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Demographic Dividends - Opportunities and Challenges

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March 05, 2018

What is the issue?

  • By 2020, it is estimated that the average age in India will be just 29.
  • The dependency ratio will be as low as 0.4. 
  • While this demography provides an opportunity, there are multiple challenges that need to be addressed.

What is the labour force scenario?

  • 12 million young people enter the labour force each year.
  • Millions transfer out of low productivity agricultural jobs to better paying alternatives.
  • There is hence a need to create a large number of jobs to accommodate these people and drive productivity up. 
  • But even the most liberal estimates of employment generation do not suggest that the increase is commensurate with the requirement.
  • Inability to deliver as many good jobs as required is partly responsible for India’s labour participation rate falling to around 50%.
  • Labour force participation is the ratio of working age population that is employed to that of those not employed. 
  • India has one of the lowest labour force participations (world average is 63).
  • Women have been dropping out of the labour force in large numbers.

What are some positive trends?

  • Despite the overall low job creation, allocation of labour is improving in areas where it is difficult to measure it, i.e the informal sector.
  • The informal sector combines services of old and new types.
  • Sometimes the old type gets converted into new internet based businesses.  
  • Business is also migrating to where labour is rural.
  • Rapid growth in rural non-agricultural employment is a promising prospect for enhancing incomes.
  • Notably, 70% of India’s workforce is rural based.
  • But agriculture labour now accounts for only around 64% of rural employment.
  • Unfortunately, as skill shortage is a big hindrance and skill sets needs to be enhanced by training programs.
  • India is also urbanising rapidly and the rapid growth in “census towns” again suggests a rapid pace of non-rural employment growth.
  • Steps to increase productive employment is essential for social cohesion, sustainable growth, and to constructively harness the country’s youthfulness.

What are the ways for enhancing productivity? 

  • Short term measures - Addressing skills shortages, and ensuring flexible adaptability to industry requirements for the immediate needs.
  • Three-month training can equip first-generation literate rural school-leavers with skills for working in retail malls and related services.
  • Also, similar three-month nano degrees can also re-train and equip industry workers with new skills that enhance their adaptability.
  • Ensuring timely delivery of completion, certificated to the concerned workers is key to this initiative.
  • This is mainly because, coordinating with multiple private agencies that are involved in the skilling programmes is proving difficult.  
  • There are also other issues to be addressed like lack of common standards, which is making in-house training in one industry irrelevant in another. 
  • Medium term - Employment elasticity in Indian manufacturing sector is estimated to be only 0.09, as compared to a world average of 0.3.
  • This points to the need for encouraging relatively low-skill labour-intensive industries like textiles, chemicals and food processing.
  • Construction already has high employment elasticity of 0.19 and hence stimulus to low income housing is needed to improve job creation.
  • The service industry will continue to be a major employer.
  • Health and education services are currently severely under-provided.
  • While their expansion at all levels will generate a lot of jobs, there is a dire need for capability enhancement of the workforce to fit the sector.
  • The Indian Medical Council that creates entry barriers and chokes the expansion in the supply of doctors and nurses needs to be reformed.
  • New teaching facilities should be judged on the basis of accreditation, and outcomes and structures for the same need to be strengthened.
  • Long-term measures - The quality of primary education needs to improve.
  • This requires government schools to be freed from state control, and allowed to compete and innovate in response to community needs.
  • It is feared that automation will destroy jobs (especially low-skill ones), and the role of robotic is slated to increase drastically in manufacturing.  
  • Even in the services sector, answering robots are already replacing workers in call centres and even IT sector is seeing some automation.
  • But historically, although technological change makes some occupations obsolete, it also creates new jobs, and raises income levels.
  • Hence, rising levels and quality of education are essential for seamlessly adapting to the new highly productive jobs of tomorrow.

 

Source: Business Standard

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