The Organisation for Economic Co-operation and Development (OECD), the inter-governmental body of rich western countries, has regretted that India has been creating “too few quality jobs to meet the aspiration of its growing workforce, leaving many people under-employed, poorly paid or outside the labour force.”
The report “OECD Economic Surveys: India”, released last month, says, “Despite strong economic growth, the employment rate has declined, the participation rate of women is low and job creation in the organised sector has plummeted since 2010.”
Stating that “inequalities in wages and in social and labour law coverage are large”, the report says, “Only one third of all workers have a written job contract”, with a “vast majority, particularly those in agriculture and the service sector not covered by core labour laws.”
In manufacturing, says the report, around 65% of jobs are in firms with less than 10 employees (the so-called unorganised sector), while most labour laws apply only to larger firms. In addition, larger firms tend to increasingly rely on temporary workers or workers contracted through an agency (so-called “contract” labour).
Pointing towards “an increase in the share of contract labour in the organised manufacturing sector from 15% to 26% in the first half of 2000s, the report says, “A contract worker earns 29% less than a regular worker.”
“Likewise”, the report says, “In the education sector, contract teachers are paid a small fraction of the wage received by government regular teachers and are often paid with a delay.”
Yet, ironically, the OECD report blames this state of affairs on “complex and strict, especially for large industrial firms”, with employment protection legislation being “particularly restrictive”.
“Firms with more than 100 employees are required to obtain prior government approval to dismiss one or more employee”, it says, adding, “The frequency of reinstatement orders in the case of unfair dismissal is high and long delays in resolving labour disputes add to uncertainty and indirect costs of labour.”
It fact, it criticizes social security contributions, which, it says, "are capped and are mandatory below a given income threshold for firms with more than ten employees", which "increase the cost of low-qualified jobs and discourage job creation.”
The result has been, the report says, “Overall, enterprises have reacted to labour and tax regulations by substituting capital for labour, staying small, or relying on contract labour.”
Praising the Government of India for “envisaging rationalising 44 central government laws into four labour laws”, the report says, “Promoting quality employment and reducing both labour informality and income inequality would require introducing a simpler and more flexible labour law which does not discriminate by size of enterprise, gender or job contract.”
Noting that “employer surveys indicate skills shortages in ICT, financial services, tourism, retail and skillintensive manufacturing”, the report quotes “Quoting National Employability Report: Aspiring Minds (2016)”, to say that 58% of employers reported recruitment difficulties “because of talent shortages.”
It insists, “Large sections of the educated workforce have little or no job skills, making them largely unemployable.”
“It is estimated that only 4.7% of the total workforce has undergone formal skill training, much less than in China or South Korea”, the report says, adding, “To improve population skills, vocational training should be introduced earlier in the school curricula.”