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Employment policy? Excessive use of capital relative to labour 'distorting' growth

By Arjun Kumar* 

Employment is the source of growth of a nation. The drastic recession of India during the Covid-19 phase has taken the employment to nadir. Employment is the need of the hour as the unemployed workforce leads to downfall in productivity. Rising population should ensure rising demand and, thus, increase in supply and employment.
But this phase of falling employment with rising population and stagnant demand is a spiral that would continue if not handled with an effective and efficient policy. In order to tackle the complexities of the unemployment while charting out ideas for creating an employment hub nation, the Center for Work and Welfare (CWW) at the Impact and Policy Research Institute (IMPRI), New Delhi, organized an online discussion on the Need for a National Employment Policy the state of employment and Livelihood– #EmploymentDebate series.
The discussion was initiated by Prof KR Shyam Sundar, who said that employment has not only become a social issue but a political issue. He stated that the labour market is experiencing a huge distress with little or no job opportunities.
Pointing towards underemployment and disguised unemployment, he said, emerging job opportunities that could be dwarfed because of various exogenous factors. The proportion of people working and are poor is higher than the proportion of unemployed poor, he added.

Macroeconomic framework

Prof SK Sasikumar, senior fellow, VV Giri National Labour Institute, Noida, Uttar Pradesh, pointed towards the need for a coherent policy framework for an employment-intensive recovery and growth strategy. He suggested that this should be the cornerstone around which the National Employment Policy should be conceived.
In fact, the current situation is the most opportune time for the National Employment Policy as technology is transforming work and work relations, highlighted more so in the face of the pandemic and the global economy, which is slowing down following the financial crisis, with investment falling, he said.
He went on to emphasize the prerequisite of the National Employment Policy is the need to restore the balance between quantity and quality of employment which has been deteriorating since 2011-12 and real wage growth falling.
Linking the National Employment Policy framework to macroeconomic policies, he highlighted that in the last three decades, the policy framework has excessively favoured excessive use of capital relative to labour. Even though this led to an increase in growth, but the simultaneous distortion in factor prices could not be ignored. In fact, the incentive has shifted to using more capital as against labor.
This can clearly be seen in the context of manufacturing which sadly employs only about 12% of our total workforce, the major growth being restricted to capital-intensive sectors of manufacturing. Hence, a job-rich recovery merits sectoral diagnostics and analyzing those sectors which have employment-intensive potential, he said.
He also brought to everybody’s attention the growing informalisation of the Indian economy, especially within the formal sector which is a recent phenomenon. Even though agriculture employment has been declining, most of the workers have ended up landing in the construction sector which itself is unorganized.
The five pillars of the National Employment Policy, according to Prof Sasikumar, should be employability, employment, social security, active labour market programmes, and working conditions. He suggested that we need to identify the challenges and opportunities within each of the five pillars around the National Employment Policy and need interventions to strengthen these pillars.
For employability, India should focus on demand responsiveness, he said. The apprenticeship system has not picked up in India and the state of instructors is not very good. In terms of employment, a low female labor force participation rate is a cause of worry. There is a need to leverage technology as it is generating new forms of employment particularly platform labour. Promoting platform labor has the potential to significantly raise the female labour force participation rate.
Besides, the existing social security system which is contingency-based is not working in India. The ones at the top end of the occupational spectrum with very low insecurities have the best social security schemes as opposed to those at the bottom of the pyramid. When it comes to active labour market programmes, care and education need to be factored in within the public employment programmes, he added.
Furthermore, according to him, public employment exchanges did not serve their function. Technology-enabled national carrier service should become the pivotal point for job-matching. Lastly, working conditions, especially of the vulnerable sections including migrant workers need to be pitched in as a crucial pillar.

Data analysis

Jayan Jose Thomas, professor of economics, Department of Humanities and Social Sciences, Indian Institute of Technology (IIT), Delhi, said, analysing through data on the impact of Covidp19 pandemic on informal sector in India, stated that our working age population(youth population) is increasing. He stated that workers are moving and pulling away from agriculture and there is structural transformation in all sectors.
The analysis followed with presenting data on demand for labour which has slowed down in manufacturing and construction sector. Also, there are job losses in micro, small and medium enterprises (MSMEs). Nevertheless, the situation with service sector is the opposite with demand for labor growing in this sector. He presented data on disequilibrium between demand and supply of labor in India.
Urvashi Prasad, public policy specialist, Office of Vice-Chairman, NITI Aayog, talking about the need of financial employment policy planning, stessed on the need for federalism and how the employment perspective depends on policies and planning at state as well as district level. Also, there is a need for an overarching framework for development and initializing of these policies.
She emphasized the gender gaps and population explosion as the factors for employment problems in our nation. She acknowledged that Covid-19 has badly impacted our economy but has also opened the doors for various opportunities in field of technology etc. There is a need for inter and intra-State commitments for implantation of the policies regarding employment, she added.
Prof Swarna Sadasivam Vepa, honorary visiting professor, Madras School of Economics, Chennai, expressed her views on employment by scrutinizing the impact of emergent technologies on employment. She stated that software engineers left there jobs as there work was done by machines.
Vepa emphasized on need of asking how to use technology to leverage employment. She added her views on women’s employment decrease in India whereas it increased in developed countries. She stated that it’s been both in urban as well as rural areas and provided two reasons for it. The first reason cited was the increase in machinery in rural areas that doesn’t require women’s to work as these are luxurious jobs.
In the urban sector, although female enrolment in higher education is rising, enrolment in jobs is declining as job opportunities are decreasing and corporates preferring men in spite of huge innovative women workforce, she said
Taking part in the discussion, Dr Sandeep Chachra, Director, ActionAid India, emphasized the need for minimum land holdings for agricultural peasants and thus, rise in income and no unorganized debts. These factors and initiatives would lead to an effective and efficient national employment policy implementation.
Prof Vinoj Abraham, who is with Centre for Development Studies, Thiruvananthapuram, Kerala , said that earlier governments (Central and State) focused on demand side policies. They later shifted to supply side policies. But now States are drifting from supply-side policies as well and are focusing on labour markets.
He emphasized on the need of focusing on the labour markets as this would allow equilibrium and eliminate the mismatch between the market of supply and demand of labor and thus employment. The capitalism and labor collusion have led to shrinking policies by state governments in employment area. “Are we worried about employment or are we worried about livelihood?”, he asked.
He emphasized on the need for having employment policies for not only those who are working but also, literate unemployed population. He emphasized on need for life long learning skills by the working population.
Dr Sandhya S Iyer, associate professor and chairperson, Centre for Public Policy, Habitat and Human Development, School of Development Studies, Tata Institute for Social Sciences (TISS), Mumbai , pointed out the inequality that the pandemic has exasperated resulting in the situation regarding labor market and job creation. She further argued that those with digital acumen and skills remain employed and guaranteed stable jobs.
She emphasized on the need for labor market transformation in gig economy where workers are employed on daily basis but are paid less for their freelancing services. “Social customs, cultures and traditions are discriminatory factors influencing the need for policies that are equitable and accessible to all”, she added.
She explained the need for aligning employment and environment policies together for betterment of society and livelihood. She then expressed on the need to focus on capability-employability-employment chain linkages.
Concluding, Prof Sasikumar stressed the importance of technology. Workers should be a part of on-the-job training even in smaller firms and should be technology efficient rather than relying on traditional methods of work. In addition, evaluation and monitoring of the policies demands utmost attention as it will enable us to understand whether the existing data structures are sufficient enough to understand the movements within the five pillars.
The discussion ended with the need for effective employment policies and connecting employment with the climate change factors as well. It was emphasized of the need for pushing this agenda with the government to get out of the unemployment spiral and make India a far more developing country.
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*Director, Impact and Policy Research Institute (IMPRI), New Delhi. Inputs: Simi Mehta, Anshula Mehta, Ritika Gupta, Sunidhi Agarwal, Sakshi Sharda, Swati Solanki, Mahima Kapoor. Acknowledgement: Vaibhav Aggarwal is a research intern at IMPRI

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