At the centre of job creation

Context: The government should re-establish its role as the principal employment generator.

Moreover, with its announcement that 10 lakh government jobs will be provided over the next 18 months on a “mission mode”, the govt has sent the following message:

– the creation of employment is indeed a problem and can no longer be hidden from the public discourse.

– the private sector, especially modern sectors such as the service and manufacturing sectors, which are dominated by multinational companies, have not created many jobs. Even if the IT sector or the modern gig economy have created jobs, these are either very high-skilled jobs or low-skilled ones.

What are the employment trends in India?

First, the present government is relying on the Employees’ Provident Fund Organization/National Pension System/Employees’ State Insurance Scheme registrations and exits as indicators of the formal labor market.

– This could be misleading, as companies may be increasing registrations to cross the threshold to become eligible to fall under any of these. Hence, this might be more a case of formalization rather than employment generation.

Second, media reports show that more than 85% of those aspiring for those 10 lakh jobs could be consumed by existing vacancies in Central government departments (8,72,243). In that sense, the pronouncement possibly does not indicate 10 lakh new jobs.

Third, 241 central public sector enterprises (CPSEs) have been shedding jobs in recent years — jobs declined from 10.84 lakh in 2017-18 to 10.71 lakh in 2018-19 and to 9.22 lakh in 2019-20. This downward trend is a cause for concern.

Fourth, The 10 lakh jobs creation also needs to be seen in the context of the labour market. Even though the labour force and workforce participation rates have increased marginally, there is a decline in the quality of jobs. This means that there is a rise in the unpaid segment of the self-employed and a rise in the share of the agricultural sector in total employment over the last three Periodic Labour Force Surveys (43% to 47%). This is a historical retrogression.

– On the other hand, the manufacturing sector’s share in national income has declined in 2020-21 (10.9%) compared to that in 2018-19 (12.1%).

Employment shares in the informal enterprises have increased — for men (71% to 75%), women (55% to 57%) and all persons (68% to 71%) from 2017-18 to 2020-21.

Why govt must assume a central role in job creation?

The private sector creates jobs in response to market forces and while taking into consideration radically altering technological developments.

The projections about employment generation by the gig economy are unreliable, as they are computed by a trade body or by consulting agencies which have vested interests.

Projects in the modern private sector consume a lot of capital to generate very few jobs.

– For instance, recently, there was a report that the Adani Group has invested ₹70,000 crore (or ₹700 million) in Uttar Pradesh to create merely 30,000 jobs.

Foreign Direct Investment, which at any rate is highly capital-intensive, goes mostly into the non-manufacturing sectors.

Way forward

Employment is not merely about numbers and growth figures.

India needs to concentrate on enabling the creation of decent work and a sustainable labor market, to which India is committed as a member of the United Nations and the International Labour Organization.

The government should play a significant role soon. The government should re-establish its role as the principal employment generator through jobs in its ministries and CPSEs and through assured employment generation programmes like MGNREGA.

Source: This post is based on the article “At the centre of job creation” published in The Hindu on 21st June 22.