Ashraf Engineer
July 20, 2024
EPISODE TRANSCRIPT
Hello and welcome to All Indians Matter. I am Ashraf Engineer.
A few days ago, 1,800 young aspirants turned up to interview for 10 vacancies at an engineering company in Gujarat’s Bharuch district. The interviews were being held at a hotel in Ankleshwar. Such was the crush of the crowd that the venue was overwhelmed and a railing that bore much of the pressure collapsed, taking several aspirants down with it.
Jobs. It’s a theme I have returned to repeatedly on this show, and for good reason. India adds an estimated 10 million people to the job market every year. Unless there is enough employment – and I don’t mean just a high number of jobs but also quality employment – we are heading for a socioeconomic disaster. The news, unfortunately, is consistently bad on this front. In June, the unemployment rate climbed to its highest level in eight months: 9.2% compared to 7% in May, according to the Centre for Monitoring Indian Economy, better known as CMIE. Never mind what the government says, unemployment is now at crisis proportions and most estimates say India will struggle to create enough jobs in the foreseeable future. Why is India failing on the employment generation front and what can it do to rectify the situation?
SIGNATURE TUNE
A few days ago, Citigroup said India will struggle to create enough jobs for its growing workforce over the next decade even if the economy grows at 7%. This means that India will need to do more than it is doing now to boost employment and skills. Citi estimated that India will need 12 million new jobs a year over the next decade to absorb entrants to the labour market. Even if we grow at 7%, we will generate only 8 to 9 million jobs a year, the bank’s economists said in a report.
The quality of jobs being created is a problem too. Citi’s report said that 46% of the workforce is still employed in agriculture, even though the sector contributes less than 20% of the gross domestic product. Manufacturing accounted for 11.4% of jobs in 2023, a lower share than in 2018. This indicates that the sector hasn’t bounced back from the COVID-19 setback.
Worryingly, fewer people are employed today in the formal sector than before COVID — the share was 25.7% in 2023, the lowest in at least 18 years, Citi’s report said. Only 21% of the workforce — or about 122 million people — in India have jobs that pay a salary or wages, compared to 24% before the pandemic. More than half of the 582 million workers in India are self-employed.
Coming back to CMIE data, what’s also worrying is that in June 2024 the female unemployment rate exceeded the national average, reaching 18.5%, up from 15.1% in June 2023. The male unemployment rate also rose slightly to 7.8% in June 2024 compared to 7.7% in the same month last year.
Women and the young are the worst affected by the jobs crisis. Between 2010 and 2020, the number of working women in India dropped to 19% from 26%, according to World Bank data. As COVID surged, CMIE estimated that female labour force participation plummeted to 9% by 2022 – that puts us on par with war-ravaged Yemen.
Rosa Abraham, an economics professor at Azim Premji University in Bengaluru, tracked more than 20,000 people before and after the lockdown. She found that women were several times more likely to lose their jobs than men and far less likely to recover work after the lockdown. Young people, meanwhile, are finding it ever harder to get jobs. CMIE estimated unemployment in the 20- to 24-year age group at 43.7% in June.
The rot runs deep. India fares poorly on the education and training fronts, which means that degrees are often worthless in the job market. Several employers have said that less than half the graduates entering the workforce are employable. This is why, those who can, study further, join their families in farming or simply stay home.
The average age in India is 29, which makes it one of the youngest countries in the world. While this energy is an asset, it also means there is a large labour force looking for jobs.
Let’s look at this through the prism of the recent Lok Sabha election. A pre-poll survey by CSDS-Lokniti found that nearly half the electorate viewed unemployment and rising prices as the two biggest concerns. Seen through this prism, the results come as no surprise.
This also means that the spectre of social unrest in the absence of employment is ever present. This was illustrated by protests in June over a military recruitment plan that offered shorter contracts and fewer benefits.
The official unemployment rate underestimates the scale of the problem. Such is the magnitude that many Indians signed up with Russia to fight the war in Ukraine and are going to Israel to work in conflict zones as construction labourers. Indians are even risking death to illegally migrate to countries like the US through the so-called ‘dunki’ route.
Despite all this, it seems that the government is unwilling to recognise the employment crisis.
And, government jobs are not the answer either. In all, government jobs account for up to 5% of the workforce. The only way out is growth in private-sector jobs.
When growth was in the 8% range between 2004 and 2014, non-farm jobs grew by 7.5 million per annum. If we don’t hit that rate of growth again, there’s no way we can create the 10 to 12 million jobs needed every year now. But no projection puts India’s 2023 to 2030 growth rate close to 8%. The Organisation for Economic Cooperation and Development’s projection is 7%, while the International Monetary Fund puts it at a much lower 5.6%.
Can India achieve 8% again? Only if it generates jobs, which then produce demand and this has to be across sections, not just the middle or upper classes. Without that, we will have to keep funding social rescue programmes – that’s not a sustainable model.
Citigroup’s economists proposed several measures to ease the crisis: strengthen the export potential of manufacturing sectors, incentives to attract foreign firms and filling 1 million government vacancies.
These are all important because the worker-to-population ratio has declined from 38.6% in 2011-12 to 37.3% in 2022-23, according to the government’s own labour force surveys. The government has also failed to create jobs for the unskilled and the poor. Sadly, economist Jayati Ghosh estimates that the benefits of economic growth have been unequally distributed among the top 10% to 20% of earners.
A large percentage of the workforce is part of the informal sector, which means that they work without contracts, have no access to health or other benefits, or they are self-employed.
In addition to the steps suggested by the Citigroup report, construction activity needs to continue and accelerate. Labour-intensive manufacturing by medium, small and micro enterprises needs a push. Unfortunately, the government is focused on large companies.
You can also generate jobs through services exports. We have been traditionally strong in IT services but even health, education, travel and tourism, automobile services and BFSI can provide good-quality jobs.
I want to talk a little about Indians’ long-held belief that an education would guarantee a job. An International Labor Organization report said that 83% of India’s unemployed population is young, while 66% are young and educated. It found that those without degrees or even full schooling had a higher employment rate.
To make matters worse, the Narendra Modi regime imposed three artificial disasters on the country: demonetisation, a botched implementation of the Goods and Service Tax, and a poorly thought out COVID lockdown. Each devastated large sections of society and the economy.
The government introduced the Make in India flagship programme and the Production-Linked Incentive scheme but neither made a serious dent in unemployment. The government has sought to supplement these by spending more on welfare programmes related to food, health and even subsidised cooking gas.
The government did announce plans to fill government job vacancies and unveiled the Agniveer programme to enlist soldiers on four-year contracts. That, however, is mired in controversy.
The government claims its steps will boost employment by supplying a trained and disciplined workforce to industry. However, to create jobs on a mass scale, India must boost manufacturing. This needs the creation of infrastructure and easing conduct of business.
The lack of jobs is the primary reason living standards in India are low despite economic growth. Growth of aggregate income in the economy is not good enough because it is not distributed adequately to all sections. In others words, the rich are getting richer and the poor are getting poorer.
Meanwhile, the 10 million entering the job market every year have to make do with struggle and disappointment.
Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at editor@allindiansmatter.in. Catch you again soon.
