Nowhere to Go (learn or layoff)

Is it possible that our best intentions for labour are not actually met by laws that sound progressive on paper but end up hurting the very workers they are meant to protect ? 

                                  ~ Manmohan Singh

Have you  thought what you gonna do after you pass-out from your reputated schools and colleges ? Well the majority will look forward for jobs

But what if I say we won’t have much jobs in future Or even if we do we won’t have the ‘appropriate jobs’ for our workforce . 

No matter which sector or which industry you are planning to dive in, job crunch gonna hit each and every sector and each and every industry . 

 One can argue that how this can be possible when such a rapid growing county like India, touching growth peeks as high as 9% even while the whole world is facing slow growth rate ( negative for some countries), gonna face job crunch . Well, if you look more closely then this high growth seems more unsustainable as what we are currently facing past few years can be termed as ‘Jobless growth‘. 

What we mean by jobless growth is that we are bagging high growth rate but it’s not suitably backed by high emploment rate . A  recent literature revealed that the average growth rate of economy was 7.7 % pa. , while it was only 1.8% pa for employment. 

When Productivity gain starts hurting

Since output is growing faster than employment , it is obvious that output per worker, or what we call  Labour Productivity  is rising rapidly. But unfortunately this growth owes to the growth- enhansing ‘structural change‘ , which means that one sector in economy expands their productivity at expense of other sector . And this looks quite true . 

Service sector continue to help India gain higher growth however, in terms of employment , service sector holds only 25% , half of what employed by agriculture sector . 

So whats the problem ? 

 The problem with this structural growth enhansment is in its future . The service sector seems to be already reaching its threshold .  Besides similar trend of lay offs,like in manufacturing sector, is seen in service sector with major IT companies like Infosys, Cognizant , Wipro & Tech Mahindra plan to lay off thousands of employees . The reason for job cutting is said to be Automation & Productivity. With more advancement tech firms can take the higher amount of service with lesser amount of employees . Unfortunately majority of skilled workers  posses the set of skills which can be automated . Same is the case of Telecommunication and Banking sector . With the Advent of automation current skill sets are outdated.

Further, India’s service sector cost advantage is also running out with foreign countries making laws protecting there countrymen and jobs . One such recent example is changes in America’s H1 visa policy . Earlier Indians use to work at lower wage rate in foregin country thus grabbing the job opportunity away from local residents. But new rules force companies to set minimum wage which is as high as demanded by locals . This means India will loose jobs in foreign nations too. 

A more deeper implication arising out of unemployment  is that apart from all financial and emotional trauma unemployment brings to an individual and upon it’s dependents , lack of jobs also compels the local comunities to ask for reservation in govt jobs as they can’t score in shrinking private jobs. But not to mention govt jobs have also shrunk in recent past few years.

What can be done

The only long term possible solution is to raise the skill level of majority of workforce. But in a country like India where majority of workforce is unskilled updating skills will  to take few decades. In short & medium term, it is labour intensive manufacturing that would need to grow to absorb year by year growing pool of workforce. However,this has not  has happened so far . As a result, India’s manufacturing sector accounts for only 15% of national employment

Besides, the major problem is in the composition of manufacturing sector. According to recent data by ILO, 87% of India’s manufacturing employment is in informal sector,  where productivity is low

The major fast growing industries like automobile, petroleum, chemicals are depending mostly on automation. Remaining high labour -intensive industries like Textile, Gems, transport are performing at small scale level and that also  most of them in informal sector .

 While in China most of the manufacturing employment is concentrated in large enterprises with 1,000 workers or more, in India it is concentrated in those with lower than 20 workers.As a result, efficiency in India is relatively low and costs are relatively high, resulting in a serious handicap in world markets.

Factors responsible for forcing firms to remain small and unregistered includes reservation of small & medium enterprises in labour -intensive sector, poor infrastructure and rigid labour regulations that make it extremely difficult to fire workers in response to contraction in demand or incompetence. As a result, firms are reluctant to hire workers.

The only feasible solution  

Indian firms use more capital- intensive techniques of production and produce more capital-intensive products than countries at the same stage of their development. The high capital intensity is also a response to India’s labour regulations that make labour (adjusted for its productivity) more expensive, forcing firms to substitute away from it into capital. Thus the major step to bring country out of this jobless trap goes through labour regulation. 

  • Raising firm employment size for seeking permission for laying off workers from 100 to 300 workers under the Industrial Disputes Act.
  • Cutting down cumbersome and repetitive labour laws, beside putting labour law under state list. 
  • Making new rules regarding work strikes which result in huge productivity loss. 
  • Checking  on growing militancy in labour Unions. 
  • Encouraging more industrial start ups and giving more incentive to labour-intensive industries to grow and produce at large scale. 

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