Employment generation—or rather the lack of it—has been one of the most important failures of the Indian economic growth trajectory, particularly over the past decade. Of course, the insufficiency of good quality jobs was a major problem even before that. But it is especially striking that just as India entered the period of what was expected to be a “demographic dividend” with a bulge of young people entering the potential labour force, employment rates for the population did not increase but actually declined.
The crisis of job generation has been festering for a while. But it has now reached extreme proportions, and even become a significant concern for voters in the general elections, despite all attempts to divert public attention to other matters. There is significant open unemployment (when people actively search for paid work but are unable to find it) which is already unusual in an economy like India where there is almost nothing in the way of unemployment benefits that would allow people to survive without livelihood. In fact, unemployment is especially acute among young and educated people, to the point that among the youth, the probability of being unemployed increases with the level of education.
But there is also a very large presence of unpaid work in India, performed dominantly (but not only) by women within households and communities. The more relevant measure is thus the employment rate, which measures the number of people who actually get some remuneration for their work as a share of the working age population. By that measure, India has one of the lowest employment rates in the world. The data from the Periodic Labour Force Surveys tells us that only 30.5 per cent of people above the age of 15 years worked for some remuneration in 2022-23. The ratio was 48.1 per cent for men; it was a shockingly low 13 per cent for women, which must count as one of the lowest employment rates for women anywhere in the world.
In an economy that is supposedly growing very fast, but with sharply rising inequality, this is a severe crisis. It amounts to a huge waste that is unforgiveable in a country where standards of living for the majority of the population are still well below what is required for a civilised existence, and in which the development project is far from complete. And it is also increasingly a socio-political problem because of an aspirational younger generation that is increasingly being denied the opportunity to live up to its own potential.
Obviously, this is therefore an urgent and critical task for whatever political coalition government forms after all the votes have been counted. It is striking that the current ruling party, which had earlier made so many promises about employment generation in previous election campaigns, barely mentioned it this time around. Instead, it sought votes on very different grounds. This is part of a broader lack of due attention to the problem that it has displayed in the past decade. It seems that the Modi government’s approach was to incentivise big business (and particular segments of that group) in as many ways as possible, in the hope and expectation that this would result in more private investment, boost the real economy and thereby “trickle down” to people through increased employment and higher wages.
This strategy has most definitely not worked. Not only has employment not increased, but real wages have stagnated over the decade, and some categories of workers (like construction workers and regular workers) have actually experienced declining real wages, as highlighted by the ILO’s recent India Employment Report 2024. What is more, jobs remain dominantly informal, with more than 90 per cent of workers lacking any of the benefits of legal and social protection that come with formal contracts. More than half of all workers are “self-employed”. Mostly with very low incomes. Unsurprisingly, women are the worst off, as paid and unpaid workers, and as self-employed people.
Immediate measures
The problem is huge but the need is urgent and the task is not impossible. There are some measures that could immediately be taken by the next government to provide a quick jumpstart to employment generation. The most obvious one is filling vacancies in public employment and converting contractual workers into regular employees. There are around 1 million vacancies in the central government alone, and probably several millions more in all the state governments taken together. Filling these vacancies would not just create more jobs; they would also improve the quantity and quality of public services, especially in health, education, sanitation and a host of other services, and thereby improve the quality of life of everyone. Regularising all workers, especially the millions of women working in “schemes” that are really about essential public service delivery, would obviously benefit such workers, but it would also make such delivery more stable and provide a major fillip to domestic demand. A greater emphasis on public spending for care activities in general is not only important for a happier and healthier society, but also would have significant positive multiplier effects on domestic demand and therefore additional employment generation.
In addition, the rural employment scheme, which has been starved of funds, must be immediately allowed to recover through proper financing, which means clearing arrears owed to state governments, ensuring flows of fund at least equal to the labour budgets specified by states, and avoiding partisan approaches to funding that have denied such resources to states ruled by Opposition parties. There is clear need for a urban employment guarantee scheme, and this could have many components that could enable rejuvenation and “greening” of urban areas and include elements of skill training and apprenticeship that would cater to the educated unemployed.
These are immediate measures, but in the medium term it would be crucial to develop a package to revive and strengthen micro, small and medium enterprises. They have been battered by a series of misplaced policy measures since 2016, and urgently need public attention. Such a package should include access to credit, to knowledge, technology and inputs, to marketing—and should truly try to provide at the very least the same incentives that are currently provided to large firms and big conglomerates. There has to be a special focus on agriculture, which continues to employ slightly under half the work force, and measures have to be put in place to ensure the viability of cultivation through policies such as ensuring a legal MSP, public investment in relevant technologies, access to water and other inputs, post-harvest storage and processing, marketing, recognition of land rights, etc. The impact of rising temperatures and climate change must be factored into all of these policies.
These measures focused in employment generation are likely to have a positive impact on output as well, and to lead to a more sustainable, equitable and just economic growth trajectory.
Jayati Ghosh is a professor of economics at the University of Massachusetts Amherst and was previously with Jawaharlal Nehru University, New Delhi
Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth
