Job Crisis an Outcome of Decades of Bad Policy-making

The job crisis can only be solved by the private sector. Even the Finance Minister admitted that bulk of the jobs cannot be created by the government.

There is a rallying cry all over the country against failure of the government to generate decent employment opportunities. Recently, 2.8 crore people applied for 90,000 jobs in Indian Railways. Nothing can exemplify more the fact that the country has failed to provide its growing population with enough job opportunities. The job crisis in India can only be solved by the private sector. Even the Finance Minister has admitted that bulk of the jobs in India cannot be created by the government.

The figures from NSSO’s Fifth Annual Employment-Unemployment Survey (2015-16) reveal that manufacturing comprises only 10.5 percent of the total workforce. Structural transformation is underway and as things stand, less than half (49.5 percent) of the total workforce is now employed in agriculture. But most of the labour transferred from agriculture have found employment in construction and retail, sectors characterised by low productivity, poor work conditions and low and inconsistent wages. Employment in India is largely “informal” whose main features are the absence of written contracts, the absence of paid leaves, social-security provisions, and so on.

If we exclude agriculture, 75 percent of the workforce in rural and 69 percent in urban areas falls in the category of informal workers (the latest available data is from the 68th NSSO round 2011-12). Overall, about 90 percent of the workforce works in the informal economy. This regressive employment trend is an outcome of barriers to entry erected by archaic and unnecessary laws and regulations and also the government’s excessive involvement in the operations of the industry. The solution lies in providing greater economic freedom to enterprises and firms which will boost manufacturing and enterprise growth. The following measures are warranted.

READ MORE: Working Hard to Make the Job Crisis Worse

First, we need to modernise the outdated labour laws in India. In their current form, the laws disincentivise formal sector firms to expand from exploiting the economies of a large-scale operation in unskilled-labour-intensive sectors such as apparel and footwear. For example, the Factories Act has a lot of inflexibilities which make it difficult to lay off workers under certain circumstances, like unprofitable operations. Further, certain provisions in the Act prohibit firms from reassigning workers to a different task. This makes it increasingly difficult for firms to become efficient and expand. Therefore, big firms have resorted to capital-intensive technologies to remain profitable at the expense of job-creating manufacturing sector. The laws hinder the entry of new firms, especially in the low capital, labour-intensive industries, which have the maximum potential to generate new jobs.

Second, government interference in land acquisition deals for the industry has impeded the progress of acquisition. This has made it difficult for new industries (and hence new jobs) to come up. Land acquisition process in India can take more than 4 years, which could have a significant negative impact on the economy. The prospects of high economic growth are thus adversely hit because industries hold the key to employment and income growth.

The existing laws empower the government to intervene must be repealed in favour of rules that allow investors to privately negotiate land deals with the owners. This will benefit not only the investor but also the landowner who would benefit from fetching higher prices for their land.

Lastly, freeing up the education system from the control of the government will ensure the country has a surplus of employable graduates ready to fulfil the burgeoning needs of industry. Public universities have limited ability to train them for future jobs. Given the resource constraints the government faces, it’s only logical to let the private sector take a lead in vocational and higher education. At some levels, this is already happening. This will help expand higher education faster.

We need to get rid of the anti-prosperity machine that various governments have set up since independence. They have tied us up in so many schemes, regulations, policies, and a system of bad governance that we cannot find viable employment and grow prosperous. It is time we realise the faults with the political system around us.

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