India’s job crisis can be dealt with policy interventions

Shankar is a street vendor of cut fruits and fresh fruit juice in a Mumbai suburb. When I met him last year in December, he was a newbie in the trade. The stall had been managed till then by his other friends from his village near Allahabad. They had given it to him so that he could kickstart his career in Mumbai. But in the first week itself, he got a taste of how tough life was going to be when the local cops took away a hafta of nearly two thousand rupees.

Shankar, who is in his mid thirties, had until a few weeks earlier been working in a company in Gurugram, making 4G cables. He was part of the semi-skilled technical team that had to do the required assembling and installing.

Suddenly the management changed and the new person sacked all the outsourced workers, who were from other states, to replace them with local Haryana boys. Not knowing what else to do, like hundreds of other unemployed, Shankar decided to come to Mumbai and was now cutting fruits, a task he had no experience or interest in. Shankar says many people lost their jobs after the GST Bill came into effect. People in the other end of NCR, Noida, echo the same view and cite dozens of small manufacturing units which have shut down rendering their workers jobless.

Official estimates back the anecdotal data that one can see all around. According to data released by the Centre for Monitoring of the Indian Economy (CMIE), the ripple-effects of the twin shocks of demonetization and GST continue to impact the economy. The workforce participation rate — which is the number of people from the working age population, who are in the labour force — became 42.7 per cent in the first quarter of 2018-19. This was lower than the previous quarter and the same time in 2017-19. According to the CMIE, many people, especially women, simply exited the labour force when jobs became difficult after demonetization, thus shrinking the size of the labour force itself.

Several small manufacturing units shut shop after GST because it became cheaper to import and trade than manufacture locally since previous levies on imports have been removed. This creates a sticky situation for the economy because economists broadly agree that growth in the organised sector should be manufacturing-led to meet the unemployment challenge. The service sector cannot generate as many jobs as manufacturing can; hence the shutting down of factories will make it hard for those workers who have been laid off to be reemployed, because there are simply not enough new jobs being created. Ironically, before the GST was introduced, a section of economists were campaigning for it as it would create a level-playing field between manufacturing companies and service companies by making the taxes they paid uniform.

The other traditionally large employer is the government. Forever, the idea of the sarkari naukri with its attendant security and perks has attracted small town youth. The numbers applying for jobs is swelling because it now includes the newly unemployed. Last April, the Indian Railways received 2.3 crore applications for 90,000 jobs advertised. I have a ringside view of this phenomenon because I am privy to the job-search attempts of a young man, Mahesh, in Greater Noida. For the past two years, he has been obsessively applying to the UP Police, the Delhi Police, Railways, and other such jobs. Despite being in the reserved category, he is yet to make it to the next level, often stymied by open demands for bribe by doctors who have to certify his physical fitness or mysterious cancellation of the exam because the paper got leaked. Yet, he keeps applying and goes to different towns to appear for exams and interviews. Such is the power of a government job. In 2018, when the Central government invited mid-career professionals to apply for joint secretary level positions, 6,000 private sector managers, including an investment banker from the US whom I know, applied for a mere 10 positions.

But how many jobs can the government generate? Most government departments are already overstaffed. Clearly that is not the answer to India’s unemployment problem. Instead, specific policy interventions could help in the medium and long-term. Skill development programmes are important and the mismatch between what formal education offers and skills needed in the labour market should be bridged. The number of unemployed engineers is testimony to this. Entrepreneurship needs to be made easier with more hand-holding for fledgling entrepreneurs struggling to set up and stay afloat. Subsidies for capital equipment that replace labour have to be reconsidered, though in the age of AI, this will become more and more of a challenge.

The writer is an author and columnist