The spectre of jobless growth

As the economy grows, it creates jobs thus helping incomes to rise which people then spend, pushing up growth further which, in turn, creates more jobs. This virtuous cycle keeps lifting people out of poverty and helps in transforming an emerging economy into a developed one. This cycle is the ‘normal’ and should have ideally helped India derive the much talked-about demographic dividend.

But what we are experiencing today is the neo-normal. The economy is growing but fewer jobs are created. The large number of people entering the job market face an uncertain future and the so called demographic dividend threatens to turn into a demographic nightmare.

Worried governments (both UPA and NDA) resorted to public spending in a bid to create jobs. Now, talk of a Universal Basic Income or UBI has also surfaced (forget about gainfully employing people, just pay them money).

Global problem

This is not just an Indian phenomenon. Lack of jobs and the consequent absence of income growth for the middle and lower strata of the society have fuelled protectionism and ill-will against immigrants across the world giving rise to populist right-wing governments — be it in the US, Hungary or more recently, Brazil.

If you are wondering what is happening to jobs, the book ‘The Jobs Crisis In India’ by Raghavan Jagannathan is a good place to start. Jagannathan, a senior journalist, has delved deeper to figure out the answers and also offer possible solutions that can help India avoid a ‘job-less growth’. The writing is simple and lucid but gets heavy at some places as the author, inevitably, tries to explain the problem with data.

The first issue the book tackles is the nature of the job crisis . Are there no jobs being created leading to unemployment among India’s youth? Or is it more a case of under-employment? Jobs are being created but are not of the quality those entering the job seekers ideally want.

We are seeing hordes of two-wheeler riders criss-crossing the cities delivering packages for e-commerce and food delivery apps. These jobs may give the youngsters employment but it is probably way below their educational qualifications. Also, there have been news reports of people with PhDs applying for low-rung government jobs.

‘Destruction’ of jobs

Then there is the issue of job loss. Globalisation, automation, consolidation and digital transformation are destroying jobs. As many as 1.5 million jobs, the author says, have been lost in India between 2016 and 2017 in the BFSI, IT and Telecom sectors due to consolidation.

In 2009-10 it took 31,846 employees to deliver $1 billion worth of exports in IT sector. In 2015-16 it needed just 16,055 employees. If the present is bad, the future looks worse. A research based on World Bank data, estimates the proportion of jobs threatened by automation at 69 per cent.

“...every age has its disruptions, but the world has ultimately managed to create more jobs after a lag,” says the author. But going by the above numbers, the lag appears long and indefinite.

What is even more scary is the inability of the government to deal with the problem. Jagannathan bemoans the fact that there is no clear data on jobs. There are multiple estimates which are delayed, unreliable and scattered.

“We cannot afford such delayed data when jobs are being destroyed and created at high speeds,” he says.

That explains why the government has not been able to come out with right policy prescriptions even as ‘employment elasticity’ — a measure of the economy’s ability to create jobs — has been declining over the years. Also, whatever policy it has come up with is insufficient or focuses on the wrong solution.

Take the case of ‘Make in India’. While the idea is welcome, the author rightly says that it will only end up increasing the output rather than jobs.

This is because, the government is focusing on big and `sexy’ sectors such as steel or automotive sectors where for every ₹1 lakh investment just 3-4 jobs are created while sectors such as apparel (24 jobs), food processing (28 jobs), leather and footwear (5.5 jobs) create more jobs.

Large manufacturing is rapidly automating and will predictably create fewer jobs.

This has, in fact, caused India to de-industrialise pre-maturely. The book quotes data to say that industrialisation peaked in the US when the share of labour force in manufacturing touched 33 per cent. In China it was 28 per cent. In India we are already de-industrialising at just 11 per cent.

Information deficit

Lack of information is also ensuring that the government’s skilling programme is ineffective. “Without authentic data, can the government decide how and where to invest in skills, what kind of jobs are disappearing and what kinds are set to appear?,” Jagannathan asks adding “you cannot solve a problem you do not understand.”

Rather than pumping public money in creating jobs or consider policies such as UBI which even developed countries have avoided, the government should promote sectors that create jobs.

Big bang investments by large multinational companies may be news worthy, but they will not create jobs. Reforming labour is also critical, the author notes.

It also gives us some glimpses on the nature of jobs in the future. Few people will work for a company for life.

Short-term jobs or gigs will be the order of the day. Most jobs will be contractual and constant reskilling will be indispensable. Job loyalty will be a long forgotten attribute. If you do not accept this and adapt, you will be left unemployable.

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