Jobless Growth

What is the issue?

Chief Economic Adviser Arvind Subramaniam recently pointed to the need to achieve higher economic growth, in the range of 8% to 10%, to solve the problem of jobless growth.

What did the NITI Aayog says?

• It is worth noting that India added just 1.35 lakh jobs in eight labour-intensive sectors in 2015, compared to the 9.3 lakh jobs that were created in 2011, according to Labour Bureau figures.
• The rate of unemployment grew steadily from 3.8% in 2011-12 to 5% in 2015-16.
• NITI Aayog has dismissed concerns over jobless growth, saying the real problem is underemployment rather than unemployment.
• Nevertheless, this month the government set up a high-level task force headed by NITI Aayog Vice-Chairman Arvind Panagariya to obtain reliable data on employment trends to aid policymaking.

What is the relation between job and economic growth?

• The focus on jobs is obviously vital. However, higher economic growth alone will not solve the jobs problem.
• Jobs can be created when growth comes from the transition of labour from informal sectors like agriculture to the more formal manufacturing and service sectors.
• Such extensive growth runs the risk of stagnation once the available stock of informal labour is exhausted — as some Southeast Asian countries found out the hard way in the late 1990s.
• On the other hand, growth can come about without any substantial job-creation in the formal sectors of the economy, but through improvements in productivity.

What India should do?

• India should aim at growth that is driven both by improvements in productivity and modernisation of its labour force — especially since better jobs are crucial to improving the lives of millions who are employed, indeed underemployed, in low-paying jobs in the farm sector.
• Ironically, achieving both those objectives will first require labour reforms — ones that can both boost labour mobility within the formal sector and bring down the barriers businesses face in hiring labour.
• But labour reforms alone won’t work unless these are combined with a step-up in government spending on asset and job-creating areas such as infrastructure, which in turn inspires private investment
• Job-creation needs to be an essential axis along which economic and social policies are formulated.

Source: The Hindu