BackLetting jobless growth worsen is way too risky
We have been seeing fewer jobs created by India’s economic expansion as we go along because of our peculiar pattern of emergence. We must fix this before inequality results in social strifeInfdia
PremiumFor an emerging economy, the path to higher incomes, productivity and growth must lead workers away from farms towards jobs in factories and offices. That India has had limited success in enabling such a transition is well known. It is the weakest link in our economic story. Some estimates say we need to create 90 million jobs by 2030 to absorb new entrants to the workforce, a tall order. New research by economist Amit Basole of Azim Premji University flags a distinct feature of this challenge. The proportion of Indians employed in agriculture had been falling for decades, but this process flattened some years ago and was reversed by the covid crisis, going by data from the Periodic Labour Force Survey. That farms support around 43% of our workforce is not unexpected, given our level of development. It’s the other missing pieces of the puzzle that stand out. What options do workers who leave farms have? In the absence of a robust manufacturing sector, the answer is not more productive factory jobs that pay better and foster a virtuous cycle of value generation and demand. Instead, those who move out of farming mostly find themselves in low-paying construction work and informal services. Our lopsided structural transformation is thus trapping former farm hands in precarious jobs. This also explains why rural households persist with farming tiny plots of land: to supplement meagre earnings.
In contrast to Bangladesh, we have not had an export boom of low-skill, labour-intensive products. India’s economic growth has been largely services led, with a small pool of skills at the upper end, given a glaring failure in mass education, while capital intensity has increased in manufacturing overall in spite of our labour abundance. In the 1990s, a leap from the primary to the tertiary sector was welcomed for reaping the benefits of globalization. But software, finance, etc, can’t absorb workers in the volumes we need, leaving multitudes of uneducated or barely educated folks vying for manual work. Broadly, we have seen far too few jobs created by expansion of output in comparison with other countries on their way up. Our growth elasticity of employment, a measure of how output expansion generates jobs, has been in decline. As per Basole’s paper, it is so weak that a 10% growth in gross domestic product is associated with only a 1% rise in employment. This is what a crisis of ‘jobless growth’ is.
The government has made efforts to address the problem. Its Make in India initiative, for example, has morphed into production-linked incentive schemes for manufacturers. Global business diversification of supply chains away from China has also spelt an opportunity for Indian manufacturers to grab a slice of the action. But this is hindered by legacy issues of poor infrastructure, complex and variable rules, skill deficiencies, hidden costs and more. All of this makes for a striking picture of contrast—between attrition wars in thriving service sectors and a job scarcity in the larger economic landscape. Our K-shaped recovery from the covid pandemic has only worsened inequality. Among other consequences of such stark divisions in a democracy, political processes can fail to convince people of difficult reforms, as seen in the aborted farm laws and Agnipath protests, if they do not see prospects in the private sector. A desperation for government jobs has been visible on our streets—a sign of trouble ahead. While growth should be our aim, we must fix imbalances before they tip over into strife.
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