Monday, 30th October 2017

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No jobs? Let them eat...

Employment growth at 8-year low, tough times ahead for the young

By Jayanta Roy Chowdhury
  • Published 18.05.17

New Delhi, May 17: The big red blotch on the Narendra Modi government's report card after three years in power is its dismal performance in job creation - and there are no indications that things will improve in the near future.

Cold statistics from the government's labour bureau show that job growth plummeted in key sectors to its lowest levels in eight years in calendar years 2015 and 2016 at 1.55 lakh and 2.31 lakh, respectively, compared with a high of over 10 lakh new jobs created in 2009 when the Manmohan Singh-led UPA was in office.

The more worrying fact is the continued chatter about layoffs in the information technology sector, a big employer of science and engineering graduates. Those fears haven't been quelled by recent assertions by the Modi government and Nasscom, the industry forum, that there will be no large-scale layoffs in the software industry.

The intriguing bit is that while the economy seems to be picking up speed with GDP growth projected at over 7.5 per cent this fiscal, it isn't translating into job creation on the ground.

One explanation for jobless growth is that companies are increasingly turning toautomation and digital processes even as they pare other costs, including wage bills, to future-proof growth and profits in a competitive environment.

That means that the Modi government's goal of creating 2 crore new jobs every year is fast turning into a daunting task.

Prime Minister Modi has often spoken about the demographic dividend that India enjoys with a fairly youthful working population with an average age projected at 29 by the year 2020 - one of the lowest in the world. But the inability to create jobs means that it runs the risk of triggering restiveness as an estimated 1.2 crore to 1.5 crore young Indians join the ranks of job seekers every year.

"We are not creating sufficient jobs in the organised, corporate sector. The effects of a global slowdown and local factors have only deepened the problem," said Pronab Sen, former chairman of the Statistical Commission. "The informal sector, whose data we do not capture in our official figures, was absorbing much of our new job seekers. However, after demonetisation, there is a big question mark on job creation in this sector as well."

The Economic Survey for 2015-16 underscores Sen's point. It said that only 3.7 million (roughly 35 per cent) of the 10.5 million new manufacturing jobs created between 1989 and 2010 were in the formal sector.

The Modi government has aggressively pushed its Make in India programme to catalyse new project investments - and a number of associated initiatives - but these have failed to gain traction.

"This (jobless growth) will accelerate as we go along," said M. Govinda Rao, former member of the Prime Minister's Economic Advisory Council.

"The IT firms have already started shedding workers. We are replacing labour-intensive methods with capital even as we have failed to skill up our workers to take on new challenges or to tap into the new avenues which were created in the global market when Chinese wages went up," Rao added.

Indian IT firms are currently in the midst of one of their largest retrenchment drives with seven of the biggest firms, including Infosys, Wipro and Cognizant, planning to lay off 56,000 engineers this year. As the technology firms start to focus on new-age areas like artificial intelligence and the Internet of Things (IoT) and countries like the US clamp down with visa restrictions on job hires from India, the job market in the IT sector has started to look bleak.

A McKinsey & Company report said nearly half of the workforce in the IT services firms would be "irrelevant" over the next three to four years, translating into possible retrenchment of up to six lakh people.

"It's not just IT, we expect white-collar jobs in telecom and finance to be impacted by technological progress combined with sectoral consolidation... one can expect over a million jobs to become redundant over the next three to four years," said Amajeet Banerji, director of hiring and HR research firm Talisman Management Services Ltd.

The global slowdown has crimped demand for services and merchandise exports across the world with a knock-on impact on the job market. Compared with $314.4 billion in export earnings for India in 2013-2014, the country notched up just $196.6 billion in exports in 2015-2016, a massive slide of 37 per cent.

Said N.R. Bhanumurthy of the National Institute of Public Finance and Policy: "The government has been struggling to achieve the job creation target it set for itself. However, the issue is not specific to India but is a global phenomenon, which is why we are seeing several countries adopting increasingly protectionist policies."

Steel ministry officials said the old thumb-rule of providing 30,000 jobs for every million tonnes of steel manufactured has now been junked.

"Steel mills typically hire 3,500-4,000 people for every million tonne of steel capacity. Technology upgrade in existing mills knocked out tens of thousands of jobs. The tragedy is we have not been able to train manpower in the steel belt of Jharkhand and Chhattisgarh to take on new jobs in other areas," an official added.

The net result of technology upgrade in old factories and lack of new jobs being created by new factories or start-up service sector firms has deepened the job crisis, admitted top government officials.

The displacement of low-end manufacturing in the textile, leather and consumer goods sectors in China by rising wages benefited a number of Asian countries, including Bangladesh, Cambodia and Vietnam, but did not seem to help India much.

Rao said: "We have been talking of reforms for a long time but have not been willing to bite the bullet. One would have thought that the formation of a new government with such a massive mandate would have helped in speeding up decision-making. But unfortunately that has not happened. The deft economic moves needed to attract the factories which moved out of China were never taken."

The social impact of the sharp decline in job growth is scary. Said Neshat Quaiser, head of the department of sociology at Jamia Millia Islamia: "Slowing job growth can be disastrous for a developing economy... the Indian youth whose aspiration levels have been raised by a variety of factors but unable to get the means of sustenance or livelihood he was expecting is increasingly turning towards crime and violence. This is borne witness by the higher levels of social and political violence in this country. Even the seemingly unconnected violence you witness in agitations over (the bull-taming sport) jallikattu is nothing but transferred anger."

The latest labour bureau report which gives data for eight sectors for nine months in 2016 till end-December - manufacturing, construction, trade, transport, hotels and restaurant, IT/BPO, education and health - shows low job growth in almost all sectors and jobs shrinking in construction and hotels and restaurants.

"Infrastructure building, construction and small business could have created jobs, but these sectors, especially construction and infrastructure, are plagued by bad loans and can't access fresh capital. So it's also a vicious cycle which holds back new jobs being created," Sen said.

Surprisingly, the labour bureau, which has been compiling the statistics, claims much to the consternation of professional economists that the October-December 2016 quarter was a positive for jobs - creating some 1.22 lakh jobs.

Economists did not seem to buy into that figure. "Demonetisation was not a reform measure," said Rao.