- As outlined in the NITI Aayog’s Action Agenda, India suffers more from the problem of underemployment (i.e. low-productivity, low-wage jobs) than unemployment as for example:
- In 2011-12, agriculture engaged nearly 50% of the workforce but contributed 15% to GDP
- In 2010-11, within manufacturing, small firms employed 72% but output was only 12%
- In 2006-07, in services sector, MSMEs employed 98% of workforce but produced 62% of services
- Opportunities for creation of well-paying and high productivity jobs: o Expansion of the organized sector to create well-paid high productivity jobs o Shift towards labour-intensive goods and services e.g. apparel, footwear, food processing, tourism etc.
- Expansion in export market by developing Coastal Employment Zones, using better technology, and improving on quality to remain competitive o Leverage on economies of scale offered by exports market potential o Filling in for ageing workforce of China and also rising labour wages there o Reformation of labour laws.
- Significant employment generation also takes place as a direct result of public investment in infrastructure and expenditure on government schemes. Such jobs, being more manual or non-cognitive, do add to the numbers but miss focus on development of cognitive abilities that are going to be indispensable for the Fourth Industrial Revolution.
FORMALIZATION OF INDIAN ECONOMY
Formalization means creation and expansion of formal jobs, essentially, that come with social security, financial inclusion and legal empowerment of the workforce.
- Advantages of formalization
- Increased tax revenues for the government due to better reporting under taxation laws
- Coverage of population under social protection plans, saving from financial distress during difficult times
- Increase workers’ welfare and the opportunities for decent jobs
- Reduce unfair competition between formal and informal enterprises arising from tax or regulatory arbitrage
- Downsides of formalization
- Exclusion of population, if knee-jerk steps are taken e.g. demonetization
- Poverty and destitution as rapid formalization imposes additional costs on informal economy
- As per Employment-Unemployment Survey (by NSSO) of 2011-12 total workforce employed stands at 47.36 crore; with 23.16 crore in agriculture and 24.2 crore in industry and services
- According to the fifth Annual Employment-Unemployment Survey (EUS) conducted between April and December 2015, 83% of the workers in India were self-employed, casual or contract workers.
- As per Economic Census, 2013-14 (latest available), total workforce employed in all establishments stands at 13.1 crore. Further, own-account enterprises (OAEs), which do not employ any regular workers, and enterprises with < 10 workers together accounted for almost 79% of India’s workforce
- Beginning from 2017-18, the NSSO has launched periodic labour force surveys (PLFS) to produce annual estimates of formal employment in the economy. This would also help India to meet the IMF’s Special Data Dissemination Standards (SDDS) for releasing quarterly data on macroeconomic indicators
- In April 2018, for the first time, India released report on monthly payroll for the formal sector to facilitate analysis of new and continuing employment, based on EPFO’s, ESIC’s and (NPS) PFRDA’s payroll data and subscriptions. The period between September, 2017 and February, 2018 was covered and reported 31.10 lakh new additions across all age groups (those in the 18-25 age group, considered a proxy for new jobs, amount to 18.5 lakh). The payroll data from these three organisations would now be released every month
- Report of the NITI Aayog’s Task Force on Improving Employment Data was released
- Committee under Dr. T.C.A. Anant, former Chief Statistician of India, is also examining various approaches with a view to reducing redundancy and avoiding duplication of efforts in estimation of employment through the establishment approach. It will also look into whether the monthly payroll data released by EPFO, ESIC and PRFDA can replace the quarterly enterprises-based survey on job creation by the Labour Bureau.
IMPROVING EMPLOYMENT DATA
- Report of the NITI Aayog’s Task Force (released in 2017) made recommendations to create a 21st century statistical system in India for the generation of comprehensive employment, unemployment and wage estimates on a sustained basis. These include: Conduct of household surveys on annual basis.
- Introduction of time-use survey, that be conducted every three years (such surveys also help in measuring women’s participation in unpaid work).
- Use of technology for faster and better data collection, processing and assimilation. Introduction of annual enterprise survey using enterprises registered with the GSTN as the sample frame.
- Separate annual survey of enterprises excluded from the GSTN database (i.e. those in health and education sectors, and those with turnover < INR 20 Lakh in other sectors). Adoption of inclusive and wider definition of ‘formal workers’.
- Adoption of GSTN across all legislations, ministries and departments as the universal establishment number
- THE two most interesting trends in recent employment figures deserve a closer look. There has been an increase in organised sector manufacturing employment during the period January 2000 to December 2011 to the tune of about 5 million, more than half of which is on the basis of contract.
- More recently during March 2014 to July 2015, total employment in manufacturing including organised and unorganised declined in absolute terms while there had been increase of 0.32 million employment in organised manufacturing and this time the share of contract workers of newly employed in organised manufacturing went up to 85 per cent.
- In the case of unorganised manufacturing, the only segment that recorded growth in employment is the Own Account Manufacturing Enterprises (OAMEs) which are basically one person enterprises meaning self-employed who do not hire any labour and mostly employ family labour.
- According to the NSSO survey on Unincorporated Non-agricultural Enterprises (excluding construction) total employment in unregistered manufacturing increased from 34.8 million in November 2010 to 36.04 million in 2015-16, a meagre increase of 1.24 million in five years. The rise has been higher in OAMEs to the tune of 1.84 million.
- Perhaps the more important fact is employment declined in establishments that are relatively larger in size within the unregistered segment and employ one to ten hired workers, have employed 0.67 million less workers during the same period.
- Therefore, the rise in employment in the organised manufacturing sector was primarily driven by contractualisation and in the unorganised segment, employment increase was accompanied by fragmentation of productive activities.
- The situation has further worsened because of demonetisation and introduction of GST, causing suffocating effects on the unorganised segment of the economy that employs 92.8 per cent of India's workforce.