A ‘job’ for this Government

Among the many challenges in hand for the newly-elected government, creating enough job opportunities will be the most difficult. In an apparent move to push job creation, the Rajasthan government recently announced its intention to amend major labour laws.

Having a flexible and fair labour market — one which allows both employer and employee to agree on suitable arrangements — is crucial for good quality regular job creation as well as for raising productivity of labour. The NDA government at the national level too has resolved to reform labour law.

The educated unemployed In India, professional salaried jobs in the organised private sector are particularly sought after, given India’s growing labour force. Labour market reforms will create more such opportunities, but we also need to ensure that the emerging labour force is adequately skilled and trained. Without it, unskilled labour might not be able to make a swift transition into relatively productive jobs.

According to various estimates, only 76 million people or 18 per cent of India’s working age population (aged 15-59) were employed in relatively high-productive salaried/regular wage jobs in 2011-12. Bulk of these workers are likely to be employed by the government in roles such as public administration and social services.

Education — the way it is currently imparted by our education system — does not seem to help get jobs, especially in rural India. In fact, data suggest that higher the education level, greater is the youth unemployment rate.

In 2011-12 rural India, 6.5 per cent of the educated male youths in the bracket of 15-29 years with higher secondary schooling were unemployed, while the unemployment rate peaked at 19.1 per cent for those who were graduates and above.

The data for urban male youths showcase an ever starker story, with unemployment rate at 14.6 per cent for youths with higher secondary education and 23.4 per cent unemployment rate among those educated at least till graduation.

The low perceived return to education disincentivises people from getting educated. This is especially so when education has a high opportunity cost, especially for poor households — around 37 per cent of respondents in rural and 40 per cent in urban areas, list the need to supplement household incomes as the primary reason for children not attending school.

Given the low employment opportunities at present, poor households need to be incentivised to educate their children.

Learning from others While schemes such as the mid-day meal schemes are operational, an effectively implemented direct cash transfer scheme could remove the income handicap. Latin America presents examples of conditional cash transfers to families who send their children to school. For example, the Bolsa Familia programme in Brazil that was started in the 1990s.

The next question is — how do we ensure that education provides the youth the skills demanded by employers?

The German system incorporates vocational training at an early stage of schooling, includes apprenticeship and involves corporate enterprises in training students. India, too, has vocational training centres but they lack in quality and have a limited reach.

The need to improve the quality of vocational education is crucial.

And now finally, we come back to the original question - how do create sufficient professional job opportunities?

Again, Germany provides some tips here, based on its experience of reforms in the country’s labour market over the past 15 years. The labour market has become more flexible over the years with wage increases that are in line with a rise in productivity.

However, even in Germany regular job creation has been accompanied by the emergence of part-time workers, providing greater flexibility to firms.

Globally, countries are finding it difficult to generate professional salaried jobs now, as compared to 3-4 decades ago. With rising automation and new technology being employed in manufacturing, demand for labour is not rising fast enough. Even in services such as education, the use of online computer aids, which will create less additional demand for teachers, is becoming more popular.

Nonetheless, India clearly needs more teachers, more healthcare workers, more financial services professionals, where skilled staff is in short supply. Alongside, we also need to shift the focus back to labour-intensive manufacturing by raising labour market flexibility.

There is a trade-off here; opting for labour-intensive manufacturing, might create less value added (by additional workers) than capital-intensive manufacturing sectors or services, and hence the economy might grow at a slower pace. But more jobs will be generated.

The immediate focus of the new government will be to raise growth and rightly so. But growth per se is of little use if a majority of the populace is unable to enjoy its fruits.

The writers are principal economist and junior economist, respectively, at Crisil

COMMENT NOW