Growing Unemployment, Lack of Systemic Reform and India’s Job Market

Unemployment has a catastrophic impact on the Asia-Pacific
Unemployment has a catastrophic impact on the Asia-Pacific

Creation of employment opportunities  has been repeatedly identified as an important electoral issue in the recent elections. However, the National Sample Survey Office’s Periodic Labour Force Survey recorded the unemployment rate in India at a 45-year-high of 6.1% in 2017-18.

The reports came in after the completion of a full financial year after the government undertook the demonetization of high value currency notes in November 2016. Despite this, the voters still backed the Bharatiya Janata Party in the recent Lok Sabha Elections.

While the data states the staggering rise of unemployment, the numbers alone do not tell us about the nature of crisis in India’s employment sector.

A lack of uniform, systematic employment data for the country makes it difficult to do a comprehensive assessment of quantity and quality of jobs.

The complexity of India is reflected in its labor market.

India’s large and growing youth population, while on one hand offers a demographic advantage with working age population constituting a rising share of the total population; it also creates an enormous pressure on the economy to create stable employment to so many people.

There is a need for urgent action in creating more jobs to enable the productive potential of the youth and to raise the living standards for more of the people living in the country.

To understand the nature of job crisis in India comprehensively and to understand what jobs ought to mean in a just society, Sabina Dewan and Divya Prakash of the Just Jobs Network, a private research and policy organisation, have come up with the Just Jobs Index, in partnership with the Centre for Policy Research and supported by Azim Premji University.

The goals of the Index are three-fold: to deliver a regular and reliable source of information on the state of employment in India, highlight differences across states, and to serve as a tool to support polices for job creation—especially in lagging states. It draws exclusively from government sources, including surveys conducted by the National Sample Survey Organisation, the Labour Bureau, the Annual Survey of Industries, the Reserve Bank of India, and the recently released Periodic Labour Force Survey. For each indicator, the Index uses a mean of the available values between 2010 and 2018.

The index is framed in a way to understand what jobs provide to workers instead of what skills or education workers have. This allows the authors to define what a “good” job ought to look like, and how much progress Indian states have made in creating them.

The index hones in on five dimensions to capture the heterogeneity of the Indian labor market:

  • Employment: This covers the labor force participation rate, the unemployment rate and the youth unemployment rate.
  • Formality: This looks at how many among the total workforce have written job contracts or earn regular wages, compared to those engaged in informal work, which can range from self-employment, unpaid family work to working for informal businesses.
  • Benefits: State expenditure on pensions, the proportion of workers who are part of a union and the proportion of workers that have pension funds make up this dimension. It is a measure of the social protection afforded to workers, especially vital in an economy where millions are one expensive illness away from poverty.
  • Income equality: Since credible income data is hard to come by, the authors have used consumption data to calculate consumption-based inequality as one of the indicators of income inequality. The other indicators are the ratio of minimum wages to average real wages and the ratio of informal wages to average wages.
  • Gender equality: This is quantified by the ratio of female to male employment rates, labour force participation rates and the ratio of their wages.

A breakup of the index into its various dimensions draws a clearer picture of which areas the states are underperforming in. For instance, the study found that Gujarat, which has the highest economic growth rate in India, while it scored high on the all four employment dimensions, it performed poorly in the quality of employment. The findings of the states’ poor performance on benefits in turn could be partly linked to the large degree of informality in India’s employment landscape: workers who receive wages but have no contracts and no social protections. The study also offers suggestions to tackle the growing population and job demands through the establishment of National Employment Strategy with focus on creating labor intensive jobs, making investments in human capital, and strengthening labor market institutions through simplifying and rationalizing labor regulation and providing a national minimum wage.

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