Although the economy is growing at a reasonably good pace, it is somewhat disconcerting that not enough jobs are being created especially for blue-collar workers, and even those employed are not always well-compensated. Increasing mechanisation and greater use of capital has meant that fewer workers were hired between 2000 and 2019 than in the 1990s. Most worryingly, the youth account for nearly 83% of the unemployed and the share of youngsters with secondary or higher education in the total unemployed youth has almost doubled from 35.2% in 2000 to 65.7% in 2022. The findings of the India Employment Report released by the International Labour Organization (ILO) on Tuesday corroborate what many economists have been pointing out—that India’s economy is seeing ‘jobless growth’. The study revealed that the labour force participation rate (LFPR), worker population ratio (WPR), and the unemployment rate (UR) showed a long-term deterioration between 2000 and 2018, while seeing an improvement after 2019. To be sure, these have improved in the last few years, but India’s LFPR nonetheless remains lower than that in other EMs, such as Indonesia and Vietnam, where they are at least above 60%.
Equally worrying is the fact that wages have stayed largely stagnant or even fallen; in fact, thanks to soaring inflation, real wages for regular workers and the self-employed have seen a negative trend post-2019. Again, the report notes that a substantial share of unskilled casual workers—62% in agriculture and 70% in construction—did not receive the mandated minimum wages in 2022. In fact, the real earnings of the self-employed fell post-2019, possibly due to the disruption caused by the pandemic. While the emergence of e-retailing has seen an increase in hiring of gig workers, this is informal work with virtually no social security provisions.
One more fallout of the pandemic appears to have been the reversal of the transition away from agricultural employment—post-2019, there is a notable rise in agri employment accompanied by a fall in non-farm employment, particularly manufacturing. Some of the surplus in non-farm jobs was absorbed by the construction and services sectors. But as experts have pointed out in general, the country’s transition to higher-value-added jobs has been slow, with agriculture still the predominant employer accounting for nearly 46% of the workforce. This over-dependence on agriculture is a concern. As a Morgan Stanley analysis has shown, the employment elasticity for agriculture has become more negative, moving from -0.26 in the previous decade (FY2000-10) to -0.48 in the current decade. This means that a 1 percentage point (ppt) increase in GDP growth would now lead to a contraction in employment of 0.5 ppt versus 0.3 ppt earlier.
While skilling has been seen as the solution to India’s unemployment problem, the progress in vocational training has been unimpressive. PLFS data shows just 4.4% of the country’s total workforce, as of FY2023, has undergone training in formal skills. While the Chief Economic Advisor Anantha Nageswaran is justified in saying that the government cannot shoulder the responsibility of providing jobs for everyone and that the for-profit commercial sector needs to be hiring actively, the government needs to do some nudging. It could, for instance, ask companies to train and skill youngsters for a certain period for a stipend, even as part of their corporate social responsibility. This kind of apprenticeship programme could lower the dropout rate seen in other skilling programmes and should result in a more employable labour force in an increasingly digital world.
