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Interpreting the (Un)employment Scenario in India

India’s unemployment rate rose to 7.78% in February 2020, reflecting the slowdown in the economy. Following the InfoSphere issue on unemployment trends in India, this article looks to further analyze the employment landscape with a focus on the unorganized sector, the gap between education and employability, and the gender bias that is prevalent.

The consistent rise in unemployment rates in recent years in India indicates that the issue of employment creation is not being addressed sufficiently. The employability of a person is dependent on their skills, that being the level of technology they are equipped to handle. The skill gap that is present in developing countries such as India is also responsible for other socio-economic issues like crime, poverty and income inequality. 

In order to battle this problem, the Indian government is focusing on skill development and providing vocational education training to more and more people. According to the India Skill’s Report, 54% of India’s population is below 25 years old. This advantage allows for skill building to be integrated into the education system. In today’s world, technologies such as artificial intelligence and robotics are key focus for industries to keep up with global shifts. India’s education system is based largely on theoretical knowledge, which is not used in the job market. The statistics show that the level of unemployment increases with the level of education. This only leads to the belief that higher education is not worth investing in. The solution is not to stop education, but to alter the education system in order to ensure that it is in sync with the changing nature of the job market. 

We anticipate that more and more jobs will be lost to automation as this transition takes place. As the employment landscape worldwide is going through structural change, education must be encouraged in entrepreneurship and computer skills in order to bridge the demand- supply gap. 

The other main issue that India must tackle is that of the unorganized sector. Although India’s informal workforce is difficult to count, and even the government is unsure of the exact size, it is estimated that around 92% of India’s workforce consists of unorganized and informal labour. However, it contributes to just about 50% of the national product. The informal sector in India suffers from a low productivity syndrome, the prominent features of the sector being low real wages and poor working and living conditions. Even in our most developed and global cities such as Delhi and Bangalore, lakhs of people rely on daily wages. The incomes of construction workers, cobblers, beedi workers and drivers have not grown at the rate of their employers. Furthermore, after adjusting for inflation we see that their incomes have fallen, driving them further into poverty. 

Agricultural workers constitute the largest segment in the unorganized sector (around 52% of total workers), yet the number of farmer suicides increase every year. If we are not able to support the very base of our economy, there is something very wrong with how it is functioning. 

In the unorganized sector there is no formal employer- employee relationship. Workers are subject to indebtedness as their income hardly ever matches up to livelihood needs. In the midst of the COVID-19 crisis that the world is facing right now, this problem is seen so clearly. The workers who are indispensable and provide our daily essentials are unable to survive a 21-day lockdown as they live on a hand-to-mouth basis. If there is no incentive given to such jobs, no one wants to take them up anymore. Two problems will arise- one that we will no longer have such easy access to the things we take for granted, and second, most people will tend to focus on getting the same jobs (of which only a few exist) further adding to unemployment.    

Workers in the unorganized sector are subject to exploitation by the rest of society. The wages are below those of the formal sector, even for closely comparable jobs. Outdated production technologies are used, and the workers are not permitted or encouraged to integrate better machinery. The work status is that of inferior quality of work and inferior terms of employment. In rural areas the unorganized workforce is largely structured based on caste and community considerations. Moreover, as the bulk of migrant labour in the cities are from rural areas, such discrimination is seen here as well. 

Amongst the discrimination, the gender gap can be seen very clearly. Women face much higher rates of unemployment as against their male counterparts in every sector of employment and across all educational categories. It is observed that educated males are better exposed to the job market than educated females. The gender gap in youth unemployment has been observed to be rising over the years.

With the population growing at higher rates every year, according to data from The Centre for Monitoring Indian Economy, India’s economic and industrial growth cannot keep up with the increased population growth. Thus, in the absence of job-creation, the rising workforce leads to higher unemployment.

In order to try and ensure that more people are employed, we must not only focus on further developing the organized sector, but the unorganized as well. It is India’s informal sector that has the capacity to propel the economy. A large part of the urban informal sector consists of the self-employed. The focus must be to develop these informal, independent businesses in order to make them more attractive for investment. Since the unorganized sector is such a large majority of the total workforce, it must be tackled from the roots, encouraging people to stay in it. Policy intervention is required to provide access to better equipment and facilities. Minimum wages should be raised, and requirements should be stuck to. Only then will more jobs be created and investments made. Changing education systems, it is important to focus on this microeconomic model in order to manage macroeconomic growth. 

Data from CMIE, PLFS, Ministry of Labour, International Labour Organization all included in InfoSphere Vol I, Issue III

Diya Chadha is a 2nd year undergraduate student at Ashoka University pursuing a bachelor’s degree in Economics and Finance.


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