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The Great Job Chase

FDI’s up, so is GDP. And yet the demographic dividend lies untapped. Here’s why.

The Great Job Chase
No Vacancy?
Youngsters at a roadside stall displaying job ads
Photograph by Tribhuvan Tiwari
The Great Job Chase
  • Investment Blues: While there has been higher public ­investment, inflow of foreign direct investment is yet to deliver.
  • Man Vs Machine: Hi-tech manufacturing and increasing mechanisation are limiting the number of jobs in the market.
  • No Economy Is An Island:Global trends are impacting exports and ­employment across various sectors.
  • A Casual Turn:A shift from permanent jobs to contract staffing—both blue- and white-collar—is being witnessed.
  • Missing The Match:There are jobs as well as a large number of jobless people, ­suggesting persistent jobs-skills mismatch.
  • Stadium:Growing contractualisation and lacunae in skill-development means the job-creation strategy needs a rethink.


Blame it on global or domestic scenario, but the Modi government’s promise of ending a decade of jobless growth during the UPA regime is yet to deliver. This is despite a higher economic growth and over 50 per cent rise in FDI inflow in the last two years.

“To break away from the joblessness, we need a structural shift in the sources of growth, but there is no such evidence,” says Mahesh Vyas, CEO and MD of the Centre for Monitoring Indian Economy (CMIE), which tracks unemployment on a monthly basis. “At the same time, une­mployment is very high at 9.8 per cent in August as against 8.65 per cent in July and 8.72 per cent in January this year. Going by evidence, we have not moved away from the jobless growth seen in the UPA years. If growth is happening, it is not generating employment.”

Government data reveals that in the Q4 (January-March) of 2015-16, India rec­orded an estimated 7.9 per cent growth; the figure was 6.7 per cent in the corresponding quarter of 2014-15. GDP growth during the first three quarters of 2015-16 was 7.5 per cent, 7.6 per cent and 7.2 per cent, respectively, but this has not translated into higher employment-generation.

The latest Labour Bureau survey for April-June 2016 (based on sample survey of around 2,000 units across eight sectors) reveals that during the first quarter of FY2016-17, the growth in placement through direct employment or contractors dipped below zero, notching minus 0.43 per cent as against 0.64 per cent growth in the previous quarter. Since January-March 2015, growth in employment has been below two per cent, according to quarterly survey data of eight major employment-­generating sectors. Dip in exports has seen a commensurate drop in employment in automobile (-18 per cent), gems and jewelry (-16 per cent), handloom/powerloom (-12 per cent) and transport (-4 per cent), while leather has shown no growth. Even IT/BPO and textile sector, which have in the past been major employment generators, are also lagging due to factors in the US and the EU. Continuing decline in merchandise exports, which dec­lined by 3.6 percent this April-July, has resulted in considerable job loss across many industries.

Market watchers claim no particular sector seems to be doing well in job creation, including the construction and services sector. In the near absence of private sector investment, the government is pushing ahead with investments in infrastructure projects like roads and railways. Unfortunately, while the government talks of the job-creation potential of infrastructure and manfacturing, the inc­reasing adoption of high-tech man­­ufacturing and mechanisation is red­ucing the demand for labour.

“We are possibly going to see some inc­rease in the job intensity of growth, but nothing compared to the previous phase of infrastructure growth during NDA-1,” says Abheek Barua, chief economist, HDFC Bank. “This is because now there is a lot more mechanisation and use of robotics, particularly in manufacturing.”

Seek & No Hide

Too many people chase too few jobs

Photograph by Tribhuvan Tiwari

Studies by HDFC Bank show that for every percentage point the economy grows, employment now adds just 0.15 of a percentage point, down from 0.39 in 2000.

The big challenge for the Modi government, which has promised to create 250 million jobs over a decade, is to find out what mix of sectoral growth is desirable for well-paid jobs to be created, “as the simple solutions talked in the past of inc­reasing the share of manufacturing is no longer the answer,” says Barua.

Experts point out that while the private sector continues to complain about lack of skilled people and mismatch between the market demand and the available workforce, the fact is there is no premium paid for skills. So, are the various government- and private- run formal and semi-formal skilling programmes imparting the right kind of skills? Currently, only two per cent of the Indian workforce is estimated to be skilled or semi-skilled, in sharp contrast to that of countries like Germany and the UK, where the emphasis is more on vocational training after passing out of school, with a smaller percentage of students pursuing higher studies or a professional course.

Instead of direct ­employment, a shift to ­contract staffing is being witnessed. Nearly 18 lakh white-collar workers are currently on contract.

Prof S. Mahendra Dev, director of the Indira Gandhi Institute of Development Research, Mumbai, is more optimistic about the job scenario ahead. “Looking at the indicators, things are looking better industry-wise,” he says. “Some positive ­developments can be expected in the wake of the good monsoon and the jump in public investments. Also, as the FDI investments are still not on the ground, there are expectations of revival in job-creation.”

Ironically, while the government is banking on entrepreneurship to ­reduce the pressure to create jobs, the scenario is largely uncertain due to the high failure rate of such ventures, which often promise lucrative opportunities but fail to deliver.

“There are jobs, but also a lot of unemployed people. So there seems to be a skills mismatch,” says Sanjeev Duggal, CEO and MD, Centum Learning, which is partnering the government’s skill-development initiative through 400 centres. “There is also a reluctance to migrate, especially at the bottom of the pyramid, as the wages are too low to support a migratory lifestyle.”

The Grind

Daily-wagers waiting to be hired at a Dharamshala square

Photograph by Getty Images

Duggal points to a recent UNDP study that has estimated a requirement of 109 million skilled people across 24 key industries by 2020. In India, the SMEs and rural employment account for 80 per cent of the overall jobs created. Job market experts point out that while not many white-collar jobs are available even for graduates and post-graduates, there are more opportunities available as you move towards blue-­collar jobs—most of which do not even pay the legal minimum wage, let alone provide any social security. No wonder the trade unions are up in arms against the economic policies of the government.

Instead of direct employment, a shift to contract  staffing—both blue- and white-­collar—is being witnessed, led by industries (including PSUs) that need temporary staff during busy periods or those keen to keep their wage bills low. Today, there are nearly 18 lakh white-collar contract workers, who are better paid than blue-collar ones.

“This is essentially a problem of jobs not being created at an adequate pace,” says Rishi Shah, economist, Deloitte India. Poi­nting to a 10-15 per cent rise in open positions this year, Vishnu Dev, director, Man­power India, a leading staffing company says, “There could be jobless growth as permanent jobs are not growing as much as contractual jobs. In India, there is a wrong perception that contract staff is not a stable job. Here, just two per cent of the organised workforce is contract staff, unlike in the EU where 38 per cent are contract workers.” Manpower India provides over 40,000 contract staff to many leading Indian and multinational companies.

Growth in contract staff, much like in permanent positions, is more in the lower and middle segments. The number spirals during seasonal demand across various industry segments, with over 5,000 floating population finding placements, even if only for a few months. Even here, the previous training and skills come into play. It appears that the government’s much-touted skill-­development programmes have failed to deliver in any meaningful way, whether for the manufacturing sector or retail. Clearly, the government will have to ­rethink its employment strategy to capitalise on India’s much-talked-of but clearly neglected demographic dividend. Or else it may face diminishing political support of the unemployed youth.

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