Relevance: GS-3: Indian Economy, mobilization of resources, growth, development and employment.

Key Phrases: Youth unemployment, Nehruvian scheme of development, Parliamentary democracy, Secularism, Economic planning, Labour force survey, National Manufacturing Policy, Labour-intensive industries, Urban development, Manufacturing clusters.

Context:

• With the youth unemployment rate in cities hovering above 20 per cent, the government recently announced that 10 lakh government jobs will be provided over the next 18 months on a “mission mode” and sent following messages:
  • creation of employment is indeed a problem;
  • 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 Information Technology sector or the modern gig economy have created jobs, these are either very high-skilled jobs or low-skilled ones
  • the government is now forced to step in as persistently rising inflation, unemployment and underemployment are a matter of concern.

Important Facts:

• Unemployment rate fell to 4.2% in 2020-21, compared with 4.8% in 2019-20.
• The rural areas recorded an unemployment rate of 3.3% and urban areas recorded an unemployment rate of 6.7%.
• The percentage of persons in the labour (LFPR) in the population increased from 40.1% in the previous year to 41.6% during 2020-21.
• Worker Population Ratio (WPR) increased from 38.2% of the previous year to 39.8%.
• People are moving away from factories as manufacturing jobs shrink, to farms that provide shelter largely in the form of disguised unemployment.

Issues with Unemployment in India:

• Estimation method of unemployment:
  • The Government is at present relying on the Employees’ Provident Fund Organisation/National Pension System/Employees’ State Insurance Scheme registrations and exits as indicators of the formal labour 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 formalisation rather than employment generation.
• Shedding jobs in recent year:
  • 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.
• Decreases in Quality of Jobs:
  • Even though the labour force and workforce participation rates have increased marginally, there is a decline in the quality of jobs, viz. 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. This huge mass of workers contributes, thanks to low productivity, to about one-sixth of our national income, which does not augur well for a healthy economy.
• 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.
• Even though the share of regular salaried workers who did not have a formal employment contract, paid leave and eligibility for any form social security, have declined for both genders, the level is still high.

Measures needed for Job creation:

• An industrial and trade policy is needed. For 20 years after economic reforms began in 1991 there was no National Manufacturing Policy, and the Policy, when it came in 2011, was not even implemented. By the time the 12th Plan (with the first mention of Industrial Policy since 1991) became public, the government had gone into policy paralysis.
• Special packages are needed for labour-intensive industries to create jobs. There are a number of labour intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments. The apparel and garments sector received a package from the Government of India roughly a year back. The other labour intensive sectors have been ignored. The nature of the package will need to be individually designed for each sector defined as quickly as possible.
• There should be cluster development to support job creation in Micro, Small and Medium Enterprises (MSMEs). Most of the unorganised sector employment is in MSMEs, which tend to be concentrated in specific geographic locations. There are 1,350 modern industry clusters in India and an additional 4,000 traditional product manufacturing clusters, like handloom, handicraft and other traditional single product group clusters.There is a cluster development programme of the Ministry of MSMEs, which is poorly funded and could be better designed as well.
• Align urban development with manufacturing clusters to create jobs. The Ministry of Urban Development (MoUD) has a programme called AMRUT (Atal Mission for Rejuvenation and Urban Transformation) aimed at improving infrastructure for small towns. Infrastructure investment by the government always creates jobs.
• Focus of women. Girls are losing out in jobs, or those with increasing education can’t find them, despite having gotten higher levels of education in the last 10 years. Skilling close to clusters (rather than standalone vocational training providers), is likely to be more successful. The problem with skilling programmes has been low placement after skilling is complete. The availability of jobs close to where the skilling is conducted will also enhance the demand for skilling.
• Public investments in health, education, police and judiciary can create many government jobs. In the absence of greater public expenditure, the private sector in health keeps expanding, which only raises the household costs on health without necessarily improving health outcomes, because the private sector does not spend on preventive and public health measures. But the private sector prefers to set up hospitals to cure people after they have become sick rather than prevent them from becoming unhealthy in the first place.
• Preventive and public health have always been in all countries the responsibility of government. More government expenditure in health means more jobs in government and better health outcomes.

Way Forward:

• Employment is not merely about numbers and growth figures. We need to concentrate on enabling the creation of decent work and a sustainable labour market to which India is committed as a member of the United Nations and the International Labour Organization.
• 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: The Hindu

Mains Question:

Q. The current level of unemployment in India is a matter of concern. Discuss the statement and suggest measures to tackle the issue.