a given poverty line. Close to 11.8 per cent of the world’s employed workers lived on less than US$1.25 per day, whereas 26.7 per cent employed workers had to cope with US$2 a day or less in 2013.

#Preliminary estimates;* Projected; Source: International Labour OrganizationThis resulted in the increase of vulnerably employed people—that is self-employed people who are financially dependent on family members. The report says 48 per cent of the workforce was financially vulnerable in 2013.

The report also notes that the weak recovery of the global economy has led to a considerable increase in the average length of unemployment spells, especially in developed countries. In the crisis countries of euro area, “the average duration of unemployment has reached up to nine months in Greece and eight months in Spain. Even in countries where encouraging signs of economic recovery have appeared, such as the United States, long-term unemployment affects more than 40 per cent of all job seekers,” the report says. The increase in the average duration of joblessness has discouraged a lot of unemployed who have stopped looking for work. The present estimates of discouraged unemployed are 23 million, which will reach 30 million by 2018.

India matters

South Asia weathered the first phase of global financial crisis (2008-2010) well on the back of a growing Indian economy (9.5 per cent in 2010). Late in 2011, the economy in the region slowed as the country’s growth faltered (see ‘Trend of unemployment in South Asia’). India’s growth slowed down because of over-dependency on services industry, which reduced manufacturing and agricultural output. The region also faced a number of macroeconomic challenges such as high inflation and bloated current account deficit. As a result, while India added a healthy 13.9 million jobs between 2009-10 and 2012-13, most were created in the informal sector. Also, the practice of contractual work increased in multinational companies in India and in South Asia during this period. This led to a substantial increase in working poor and vulnerable employment (59 per cent in 2013).

Source: International Labour Organization

The region also reported the lowest percentage of salaried class (22.5 per cent) compared to other regions.

The report predicts that the employment situation in the region will not improve in the near future despite the area having a growing young population and infrastructure.

What went wrong?

The economic recovery post 2008 crisis failed to keep pace with the labour market. The employable population grew higher than the number of new jobs created. The global employment rate was 1.4 per cent in 2013—which was 1.6 per cent in the pre-crisis year. This gap led to loss of 62 million jobs in 2013. If this trend persists, by 2018, as many as 81 million people would be jobless in the world.

The employed population in the world (employment-to-population ratio) has also decreased. The employment-to-population ratio, which was 60.7:100 in the pre-crisis period, was 59.6:100 in 2013 (see ‘Global trend of unemployment’).

Due to persistent weak demand for final goods and services and uncertainty about future recovery, most companies in developed economies chose to wait for fresh hiring. The uncertainty was due to lack of policy coordination and continued delay in critical decisions.

Governments the world over need to go for fiscal consolidation and create policies to increase labour income to improve demand for goods and services in the economy. The steps could reduce unemployment rate in G20 countries by 1.8 per cent by 2020. The report also observes that “with more and more potential workers becoming discouraged…the risk of skills degradation and obsolescence is increasing”. Hence, governments the world over should invest in labour policies to address the issue of skills mismatch.

The report calls for investment in infrastructure and emphasises the need for strong social protection system for workers to improve the situation

Employer of the last resort?

The Centre’s rural employment guarantee scheme can be substantially improved, but it has undeniably helped Dalits, Adivasis and women find work

In an era of growing globalisation and rising inequality, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) stands out as a unique attempt to provide a social safety net via a massive public works programme. The government as an employer of the last resort is an idea that has existed in policy discourse around the world for much of the 20th century, gaining most currency during the Great Depression in the United States. However, MGNREGA takes this policy to a new realm because of its massive reach, universal nature, and its initiation during a period of rapid economic growth.

It is a good time to explore the reach and impact of MGNREGA. India Human Development Surveys of 2004-05 and 2011-12, organised by the National Council of Applied Economic Research (NCAER) and the University of Maryland, surveyed about 27,000 rural households in 2004-05, before the Act was passed, and in 2011-12 when the programme was implemented in all districts. Hence, it provides a unique opportunity to examine household well-being before and after the implementation of the Act.

Our scorecard on MGNREGA focusses on three issues: (i) The reach and targeting of the programme; (ii) Experience of the households that participated in MGNREGA; and (iii) Broader changes in the rural labour markets between 2005 and 2012.

The MGNREGA website claims that 500 lakh households — about 36 per cent of rural households — obtained employment from MGNREGA in 2011-12. Our household survey finds only about 25 per cent of the rural households participating in MGNREGA. Another independent household survey, the National Sample Survey of 2009-10, also finds about 25 per cent of households participating in MGNREGA.

Well-targeted scheme

Regardless of the discrepancy between administrative statistics and actual usage, the programme is remarkably well-targeted. This targeting operates at three levels. At the village level, the uptake in villages with low levels of infrastructure is higher (28 per cent) than in villages with better infrastructure (21 per cent). It is more difficult to organise new programmes in more backward areas, so MGNREGA’s success in achieving this goal is quite remarkable.

At the household level, households from the marginalised communities — Dalits and Adivasis — are far more likely to participate in MGNREGA (36 per cent and 30 per cent respectively) than other households (20 per cent). At the individual level, older workers are disproportionately more likely to participate in MGNREGA than in the general labour force. Women, too, have higher participation rates; although only 29 per cent of all non-agricultural wage workers are women, 44 per cent of all MGNREGA workers are women.

However, even for those households doing MGNREGA work, the number of MGNREGA work-days is not very large. About 50 per cent of participating households work 40 or fewer days. MGNREGA administrative data shows that less than 10 per cent of the households complete their full 100 days; the India Human Development Survey (IHDS) data record about 15 per cent of the participating households completing 100 days. In the run-up to the election, the government has raised the limits for Schedule Tribes (ST) households living in forest areas to 150 days, from 100. But 85 per cent of the participating ST households and 95 per cent of all ST households have not exhausted their current limit of 100 days. When asked by IHDS interviewers why they had not completed the full 100 days, 75 per cent of the MGNREGA participants cited “No Work” as the primary reason. It would seem more important to focus on ensuring the full 100 days of work for everyone than to increase entitlement to 150 days.

For those households that participate in MGNREGA, the income from MGNREGA forms about 14 per cent of their total income. While the Act mandates payment in cash for people who are not offered work, we found few respondents knew about this provision and even fewer availed of it.

It is not clear whether MGNREGA is providing alternative sources of work or attracting people who were formerly underemployed or disguisedly employed. The IHDS data document an increase of just five days of work for men over a 12- month period in rural areas and four days for women. This is not a massive increase, suggesting that some of the MGNREGA work may have replaced rather than added to former work.

The IHDS also documents other changes in rural labour markets. Among workers, non-farm work has grown substantially while an exclusive agriculture focus has declined. The proportion of individuals who focus solely on agricultural activities— cultivation, agricultural labour, and animal care— has gone down from 51 per cent of men aged 15-59 to 35 per cent; for women the drop is from 84 per cent to 66 per cent. Much of this drop comes from changes in agricultural wage work and caring for animals; own-account cultivation is unchanged. While we do not know that MGNREGA caused these changes, the alternative non-farm employment is certainly part and parcel of broader changes in rural labour markets.

Increase in daily wage

This declining agricultural employment has accompanied wage growth for daily wage workers, particularly agricultural labour. For male agricultural workers, daily wages in constant terms grew from Rs. 90 a day to Rs. 134; for male non-agricultural workers they grew from Rs.126 a day to Rs. 155. The growth for women agricultural workers was from Rs. 62 to Rs. 91 and for non-agricultural workers from Rs. 77 to Rs. 111.

These wage increases for women are particularly interesting. Historically, the lack of non-agricultural work has constrained women’s wages. If MGNREGA is in any way associated with the growth in women’s wages, this is a positive outcome. But these observations may also point to a real concern for farmers — a possible lack of availability of agricultural workers and high wages during harvest time. Rising agricultural wages for both men and women and simultaneously declining agricultural wage work suggest that it would be a sensible precaution to ensure that MGNREGA work is not timed for the peak agricultural periods.

The above discussion has noted several concerns with MGNREGA, particularly the discrepancy between official data and household reports on usage as well as the potential wage impact. But we have also noted that the programme has been particularly successful in providing employment to Dalits, Adivasis, and women, thereby serving as an attractive employer of the last resort to the most disadvantaged workers.

DOMESTIC WORKERS THE HINDU

In India, official figures show that there are 4.75 million domestic workers, out of whom three million are women in urban areas.  The actual number is probably closer to 90 million. 

The shame and stigma that domestic workers in India experience is not simply a symptom of their inner life but is also sustained by external, social structures and processes. 

Any vision of dignified domestic work must take into consideration the poignant issue of prejudice against domestic workers, which is institutionalised not just in informal work relations in individual households, but also in the organised domain of state and public policy.

Caste factor

It should not come as a surprise to any Indian that, very often, the division of tasks and even the hiring of workers is based on their caste and even their religion. 

Propagating prejudices

State machinery and agencies very often embody similar prejudices but in more subtle forms. (POLICE verification and any allegation leading to loss of job may be forever ,but police issues such advisories) Such an institutionalisation of prejudices, in addition to exaggerating the actual danger, also ensures that there is no scope left to highlight the vulnerabilities of the other party in the arrangement. 

the Ministry of Women and Child Development shared statistics of a report, “Violence against Maid Servants,” according to which violence against women workers has shown an increase from 3,422 cases in 2010 to 3,564 in 2012. 

Changing just one fact of Indian society might be the start to overcoming many of these prejudices: we must acknowledge home as a workplace. When we think of an employer’s home as just a private space, and not a domestic worker’s workplace, we render the worker invisible. 

A set of measures to protect workers at their place of work is a great beginning, but the larger objective should be to empower workers to have a sense of entitlement and claims over their site of work just like many of us at our respective formal workplaces do.

Thus, any policy on domestic work that doesn’t address the stigma and discrimination originating from large-scale, structural forms of prejudices against these workers will result in nothing but failure. 

A National Policy for Domestic Workers was drafted by the Ministry of Labour and Employment that addresses the issue of discrimination in the workplace and in various other domains. However, the process of addressing some of these issues has to be far more comprehensive than what the policy seems to offer.

National Skills Qualifications Framework

The Cabinet Committee on Skill Development today approved the National Skills Qualifications Framework (NSQF), a quality assurance framework which organizes qualifications according to a series of levels of knowledge, skills and aptitude. These levels are defined in terms of learning outcomes which the learner must possess regardless of whether they were acquired through formal, non-formal or informal learning. The NSQF would also help shift emphasis to outcome based learning - both in the general and vocational space. Today, there is lack of uniformity in the outcomes associated with different qualifications across institutions, each with its own duration, curriculum, entry requirements as well as title. This often leads to problems in establishing equivalence of certificates/diplomas/degrees in different parts of the country, which in turn impacts the employability and mobility of students. By shifting the focus from inputs to learning outcomes, the NSQF would aim to tackle this challenge. NSQF will also facilitate Recognition of Prior Learning (RPL) that is largely lacking in the present education and training scenario. Additionally, it would help alignment of Indian qualifications to international qualifications. The credit accumulation and transfer system that will be integrated in the NSQF will allow people to move between education, vocational training and work at different stages in their lives according to their needs and convenience. The framework would be anchored and operationalized by the National Skill Development Agency (NSDA), an autonomous body attached to the Ministry of Finance, mandated to coordinate and harmonize skill development efforts of the Government of India and the private sector. The NSQF is a nationally integrated education and competency based skill framework that will provide for multiple pathways, horizontal as well as vertical, both within vocational education and vocational training and among vocational education, vocational training, general education and technical education, thus linking one level of learning to another higher level. There are 10 levels in the framework, with the entry level being 1, and the highest level being 10. This will enable a person to acquire desired competency levels, transit to the job market and, at an opportune time, return for acquiring additional skills to further upgrade competencies.