Bridging the Gap Between Corporate Needs and Labor Supply
The employment paradox in India is best exemplified by the divergent realities faced by corporate India and the broader labor force. Companies struggle to find qualified employees to the extent that a client of a leading staffing company, exasperated by the lost opportunities from unfilled sales positions, remarked, “I need a pair of hands and don’t care if a brain comes attached.” This sentiment highlights the desperation in the labor market. For the first time, in two decades of operations, the staffing company reported hiring 15% of over two thousand temporary workers from a pool of workers that did not possess a bachelor’s degree. The skyrocketing wages in this context resemble the inflated price of essentials during a famine; they do not reflect a sustainable market rate.
The Agricultural Workforce and Unemployment Crisis
In stark contrast, we see farmer suicides and a vast agricultural workforce comprising 73% of the labor force, pointing to a systemic failure to create non-farm employment for low or unskilled workers. A staggering 94% of the unemployed are under 34 years old. If current trends continue our demographic advantage could become a disadvantage. We need to generate jobs for all profiles: skilled, not skilled or low skilled, well-educated, and those with basic education.
Linking Labor Supply and Demand Issues
The issues of labor supply and demand are intrinsically linked. Our predicament stems from the absence of a Ministry of Employment focused on evaluating policies based on their effectiveness in reducing unemployment or creating jobs. It’s naive to believe that labor reform alone will trigger a surge in job creation; the solution lies in addressing the entire labor ecosystem, which includes demand, supply, and legal frameworks. Policymakers must adopt a holistic approach, much like the shift from classical to quantum physics, recognizing the interconnectedness of these factors.
Addressing the Labor Supply Crisis
There is widespread acknowledgment of our labor supply crisis. Only one in 66 children who start primary school graduate. Forty percent of the labor force is illiterate. Data indicates that a mere 3% of rural youth (aged 15-29) and 6% of urban youth have received any formal or vocational training. The primary education system is fundamentally flawed, yet the Ministry of Human Resource Development (HRD) continues to intervene in higher education. A radical overhaul of our educational assumptions is necessary to combat unemployability; minor adjustments to the current system are inadequate, akin to trying to accelerate a plane that is already losing altitude.
Increasing Labor Demand Through Infrastructure Development
Labor demand has undoubtedly increased since 1991, dispelling the myth of jobless growth often propagated by those who equate job preservation with job creation. Given our demographics, the pace of job creation must accelerate, with infrastructure development being the most significant driver of absolute job growth.
The Controversy of Labor Reform
Labor reform remains the most contentious issue. Contrary to popular belief, it is not corporate India that would benefit most from labor reform, as they have largely adapted to existing labor laws (viewing them as a nuisance rather than a critical barrier). The real victims of outdated labor laws are unorganized laborers and small entrepreneurs. While labor reform might not directly increase job creation, it could shift employment into the organized sector, leading to higher taxes, better training, human capital development, and increased productivity.
Empowering States for Better Job Creation
Currently, employment lacks dedicated policy attention. It may be time to consider a constitutional amendment moving labor laws from the Concurrent List in Schedule Nine to the State List. This could empower states to foster environments conducive to job creation, improved labor supply, and balanced regulation.
Economic Growth and Job Creation
Over three decades of liberalization have shown that economic growth, while necessary, is not sufficient for substantial job creation. The government cannot simply mandate job creation; attempting to legislate employment is as futile as addressing obesity by enforcing smaller clothing sizes. A nuanced approach, addressing the broader ecosystem, is essential for fostering meaningful employment growth.
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